In “Pick one and own it“, Jason Cohen advocates for picking just one advantage over your competition to sell, and really owning it.

Its a valuable debating technique to learn, regardless:  when confronted with an argument, instead of switching to a different argument, stick to the one at hand, and finish it out.  When you switch gears you’re often conceding ground, without arriving at consensus. It also prevents you from being intellectually lazy if you can’t just switch subjects when the discussion isn’t going your way or the way you expected.

It is also a good way to build your brand if you can focus on just a few key advantages, taking each one to logical conclusion, instead of overwhelming the message with 100 advantages that are difficult to prove or show.

AustinStartup has had a couple of posts attempting to help those new to SXSW find some of the gems hidden in the long schedule of events at SXSW.

Here’s another take on panels you shouldn’t miss, by Carla Thompson.

Interesting reading about Social Tools within Intuit on the Dachis Group’s site, as they discuss engaging with social tools in their business and the new processes they have to embrace.  Christine Morrison responds to questions from Dachis Group, and I’ve quoted the exchange that caught my attention:

Getting diverse constituents to agree on process changes, or new processes can be difficult. Any tips you can share on bringing people together?

The answer is, it depends.

If the goal is to just make a new, first-ever process that’s never been attempted before in your organization happen (and it doesn’t have to be large-scale right off the bat), I recommend a skunkworks operation: prove your case in a limited, low risk way, and use that data to drive adoption across the organization. The overhead in this scenario is a lot easier to achieve: you usually just need one well-placed promoter who is willing to take a risk on a new way of doing things. Some of TurboTax’s most long-term, strategically important social initiatives were launched this way (Live Community and Inner Circle, for example). [...]

Call me a BPM geek but I like seeing people outside of the BPM world thinking about process, and in this case realizing that social tools don’t get you out of having to think about process – but they do have implications for change in your processes as they exist today, if you’re open-minded enough to allow for it.

Stacy Higginbotham from GigaOm gets things rolling with 10 Austin Startups you should meet at SXSW.  Notably, she avoided the obvious in Gowalla and listed out a few that folks outside of Austin might not have heard of or made contact with.  There are certainly other interesting startups in Austin, but she managed to call out a couple of my favorites (Whurleyvision, Appozite, and OtherInbox).

There are a mind-numbing number of panels, just for the interactive portion of SXSW. I’m going to attend some of the sessions this year and I’m still trying to figure out how to narrow it down. Its definitely a time to feel fortunate to live in Austin to have this kind of opportunity to see what’s going on in the world of music, movies, and “interactive” (this year, by the way, the focus seems to have turned toward mobile platforms… whereas interactive used to be more focused on blogging).

UPDATE: of course, as I soon as I posted this I found an article I’d been saving to read that should have been included:

Austin Startup’s “Tech Tips for N00bs to Survive SXSW“.  It gives some classic advice about double checking the locations of your events before assuming they are all co-located.  SXSW uses *all* of Austin for its events – especially for the music festival.  I recall one year that they reported using 300 music venues in Austin for one festival.  The article also includes great links to sites with more information on SXSW, and who to follow on twitter to keep up with the latest and greatest.

The best advice: bring earplugs.

I was recently struck by the difference between a couple of posts about SAP Gravity and Microsoft’s Windows Workflow Foundation.

In the first, some demonstrations of SAP Gravity with Google Wave are presented. But they seem a bit contrived to me – and moreover Google Wave isn’t realistic for enterprise use yet – which makes SAP’s focus on Wave all the more puzzling (since they usually don’t focus on any technology until its pretty tried and true).  Gravity seems to be long on sizzle and short on substance to me.  But I give SAP props for trying something different to unlock innovation around their huge install base.  And honestly, what they’ve done so far has definite “cool” factor.

But then I saw this post on Windows Workflow Foundation, and I see that it is possible to have been in the BPM space for 10 years and still not get the importance of the business – it is still a programmer’s product, rather than a business-person’s product.  You can sum it all up right here:

“The purpose of WF is not to be a complete workflow solution for Windows. Instead, the goal is to make it easier for software developers to create workflow-based Windows applications.”

Luckily, if you really want to be on a Windows-centric solution, there are BPMS vendors out there that do that…

Every so often, someone makes the argument that essentially nothing has changed in the world of BPM.  Actually, this isn’t unique to BPM – it is a common refrain across all kinds of software categories.

And it is tempting to buy into this, when you realize how durable a writeup like the history of BPM can be (this isn’t a bad writeup, by the way). But one has to remember that history *should* be a bit durable with the passage of time. Jon Pyke recently opined that no one in BPM has anything new to offer.  But the substance of his post is that the marketing isn’t differentiated, and the product positioning isn’t differentiated, and further, that the people who work at these companies don’t know what differentiates them.

Having worked on both sides of the coin (on the software side and the consulting side), I have to disagree with some of Jon’s conclusions because the input data is more limited than he’s realized.

