I’m currently reading Kai-Fu Lee’s book on artificial intelligence. Notes are coming soon. Meanwhile, treat yourself to a free course on AI, compliments of Sebastian Thrun and Udacity.
Leaders who are skilled storytellers have an unfair advantage. They can out-sell, out-motivate, and out-lead other executives less-versed in the art of story. This isn’t about extroverts vs. introverts—rather, a skill anybody can learn. Peter Guber is a good person to learn from. With his 50+ Academy Award nominations and best-selling books, Guber is considered a master storyteller. Let’s see what he has to say.
Perhaps the most overused word in tech startups, the word ‘scaling’ has shouldered many meanings. Let’s take a look at them, and get clear about the various types and ways of scaling a business. Why is this important? Because clarity drives team alignment and improves the odds of successful execution.
The average American spends 11 hours per day staring at screens. As smartphones, streaming and social media inundate our dopamine-addicted brains with content, our collective consciousness is being commoditized. This is generally bad, but a reality we must confront. This article explores the data behind Instagram usage, Netflex et al, along with a few ways we can regain our focus and, eventually, our consciousness. Thumbs crossed.
A retrospective on the results from 4 years of quarterly goal setting. The purpose? Identify ways to improve my goal-setting process so that I can accomplish more and live a fulfilling life.
Article Highlights:
How we communicate defines how we are perceived.
Verbs and adjectives—while both entirely critical—have different implications.
Leaders who embrace a growth mindset would be wise to utilize verbs over adjectives.
While adjectives are best suited for understanding nuance, verbs are most useful for inspiring action and forward progress.
Swimming in the pool
I was swimming in the pool in Marin, and it occurred to me: verbs are much more powerful than adjectives. An adjective is typically a description at a point in time. A snapshot. A best guess. Adjectives usually describe a static state (unless of course the state is in motion) and capture more of the “being” versus the “doing”—solid vs fluid.
Conversely, verbs are kinetic energy in action. Dynamism, evolution, growth, change!
How it affected me
After reading Think and Grow Rich by Napoleon Hill a few years ago (at the recommendation of my good friend, Chris Escher), I was inspired to create a personal ambition statement which I read aloud to myself twice per day: morning and night. I've been partaking in this ritual for 2+ years now and have come to appreciate it's impact.
However, last week I applied a critical eye to it. What I noticed: lots of adjectives, few verbs. So I rewrote it to be more action-oriented:
Before: "I am smart. I am successful. I am doing big things. I will earn $5m dollars by the time I'm 35 by providing quality consulting services to young, growth companies and an innovative picture frame design for sale."
After: "I am learning. I am growing. I am getting stronger. I am doing big things. I will earn $5m dollars by the time I'm 35 by providing quality consulting services to young, growth companies and an innovative picture frame design for sale."
See the difference? Verbs. Emphasis on the doing. The work. This change was inspired by Carol Dweck’s book Mindset which, if you haven't read it yet, is a game changer. The book paints a remarkably poignant, evidence-based picture of two types of mindsets: growth vs. fixed. This book came highly recommended from over 70% of the CEOs we advise.
What's next?
We've started analyzing the publicly available executive communications of "good" vs. "bad" executives. Since our team obviously doesn't have access to internal leadership presentations, we are focusing on publicly available video, podcast and written talks.
Source: https://stackoverflow.com/questions/10674832/count-verbs-nouns-and-other-parts-of-speech-with-pythons-nltk
Using Python we are basically combing through lots of executive-speak (literally) to understand the relationship between verbs, adjectives (and nouns) to see if there's a correlation. Additional information here (frequency per 1,000 words):
LEXICAL WORDS
CONVERSATION
Adverbs 50
Adjectives 25
Verbs 125
Nouns 150
ACADEMIC PROSE
Adverbs 30
Adjectives 100
Verbs 100
Nouns 300
FUNCTION WORDS
CONVERSATION
Pronouns 165
Primary auxiliary verbs 85
Prepositions 55
Determiners 45
Coordinators 30
Modals 20
Subordinators 15
Adverbial particles 10
ACADEMIC PROSE
Pronouns 40
Primary auxiliary verbs 65
Prepositions 150
Determiners 100
Coordinators 40
Modals 15
Subordinators 10
Adverbial particles 5
These figures can give only a crude picture and show only the figures for one kind of written English. In general, though, nouns and verbs are the most common words, and conversation seems to use a higher proportion of verbs, adverbs and pronouns, while written English uses a higher proportion of nouns and adjectives.
Article Highlights
Many tech startups face similar challenges, e.g. hiring, product fit, growth, retention, etc.
There is a temptation to solve problems in a vacuum and "go it alone."
While learning from first principles is unequivocally important, leaders often benefit more from building a habit of interviewing at least one expert per week to improve their thinking on their #1 challenge.
Where I'm coming from
I've noticed a trend. Having been an advisor to high-growth startups for 4-5 years now, one thing stands out: most of the companies I work with are trying to solve very similar problems, but often do so in isolation. This allows me to add value by connecting people or sharing some best practices, but I challenge them: "Who else did you meet with to explore this topic?"
