Business Insight Zone

Another good idea for a SXSW session: Get somebody as swift as Jason Fried to share his views on how to do business.

37signals makes online collaboration software such as Basecamp and Highrise. The company punches way above its weight: despite employing about 10 people, it has developed a large and devoted following, both for its sweet-and-simple products and for its blog, Signal vs. Noise.

From listening to Fried, it’s easy to understand where 37signals gets its devotion to simplicity: he talks in clear, declarative sentences that hammer his points home. His presentation was lucid and down-to-earth — just like his products.

The point of this session was to share the business lessons that 37signals has learned since it started up a few years ago. Here were some of the best points that Fried made:

–Entrepreneurs and makers of new products will always face “The great unknown” – the cloud of the unknown that usually scares people away from doing something new. But you don’t need to worry about what you don’t know. Just build something and see what happens.

–Don’t ever worry about what-if questions like “But what happens about when we have 1,000,000 customers?” Fried says: “Who knows, who cares.” The decisions you make now don’t have to last forever. If things need to change, you change.

–”Optimize for now.” Pay attention to now. Hopefully things work out, but if they don’t, don’t worry about it.

–Be watchful for “red flag” words, which cause things to go wrong, cause people to get upset, cause problems. Some of the words in question (which Fried addressed in detail: “need,” “can’t,” “easy,” “only,” “fast.”

• Very few things actually *need* to get done. Instead of saying “need,” we’re better off saying “Maybe” or “What do you think about this?” or “How does this sound?” or “Do you think we could get away with this?”
• When you say “can’t” . . . you probably *can*.
• “Easy” is often used to describe somebody *else’s* job, i.e. “That should be easy for you to do, right?”
• Fried did a funny thing: he strung together a bunch of these words into a single paragraph, which got a laugh. Then he said, “This paragraph alone could make something three months late,” which got a bigger laugh.

–Be successful and make money by helping other people be successful and make money. Spot chain reactions. Be the catalyst that helps others succeed.–Target the nonconsumers — that is, the people who have a need that could be addressed by a product, but the existing players in the market aren’t addressing that level of need. In other words, the market of people who don’t use something but WOULD use it — IF it was offered at the right level. This minimizes your chances for competition from entrenched players. (He used the example of the big market of nonconsumers of Salesforce.com’s CRM offering who are small enough to use HighRise to track how often they contact clients, when things are due, etc.)

–Question your work regularly:

• Does what I’m doing make sense?
• Why are we doing this?
• What problem are we solving?
• Is this actually useful?
• Are we adding value? (Be careful, because you might be *subtracting* with what you’re doing.)
• Will this change behavior? (If something won’t change your users’ behavior for the better, get rid of it — it’s clutter.)
• Is there an easier way? (If we’re thinking of doing it the hard way, is the hard way worth it?)
• What’s the opportunity cost?
• Is it really worth it?

–”Err on the side of simple.” Fried said that “Every mistake we’ve ever made as a company is because we tried to do too much.” His advice: “Start with the easy way.” The easy way often satisfies 80 – 90% of what you want. In general, Fried takes the view that “Most things are not hard, we make them hard.”

–Fried had a lot to say about chopping things up into smaller units, which fits his overall idea of simplicity:

• To maintain morale and momentum, “Get three things done in one week instead of one thing done in three weeks.”
• “The longer it takes to develop something the less likely it is to launch.”
• “Break problems down to the atomic level.”
• “Celebrate little launches.”
• “Morale feeds off progress.”

–Related to this, Fried believes strongly that companies should “Make tiny decisions.” This keeps you from making big mistakes, because if you made a tiny decision yesterday and launched it this morning, if something goes wrong, you can fix it tomorrow. I thought he made a great point when he said that companies are terrified about making big decisions (and drag their heels doing it) because there’s such big risk (real or perceived) attached to it, and you can’t undo it easily. (Don’t be surprised to see more from me on this topic.)

–“Invest in what doesn’t change.” Companies should invest in the stuff that works today and will also work ten years from now. For example, Google focuses on the speed and accuracy of its searches; people are still going to want speed and accuracy ten years from now. Ditto Amazon with fast shipping or good customer service. The 37signals view is that simple software will still be popular in ten years.

–”Follow the chefs.” Fried notes that the famous big-name chefs (Emeril Lagasse, Mario Batali, et al.) SHARE a lot. Here are these big experts who are authorities in their field, and yet they’re sharing everything they know. Along the way they collect money from willing customers/users who buy their cookbooks, eat at their restaurants, buy their sauces at the grocery store, etc. Fried says you should figure out what it is YOU do that you can share with everybody else.

–“Interruption is the enemy of productivity.” The more time you spend face-to-face with your co-workers, the more apt you are to interrupt them. Those taps on the shoulder and impromptu meetings are corrosive to productivity. In other words, since “A fragmented day is not a productive day,” don’t fragment others’ days into small blocks. To prevent this, 37signals emphasizes passive communication mechanisms — e-mail, Basecamp (wiki-style) posts, and the like — instead of interruptive communications like phone calls and face-to-face meetings.

–”Be clear in crisis.” You can build tremendous goodwill if you’ll “Be open, honest, public, and responsive.”

–”Road maps send you in the wrong direction.” Fried believes that formal business planning, revenue projections, and product roadmaps are bad for companies and bad for customers, because they lock you into a certain path. You don’t want to be locked into decisions you made 18 months ago. Fried quotes Brazilian business maverick Ricardo Semmler: “It’s OK to think about the future, just don’t write it down.”

–During the talk, Fried mentioned that 37signals has gone to a four-day workweek. In the Q&A session, someone asked how this decision was reached. Fried said that they were doing it anyway during the summer when the weather is nice, and they found out that everyone was getting more work done. People are happier on Monday and they get more done in the four days of the workweek. He doesn’t care how many hours somebody works. In Fried’s experience, there are very, very, VERY few things that are urgent. For most things, if it needs doing, there’s no need to hang around the office on Friday — it’ll wait until Monday.

–“Make it matter.” Everything you do should matter. Every pixel, every hire, every blog post. We don’t want to admit that so much that we do doesn’t matter, but it’s still there — and we should skip doing it.

(Photo by deneyterrio.)