Ray Dalio's landmark book, Principles, offers some additional guidance in the form of two principles that leaders could benefit from:
Principle 3.2 Practice radical open-mindedness. a) Sincerely believe that you might not know the best possible path and recognize that your ability to deal well with "not knowing" is more important that whatever it is you do know.
Essentially, Ray Dalio is encouraging us to embrace intellectual humility. Start with what you know you don't know. If you're new to an industry or company, this list is likely to be quite long. That's okay. The most important part of all this is a sober appraisal of what is known vs. unknown.
Later, once you've done you're preliminary research and assembled some viewpoints, its time to spar, intellectually, with other people. Ray suggests seeking those with high "believability" which he defines as having done X with success 2-3 times and a cogent rationale to go with it:
Principle 3.4 Triangulate your view with believable people who are willing to disagree.
As he says it, "By questioning experts individually and encouraging them to have thoughtful disagreement with each other that I can listen to and ask questions about, I both raise my probability of being right and become much better educated."
With this in mind, leaders could benefit from building a habit of interviewing at least one expert per week to improve their thinking on their #1 challenge.
Here are a few practical services that can help you get out of your own head and absorb perspectives from other people with (potentially) high believability:
Meetup: a community-managed service that brings people together on a common interest. I've attended and spoken at numerous meetups from topics ranging from Ethereum to Leadership to Customer Success. All were worthwhile because I got to interrogate other folks with relevant experience (to learn), and have others challenge my beliefs (to iterate).
Shapr: a popular new service that's described as Tinder for professionals. Swipe for 1 minute per day and get matched with other professionals.
Quora: ask a question, hope for high-believability responses.
![Ready. . . Aim. . . [check smartphone]](https://images.squarespace-cdn.com/content/v1/55dbfccee4b08731143170b6/1527214735848-JXL81VT0W8FJJ03L6M5J/smart+phone.jpg)
"More companies die of indigestion than starvation." —David Packard
Article Highlights:
Focus is a critical ingredient for personal and professional success.
Distraction is the enemy of focus.
Smartphones are one of the greatest sources of workplace distraction.
Small changes in habits can have a profound impact on personal and professional focus.
Focus beats capital
Focus is the ultimate competitive advantage: an inspiring vision, cultural alignment throughout the org, clearly defined goals, and a strike zone everyone is aiming for. If your company doesn't have focus, no amount of capital will make your successful. Venture capitalist Bryce Roberts describes the phenomenon better than I:
This isn't a rant on smartphone addiction
Today's smartphones are perhaps the most impressive consumer product ever made. You have, at this moment, more access to information than the US President did 20 years ago. Insane! Smartphone technology has unleashed unprecedented connections, convenience and creativity.
Smartphones at work
But at the same time, perhaps you've noticed a coworker checking their smartphone at work. I'm certainly guilty of this. And why not? Today's knowledge workers are blessed with near limitless information and options {*cough* checking Instagram}.
Digital distraction
The average person checks their smart phone 75-100 times per day (conservatively). Today's workers are barraged with inbound texts, pings, and notifications. The tradeoff? Our focus.
I'm what you might call a "conscious" smartphone user—I try to think about the intent and tradeoffs—and below is my cell phone usage over the last few months. On average, I check my phone 39 times a day and spend 2:32 hours on my iPhone each day (mostly during the workday: 9-11am and 2-4pm). At work, I'm on my phone about ~20% of the work day.
How to break the cycle
In order to personally reduce smartphone consumption and increase focus, I started experimenting. After trying dozens of "productivity hacks," below are the 3 habits/changes that had the biggest impact and had staying power:
1. Switching to grey scale
The iPhone's neon color palette is visual heroine. Enable the option to turn it off. Kudos to Alex Timmons for this tip (and also Chris Escher). Here's how to do it on an iPhone (Apple makes it quite difficult): Settings > General > Accessibility > Accessibility Shortcut > Color Filters
2. Pull instead of push
A smartphone is a resource. A tool. You should engage it (pull) more than it engages you (push). A good rule of thumb is to turn off notifications from machines (not humans). Social media will likely be the worst offender. If it's automated, you likely don't need it. Exceptions: calendar reminders can be helpful.
Set aside 5-10 minutes to control how and when your smartphone notifies you:
3. Buy an alarm clock
When I realized I was starting and ending my day like a glow-faced zombie, I decided to buy an old-school alarm clock. It has made a *world* of difference. Of the three habits/changes, buying an alarm clock has had the biggest impact: peace of mind, morning reflection, more time with my lady. Everything is better. Don't use your smartphone as an alarm clock. Take that time back.
Other resources: https://www.helpguide.org/articles/addictions/smartphone-addiction.htm
"If all you have is a hammer, everything looks like a nail." —Abraham Maslow
How many accounts can a CSM handle?
Spoiler: It's not about the # of accounts. Why? Because all accounts weren't created equally.
One of the biggest challenges Customer Success leaders face is operationalizing a capacity model that reflects reality. If done correctly, your CSM team can scale to $250 million in revenue with optimal output and reduced burnout. If done incorrectly, churn can metastasize while your customer retention costs balloon to 15-20% of revenue. But what's the right approach?
The origins of "account"
Perhaps some of the confusion lies in the nebulous word itself: account. Derived from Old French and Late Latin, account was primarily a financial term referring to "a count" of something, or a reckoning of money to be paid. Around the 1600s, the definition of account garnered some nuance: "course of business dealings requiring records"—but it never ventured far from its original purpose: counting stuff.
But this poses a challenge for leaders, their CRM software, and the CSM organization. IBM and Nuts.com are very different accounts.
Let's start from the bottom
Many Customer Success executives will boldly prognosticate: "An enterprise CSM can handle 15 accounts, and a corporate/mid-market CSMs can handle 150 accounts" — or some variation thereof. Are they guessing? Yes, mostly. And that's okay early on as you test & tinker with your Customer Success model.
But cavalier guesswork can get you in trouble, especially as you begin to scale from $20M to $50M and sales begins closing dozens of deals per week.
Most leaders miss a vital input: How much TIME can my CSM team actually spend with customers?
To answer this question, we monitored my CSM team's activity for 12 months and measured how many hours they were spending with customers. Since logging calls in Salesforce is (very) prone to human error, I pulled the data directly from their Google Calendars (using a powerful software called Datahug), and inferred account names from the email domains on the accepted calendar invite.
What we learned: 15 hours per week
Sustained over the long term, the maximum amount of time a CSM can spend with a customer is 15 hours per week. At first glance, 15 hours per week might not seem like a lot, but think about it: that's three 1-hour customer calls per day, or six 30-minute customer calls per day. After you account for meeting preparation, internal meetings, administrative overhead and lunch, you run out of daylight pretty quickly.
To help build our capacity model, we can consider this a viable upper limit.
Not coincidentally, 15 hours/week was the output of one of our top-performing CSMs who typically worked 50 hours per week, so 30% of her time was spent talking to customers (either on the phone or in-person meeting). An absolute workhorse, she also had the highest product usage and often the best net retention on the team - but these are topics for another day (the r-squared between CSM "customer time" and net retention was 0.82, i.e. very strong correlation).
Highest value activites
The next piece of the puzzle to consider: if we know that CSMs can spend ~15 hours per week with customers (max), what is the highest-value use of that time? The answer depends on your product and customer profile, but the list usually looks something like this:
Discovery: learning about the people and business of the "account"
Product training: education on features & functionality to drive value for customer
Business reviews: some sort of recurring value visibility/validation exercise
Project management: systematic growth of product users and consumption over time
Marketing: obtaining customer references, testimonials, case studies
Sales: asking for referrals, identifying upsell/cross-sell opportunities
Product: seeking feedback on current & future product experience; "voice of customer"
From the bottom to the top
Now that we've 1) established a rubric for CSM bandwidth—a precious 15 hours/week engaged directly with customers—and 2) reflected on their most valuable activities, we can zoom up and outward to think about your customers:
Who are they? What industry are they in? What do they need from you? Where are they getting stuck? Where are they in their lifecycle? How would you assess their maturity? How many teams/people will be using your product? Have they bought multiple products? What is their growth potential? With these answers, you can begin to assess what your customer needs from your Customer Success programs.
It is in these gradients that we come to appreciate all accounts aren't created equal. Some customers simply require—or deserve—more time, and it is in these tradeoffs that you begin to craft your CSM strategy: being proactive, while acknowledging the reactive. Here are the customer profiles that tend to require the most time:
New customers: onboarding requires heavy training and implementation work; you might consider creating a separate team that focuses exclusively on new customers, e.g. we called them our valiant "Launch" team which launched dozens of customers per week via a virtual launch program delivered via interactive Go-To-Webinar.
Low maturity: teams with less experience in your technology (or software in general) will require more work to generate the education and enthusiasm needed to create sustained behavior change; your CSMs have to literally help them build the habit of using your tech.
Bottom quintile ARR: the old saying "the squeaky wheel gets the grease" is often true of smaller customers; often resource and time constrained, these customers often tax your entire Customer Success team and must be planned for with education & support programs at scale.
Other considerations:
Cost: depending on the nature of your product and maturity of your company, the cost of your CSM team will typically be between 1-4% of TTM revenue.
Work/life balance: companies inadvertently create a burnout culture by constantly increasing CSM portfolios. This is unsustainable in the long run.
Customer segmentation: how you categorize your customers—industry, geo, what they pay, what they bought, company size (revenue), company size (seats)—will help determine what they need, and what you want to provide them
CSM service level: how you structure and stratify your CSM offering is the most important decision to manage bandwidth/capacity effectively; aim for the lowest common denominator.
Account potential: what customers pay today is not indicative of what they could be paying; therefore, you might consider a dual-classification system to quantify both, e.g. A1, A2, A3, B1, B2, B3, C1, C2, C3. In this system the letter is what they pay you today (A = top decile/quintile ARR), and the number is the potential extrapolated from your value metric (1 = high potential/top decile in employees). This will enable you to OVER-serve your B1s, and C1s to capitalize on their potential despite modest ARR right now.
True north
Since 400 AD, the North Star has helped sailors stay on course by revealing true north amidst the chaos of the high seas. Known formally as Polaris, the North Star is "special" for three main reasons:
Brightness: one of the brightest in the night sky.
Steadfast position: due to its alignment with Earth's axis, it consistently appears true north.
Alaska state flag: while star iconography is common on US state flags (14 of 50), the North Star is only specific star to be depicted on a state flag:
Popularity in Silicon Valley
When euphoria combines with oozing metaphorical potential, its not surprising that Silicon Valley seized this celestial icon to create the North Star Metric (NSM) to symbolize the single metric most indicative of customer value.
Simple. Straight forward. Singular.
Due to these attractive qualities, a thoughtfully-nominated NSM can be particularly useful in 1) goal setting, 2) organizational alignment, and 3) product development—areas we'll expand upon in a future post.
No business runs on one metric
But the truth is, no business runs on one metric. Can a North Star Metric be useful for goals and alignment? Absolutely. Like a sea-bound armada, by all means lets trim our sails toward the North Star. But when it comes time to do the work, operational complexity sets in:
Customer acquisition cost
Dollar-based net retention
Cohort subscription expansion
Churn rate
Cash burn rate
Lifetime customer value
AE ramp rate / productivity
Unit economics
Net working capital
F*$^%# this just got hard
And before you know it, the naivety of a single metric is awash in operational winds and waves.
So what does a good captain do?
A good captain 1) inspires the crew, and 2) sets achievable goals. Of course, good/smart goals will inevitably include metrics, but goals are more inspiring than simply making a single number get bigger.
The North Star is actually three stars
Meanwhile, perhaps Mother Nature was hiding the answer from us the whole time. Did you know that the North Star is actually three stars? It's true. Polaris is in fact a multiple star comprised of Polaris Aa, Polaris Ab, and Polaris B. The three Polaris stars orbit happily some 400 light-years away (or 123 parsecs for the space junkies out there).
So instead of just ONE north star we have THREE, and instead of North Star Metrics we might consider North Star Goals. Stephen Covey calls these Wildly Important Goals, or WIGs.
3 North Star Goals
What are your 3 North Star Goals? What are the 3 biggest things your company need to accomplish this year? What are the input and output metrics that will determine goal attainment, and what are the prioritized initiatives that will thrust you towards true north?
Why
A customer recently asked our DBT Ventures team: "What recommendations do you have for closing top talent during the recruiting process?" Fantastic question. Let's explore this together.
What motivates top talent to join your company?
Top talent is usually motivated by 3 reasons:
People
Product
Pay
Let's call them The 3 P's so we sound all snazzy. It's important to understand these are broad categories, so let's dive into each one:
1. People
Humans are social creatures. The influence of other people throughout the recruiting process can not be overstated. The most talented candidates are often sound judges of character, authenticity, and intelligence. They also likely won't be swayed by smooth talk and lofty claims of success or ambition. They'll want to know about your:
Founders
Leadership team
What schools did they go to? Where did they work prior? What projects did they drive?
Quality of peers and management
Reputation of VC backers
Other VC portfolio companies (social proof)
Glassdoor reviews
The degree to which you showcase the above in a compelling way will directly influence your close rate of top talent. The best acceptance rates are often 90-95%+. This is also an area where Recruiting can help craft a memorable candidate experience to ensure the right people meet the candidate.
2. Product
The existential purpose of a company is the product and/or service offered. The product has a utility value (ease of use, accomplished X in Y time), and also a visionary value. Average candidates will typically orient around utility and insure the product is stable and works as claimed. Top talent will typically seek to appraise the visionary value of your product. Therefore, you'd be well served to nail the following questions:
What key problem are you solving for humanity?
What does the future look like in the fully-realized vision and value of your product?
How will the product evolve next year? What is the process that drives that evolution?
Does your company have a feedback loop to inform sustained product iteration?
How big is the total addressable market for your flagship product?
What other products are on the roadmap?
3. Pay
To attract (and close) top talent, you will need to offer above-market compensation in the following categories:
Cash (salary, bonus, sign on)
Equity (ISOs, grants)
Benefits (healthcare, meals, perks)
The relative importance of the above comp mix will vary from candidate to candidate, but be prepared to put your best offer out first. Top talent doesn't want to play low ball / high ball (with the exception of a few sales roles where negotiating might be expected). Lead with your best offer. You can also offer flexibility in the salary/bonus mix, e.g. 60/40 vs. 90/10 which more risk-averse candidates will appreciate.
If your company is <3 years old, make a point to be especially transparent about equity: # shares, ownership %, strike price, valuation. This is the only way the candidate will be able to evaluate the equity component which is often the biggest motivator to join a young company.
The 3 P's: People, Product, Pay.
Good luck! We hope you find this information useful to attract and close talented people for your company.
Why
Based on requests from readers, we are publishing this abbreviated post for two reasons: 1) provide insights on the recent volatility, and 2) share cryptocurrency resources.
Recent volatility
The cryptocurrency market has been volatile recently with some coins down 75% (see: Ripple). While severe, this level of volatility is not unprecedented and should be expected:
Resources
Given the extremely rapid pace of innovation, there is a true opportunity of informational advantage. Both individual and institutional investors can benefit from staying abreast of new developments and tapping various networks for insights. Because published content can become stale within a week in the crypto world, we've divided this partial list into static and dynamic resources:
Static
lopp.net: the best list we've found on bitcoin/crypto (thank you Jameson Lopp)
Coinbase tax FAQ: the only thing that is certain other than death
Dynamic
Reddit: according to Polychain founder Olaf Carlson-Wee, the best way to learn about crypto is to engage with the community
Telegram: join one of the top 10 groups that's talking about cryptocurrency
Twitter: follow the founders and thought leaders in the space, e.g. Vitalik Buterin (Ethereum), Charlie Lee (Litecoin), Binance (also on Reddit), etc.
Disclaimer
Past performance is not indicative of future returns. Invest at your own risk, and only invest what you can afford to lose. As cryptocurrency hedge fund manager Dan Morehead describes it: "This is high-octane stuff."
What can we learn from a simple fitness device?
A Bosu trainer caught my eye at the gym yesterday:
For the uninitiated, the Bosu Balance Trainer is a simple fitness device designed for one thing: intentional instability.
By design, the Bosu's partially inflated rubber dome creates a shape-shifting shit show of a workout that, at first attempt, seems near impossible to balance upon.
But aside from the physical torment the Bosu inflicts, the concept of intentional instability stayed with me for a while seeking deeper inspection.
Intentional instability
I asked myself: What would it look like if I applied intentional instability to my brain? It seems beneficial to challenge my cognitive strength by putting it in wobbly situations where I not only question my assumptions, but also exercised new ways of thinking, i.e. my "stabilizer neurons" if you will.
The Bosu brain
That same day my best friend Chris happened to text me this link: https://www.farnamstreetblog.com/mental-models/
What Chris had shared with me—compliments of Farnam Street—was a list of 113 different mental models, each of which constitute a mini-Bosu exercise in cognitive stability. My Bosu brain training program had arrived!
If there's one thing you take away from this blog post: bookmark this link. It provides a cognitive exercise regiment of compelling value.
The good people of Farnam Street took the time to compile a fairly exhaustive list of heuristics and mental models humans can use to think about challenges and opportunities in new ways. The end goal of all this is to make better decisions, and think more deeply.
For example:
Inversion: thinking backwards or in reverse
Confirmation bias: what we believe is what we choose to see
Circle of competence: knowing and respecting the bounds of our own knowledge
Hanlon's Razor: appreciating human stupidity instead of assuming malice
Second-order thinking: extrapolating the effects of the effects (of a given action/decision)
Probabilistic thinking: favoring probabilities over possibilities; also: superforecasting
Regression to the mean: confusing statistically likely events with causal ones
What mental model will you explore? How can you embrace the Bosu brain?
Inspiration and learnings from an epic zip-lining adventure across redwood trees in Guerneville, CA! Coastal redwood trees are the tallest trees in the world (350-400 feet), but they don’t have the traditional deep tap root to anchor them.
How do redwoods grow to be the tallest trees in the world without deep roots? Amazingly, redwoods connect their roots with each other underground to form a vast web-like network.
An interesting trend. . .
What do Albert Einstein, Marie Curie, Charles Darwin, Thomas Edison and Mark Twain have in common? They all kept a journal.
Journaling is a form of reflection. Reflection is important because it helps humans source creativity from within, forge emotional tranquility, and ultimately perform better at our endeavors.
For this reason, many great thinkers—and leaders—journal. If you're still not swayed, you might consider 'To Be An Effective Leader Keep a Leadership Journal' (Forbes), and 'Want to Be an Outstanding Leader? Keep a Journal.' (Harvard Business Review) for further reading.
The "LIFE" method for journaling
Having kept a journal for 10+ years, I've found myself experimenting with different formats—trigger questions, specific topic for each day of the week, etc.—but nothing really stuck.
I always found myself drifting back to unstructured prose which, although fun, wasn't entirely useful for purposeful writing, or scanning past journal entries for insights or trends.
As a solution, I created a new method to ensure I covered the four topics most important to me: learnings, ideas, feelings and experiences. When I realized these four words formed the acronym "LIFE" I immediately vaulted my hands in the air and expelled a much-too-loud, teeth-clenched "YES!" which evidently scared the crap out of everyone in the SF Public Library.
Moving on.
The "LIFE" method for journaling has four main components:
L - Learnings: What did I learn today? Whether by podcast, book, blog, or conversation, this ensures I capture the most important things I learned today. It also reinforces my daily learning habit for personal development.
I - Ideas: What new ideas did I have today? It might be an idea for an invention, or a nuanced observation. The goal here is to capture creative imagination, or your next million-dollar business idea.
F - Feelings: How did I feel throughout the day? I think of this as taking a daily emotional inventory to ensure I'm reflecting on how I'm feeling: afraid, happy, proud, grateful, angry? At first, this process felt like dredging but it got easier w/ practice.
E - Experiences: What did I experience today? What was fun, interesting, or notable? What color was the sunset? What did dinner taste like? How did the beach smell that afternoon? I try to add a thick sensory layer to prevent myself from laundry-listing the day.
It's going to get a little weird
Journals have historically enjoyed the vaunted status of "strictly private" usually reserved for classified CIA documents. I'm going to break the rules today and show you a page from my personal journal so that you can see the LIFE method in action.
That's it
I hope you find the LIFE method for journaling useful to you in some way. If you give it a try, who knows. . . it might stick.
The opera ticket
Ah, one thing we didn't cover was the opera ticket at the bottom of my journal entry. Since I'm terrible at rereading past journal entries, I've began quasi-scrapbooking every so often which brings the pages to life and makes reading past entries more enjoyable (and frequent).
The human brain
The human brain is the most complex manifestation of intelligence in the universe. The brain is composed of an astounding 86 billion neurons which generate 50,000 thoughts per day (on average). Our brain's memory has the potential capacity to hold 2.5 million gigabytes of data. Shaped by 200,000 years of evolution, the human brains exemplifies brilliant design worthy of inspection.
Source: Beyond Adversity, 2014
What if your company was a brain?
Grossly oversimplified, the human brain has two main parts:
Neocortex: planning, thinking, movement, perception, language, vision
Limbic system: our emotions, behavior, long-term memory, sense of smell
Additionally we have the cerebellum (14 above) and the brainstem. The lower part of the brainstem is called the medulla oblongata which controls our breathing, heart rate and blood pressure (pretty important, right?). At your company, what departments or groups best represent the various parts of the brain? Who does the strategic planning? Who "keeps the motor running"? Who represents the eyes, ears and voice of your company?
What the brain doesn't do
What if your medulla notified you every time it was time to take a breath. . . 23,000 times per day?
What if you consciously had to pump your heart. . . 115,000 beats per day?
Thankfully, your brain doesn't do this. Phew! But this is where the brain metaphor starts to get interesting: internal communication. Why? Because companies today have an insatiable desire to over-communicate which decreases productivity/output.
Signal vs. noise
Most executives would agree: the modus operadi of business today favors noise over signal. Across email, apps, chat and internal systems, the typical knowledge worker receives over 400 signals each day!
As a result, most executives are on neural overload with dwindling attention spans to prove it. Did you know our attention spans have shrunk 33% over the last 17 years to only 8 seconds?
Below are a few methods to:
Turn the volume down.
Enable relentless focus on your biggest goals.
Reduce distraction.
Delegate to increase trust.
Methods executives use to stay in control
1. Meticulous management of notifications
Select only certain people for which you will receive notifications, e.g. CEO, other executives, direct reports
Eliminate notifications (on desktop and mobile) from automation/machines
Reporting
Daily stats (do you really need this at all?)
Weekly stats
Monthly stats
Quarterly stats
Annual stats
2. Categorization of things that truly need your attention as priorities:
Client emergencies
Board-level matters
C-level communications
Significant Competitive intel
New product launches / new milestones to celebrate
Sensitive HR issues
Helping with a big deal
Tip: have you tried the Ivy Lee method? In the evening, write down the 6 things you need to accomplish the following day. Historical fun fact: Once this method was implemented at the executive level of Bethlehem Steel in 1918, the boss (Charles M. Schwab) was so impressed that he paid Ivy Lee a fee of $400k in today's dollars for his consulting efforts.
3. Create a culture of effective communication
Slack/chat guidelines: please, please consider this
Do you really need to @here / notify the whole channel
In-person meeting guidelines (examples from Google, Apple, Amazon and Facebook)
When to meet in person
When NOT to meet in person
Why are we meeting? Agenda, intention, outcome
Personal ownership over the breadth of your message
A primer on data science
Described as the "sexiest job of the 21st century" by Harvard Business Review, data science has penetrated the annals of business history in the last decade. Leaders today would be wise to harness this powerful capability, and consider the recent guidance from McKinsey & Company's 2017 quarterly report:
"While CEOs and other members of the executive team don’t need to be the experts on data science, they must at least become conversant with a jungle of new jargon and buzzwords (Hadoop, genetic algorithms, in-memory analytics, deep learning, and the like) and understand at a high level the limits of the various kinds of algorithmic models. In addition to constant communication from the top that analytics is a priority and public celebration of successes, small signals such as recommending and showing up for learning opportunities also resonate."
Click image to download the McKinsey Quarterly report (PDF)
What does data science mean
Data science is defined as:
An interdisciplinary field about scientific methods, processes, and systems to extract knowledge or insights from data in various forms, either structured or unstructured, similar to data mining.
Additionally, data science is a "concept to unify statistics, data analysis and their related methods" in order to "understand and analyze actual phenomena" with data.
Why data science matters
The complexity of data science lends itself to rabbit holes, corner cases, and the risk of getting mired in a blackhole of minutiae. So let's first agree on why data science actually matters: IT HELPS BUSINESSES MAKE BETTER DECISIONS. That's about it.
Having personally endured dozens of data science briefings, the most valuable outcome is unequivocally a better informed decision.
Technology has spawned a galaxy of information that's so big Google requires 4-5 million servers just to keep up. Today's executive have, at their finger tips, more data than any team of humans can analyze. Therefore, we must employ new tools and tactics to make sense of the information.
Data science helps you connect the dots, allowing you to see patterns. A regression model might reveal a constellation in the night sky you've never seen before. A classification model might yield an insight as important as the north star. Valuable knowledge awaits.
Knowledge = Power?
Contrary to popular thought, however, knowledge by itself is NOT power. It is simply potential power. Knowledge + ACTION = power. And it is here where so many brilliant data science endeavors fail to launch.
To address this conundrum, it is recommended your data science/analytics folks form a working relationship with your business operations team. This handshake is crucial because each data science output, e.g. churn predication score, etc. must be accompanied by an operational rollout plan with an expectation of accountability from management.
Resources to share
If you are considering starting—or furthering—your data science efforts, below are a few resources & tips you may wish to share with your team:
Most teams today are building their data science models in Python
The SciKit-Learn website has free, open source tools for efficient data mining
Pandas is arguably the best python library for data framing (here is a tutorial)
You can use ROC curves to evaluate your data science output, e.g. applied to renewal rate
Want to simply explore the many uses of data science? Check out: The Information Diet
For the more advanced readers, you can delve into Google's machine intelligence library: TensorFlow
The DBT Ventures team hopes this information will help your team make sense of the night sky that is today's business canvas.
"All the answers are out there, but people still watch five hours of TV a day and complain about opportunity." —Jason CalacanisThe true cost of Netflix
When Netflix IPO'd in May of 2002, the company was valued at a mere $300 million. Over the last 15 years Netflix has been on a rampage capturing 100 million subscribers and $81 billion in market cap (as of 2017; updated: market cap is $136 billion as of Nov-2022).
Yet Netflix has apprehended something far more valuable: our precious time.
Of course, there's a time and a place for entertainment: who doesn't enjoy getting into a good show every now and again?
However, this entertainment comes at a dear cost far exceeding the $11.99/mo membership fee. If you believe time is our most precious commodity, then we must acknowledge the massive opportunity cost that we sacrifice every night in front of the screen.
Let's start with some facts
The average subscriber spends 20 hours per week on Netflix
. . . That's 80 hours per month
70% of Netflix users binge-watch shows
Netflix streamed 10 billion hours last month
The Netflix catalog is approximately 115,000 hours of content (21 years; waking hours)
Sources: DMR, CinemaBlend, Variety
20 hours per week is a lot
Let's start by acknowledging the obvious: 20 hours per week is a LOT of time. In most states, 20 hours per week is considered part-time employment. With 55 million subscribers in the US, you can say that 17% of Americans have a part-time job watching Netflix (US population = 323 million). This absurd reality provokes a crucial question: is this really the best use of our time?
The importance of personal development
The short answer is no. Watching Netflix for 20 hours per week is likely not the best use of our time. Life is short. Really short. And for life to improve, we must heed the guidance of legends like Jim Rohn when he writes:
"Learn to work harder on yourself, than you do on the job."
Side note: if you haven't read The Art of Exceptional Living by Jim Rohn, it comes highly recommended from most of the executives we work with.
Only by building the habit of daily personal development can we truly improve our personal and professional wellbeing. Netflix is kryptonite to this endeavor.
"Want to watch a show?"
The question sounds innocent enough. Enticing, even. But next time you ask—or get asked—this question, make sure you keep this perspective in mind:
The typical human is awake for 15 hours per day, or 105 hours per week
As stated, Netflix is commanding 20 hours per week (on average)
20 hours / 105 hours = 19% of our waking hours are devoted to Netflix (and/or other streaming services)
Breakdown: How we spend our time in a given week
What else could we be doing?
Below is a chart of Netflix binge sessions and their personal development equivalent.
| On Netflix you could watch: | Or you could: | Time required |
|---|---|---|
| 1 episode - Archer | Run 2-3 miles | 22 minutes |
| 1 episode - House of Cards | Write a blog post | 50 minutes |
| 2 episodes - The Blacklist | Bike 20 miles | 1.4 hours |
| 3 episode - Orange is the New Black | Read 82pp. of a book | 2.75 hours |
| 4 episodes - Stranger Things | Learn 5 new subjects on Khan Academy | 3.2 hours |
| Season 1 - House of Cards | Complete Stanford's CS101 online | 10.8 hours |
| Season 1 & 2 - Orange is the New Black | Learn how to program in C | 23.8 hours |
| All 5 seasons - House of Cards | Train for a marathon | 54.2 hours |
| All 7 seasons - The West Wing | Become conversational in Italian | 112.9 hours |
| All seasons - HoC, OitNB, The West Wing | Read 34 of the 51 Harvard Classics | 227.1 hours |
| 21 weeks of Netflix (at 20 hours/week) | Build the first version of Facebook | 420 hours |
You are always choosing
So the next time you're tempted to binge of Netflix, keep the above list in mind. Realize that you are always choosing: a choice to watch Netflix for 3 hours is also choice to NOT learn 5 new subjects on Khan Academy. A choice to weekendbinge on 2 seasons of your favorite show, is a choice to NOT learn how to program at a basic level.
Every decision has tradeoffs, and the more we keep this in mind, the better off we'll be on our quest for transformative personal development.
Next episode playing in. . .
You can also disable autoplay: https://help.netflix.com/en/node/2102. This one decision could help reduce your Netflix consumption by up to 50%.
I'm curious: what would you do with the extra time?
Why the CRC ratio is critical to an exit
We've investigated important SaaS metrics before (see: Want to blow up your SaaS business? Ignore C4), but today we will expand upon Customer Retention Cost, specifically by exploring the virtues of the CRC ratio.
But first, let's recap how CRC is defined
CRC = Customer Retention Cost ($). It typically includes the following components:
What is the CRC ratio?
The CRC ratio typically takes the CRC and divides it by total subscription revenue over the same time period. For example:
Customer Retention Cost (annual) = $10M
Total Subscription Revenue (annual) = $85M
CRC Ratio = 11.76%
Pretty straightforward.
So why is the metric critical to a successful exit?
Two main reasons:
CRC too high: the exorbitant spend could derail your path to cash flow positive resulting in: lower valuations, down rounds, or possibly a fundraising crisis.
CRC too low: you may be underinvesting in Customer Success which will inevitably manifest itself it gut-wrenching churn and team burnout.
How to benchmark your CRC ratio to public companies
Since GAAP has yet to catch up to the economic realities of the recurring software subscription revenue, this gets a bit tricky for one main reason: GAAP includes CRC in the reported Customer Acquisition Cost (CAC). Therefore, public benchmarks for CAC are inflated by about 20-25%.
To isolate CRC, we recommend taking 20% of the CAC. Therefore, if CAC = $5M, your extrapolated CRC would be $1M. Let's take a look at a few data points for Salesforce, Workday, ServiceNow, NetSuite and Marketo:
[click to enlarge]
For these five companies we can see that the CAC ratio ranges from 0.08 (Workday) to 0.13 (Marketo). But these are mature, publicly traded companies. . .
What should you benchmark your company on?
Based on analysis of 24 private companies with strong churn fundamentals, here are a few guidelines for CAC ratio based on how long you've been in business:
Year 1: 25%
Year 2: 25%
Year 3: 22%
Year 4: 20%
Year 5: 18%
Year 6: 15%
Year 7: 14%
Year 8: 13%
Year 9: 12%
Year 10: 11%
You can also use this as a budgeting tool to ballpark total Customer Success spend for a given year. But remember: the money spent on retention isn't about "revenue protection". Your customers don't care about that. They care about adoption and value realization which is ultimately what drives the mechanics of churn and renewal rates.
The best leadership teams figure this out early on: investing early in Customer Success is worth its weight in gold. Yes, growth is critical and everyone likes to high-five and ring the gong when a big deal is closed. But the Customer Success program will chart the path towards realizing Customer Lifetime Value which is what the SaaS game is all about.
Two guys grabbing dinner in San Francisco
I recently had the pleasure of catching up with one of my old teammates from Optimizely. He's doing well: director-level position, managing a growing team, and meanwhile hyper-focusing on how he can take it to the next level as a leader.
So I asked him a question:
"If I were to meet with your team over drinks, and I asked each of them to describe you in three words, what would you want them to say?"
Simple question. Long, thoughtful answer.
His final answer:
"Caring, consistent, and challenging." [Three C's FTW]
While the answer was revealing, the true value was in talking through the various tradeoffs one makes as a leader:
Friend vs. boss
Lenient vs. stern
Strategic vs. tactical
Inspirational vs. directive
Spontaneous vs. predictable
And while none of the above are mutually exclusive, a leader has limited time. Very limited. So you have to explore: what is your management philosophy? How do you want to be perceived? Even. . . remembered?
So I challenge you:
What are the 3 words you would want your team to describe you?
If you're still staring instead of thinking, below is a insightful list of questions your team is likely asking themselves right now.
Credit due to Fred Kofman’s book, Conscious Business, in which he crafted these questions about communication clarity, mission, shared values, respect and teamwork.
Do I know what is expected of me at work?
Do I have the materials and equipment I need to do my work right?
At work, do I have the opportunity to do what I do best every day?
In the last seven days, have I received recognition or praise for doing good work?
Does my supervisor, or someone at work, seem to care about me as a person?
Is there someone at work who encourages my development?
At work, do my opinions seem to count?
Does the mission/purpose of my company make me feel my job is important?
Are my co-workers committed to doing high-quality work?
Do I have a best friend at work?
In the last six months, has someone at work talked to me about my progress?
This last year, have I had opportunities at work to learn and grow?
The DBT Ventures team hopes this article has been helpful in urging you to proactively control what 3 words describe you as an executive.