For example:  of course the marketing messages are commoditized among BPM vendors, as is product positioning.  Sadly, it is perfectly easy to copy someone else’s marketing and positioning – it takes minutes, hours, or days at most to do so.  I think the tragedy in BPM is that all the vendors seem willing to implement “checkbox” versions of every feature that analysts care about, rather than go deep with the product in areas that produce real value for customers.  Unfortunately, vendors have been largely rewarded for such behavior with good product comparison reviews and chart placement – but their customers have not been similarly rewarded by this kind of investment.

There are real differences in these products, but it requires a much more in-depth understanding of the products to appreciate it.  Can we be surprised that customers have a hard time achieving this level of product knowledge during the evaluation process?  I used to work with someone who was always telling me how “nothing had changed” in the last 5 years in BPM – at a time when, 5 years before, there was no BPMN – and at that time, BPMN was the de facto modeling standard for BPMS offerings.

There has been quite a bit of innovation in the last 10 years in BPM, but some of the best ideas didn’t get enough investment to go from interesting to indispensable, and some of the best ideas really were commoditized – picked up by all the pure play vendors (and later, but the stack vendors).  I could argue that nothing much has changed since 1994, when I wrote a sales process application that leveraged Lotus Notes VIP to replicate sales data and manage workflow between Sales, Sales Engineering, Manufacturing, and R&D.  But that would be a bit disingenuous. I could write that solution in 1994, but I didn’t have a way to communicate the process to the business (BPMN), that accurately reflected the implementation so we could make sure we had it right.  And I didn’t have a standard data representation for analyzing the process data (for business process improvement).  I certainly couldn’t handle in a trivial way a process that required parallelism the way I can with executable BPMN models.

Jon says:

That’s why, and I’ve said this many times before, BPM is far too important a topic to leave in the hands of product vendors – this is a Business thing – the clue is in the name BUSINESS PROCESS MANAGEMENT. [...] They will talk about the presentation layer, the SOA integration support, analytics, modeling and what have you.

This is, unfortunately, true of a great many people in the BPM ecosystem.  However, it doesn’t sound like a few of the pure plays that have been acquired (take a gander at Phil Gilbert’s blog for several essays on the subject of business taking control back from IT), and it doesn’t sound like some of the new vendors (ActionBase as one example).  Whether these vendors are well-represented at Gartner conferences is another question entirely, but it is ironic that it is typically the small vendor that is more focused on business value. One of Jon’s last points:

Every vendor believes they are unique but the fact of the matter is many of the software metaphors used in these products were defined by pioneering workflow vendors such as Filenet, Staffware, Plexus and Wang

Well, honestly, software metaphors are meant to be re-used, so I’m not sure that that, in and of itself, is a point of criticism.  For example, some of the metaphors in older integration technologies like CORBA and DCOM are embodied in SOAP and WSDL – but not many would argue that web services weren’t a step forward. And if BPM functionality is truly commoditized – is that bad for the customer and the industry if it becomes more standard and more cheaply available?

I know it is tempting to look at the glass as half-empty, but with so many BPM vendors performing so well in a challenging environment, its hard not to look at the glass as half-full. Call me an optimist.

The summary of an MIT Enterprise Forum’s gathering of 3 economists seemed to be optimistic, but with major caveats and concerns.  With three bubbles in our rear view mirror (dot.com, oil, and banking/real-estate), the concern has turned to a potential fourth bubble: cash (when there’s too much of it, inflation can eat away at it too quickly).

Here in Austin, a major new shopping center has opened (phase 2 of the Domain), and the tallest building in Austin is nearly complete (the Austonian, apparently the largest residential tower in Texas).  Meanwhile, Facebook is opening an office and hiring 200 people in Austin.  And co-working facilities seem to be doing well, while providing a good support network for small businesses. So perhaps the better-than-average local economy is influencing my optimistic outlook.

Meanwhile, the Senate has passed a $15B jobs bill. I don’t know if anything in the bill will affect our business directly, but we make our decisions without regard to tax effects (generally that seems like putting the cart before the horse), and from what we can see the environment is still favorable for BPM software and deployments – businesses are investing in process improvement, and BPM.  And big software companies are investing in BPM software (witness the acquisition activity of December and January).  Its a good time to be focused on BPM.

MWD Advisors has a post up about the coming move from “systems integrators” to “service integrators”.  Its a smart read, pointing out that customers who want to offload technical details to service providers are also likely to hand-off the technical lifting to integrate and coordinate these SaaS/Cloud services together to the companies that currently do systems integration.

Interestingly, if BPM vendors provide the right tooling, a SaaS BPMS (or even a hosted one) could be ideal tooling for pulling together these other services to support cross-functional processes for the business.

Someone had to do it, and I’m glad it was Theo Priestley, and not I!

Theo’s written up a summary of the Forrester-initiated BPM Jam on Twitter (thanks Connie!), and did a pretty good job of it.

Key points from his summary, where the idea that education needs to standardize (a la ABPMP), but also needs a more mature, comprehensive approach (a la Lombardi University). I missed this part of the discussion so I’m not sure how people felt about the OMG OCEB examination – of course, since that is a cert only, not a full educational curriculum, that may be why it was overlooked.

Another key point was the idea that a business architect requires 20 yrs of experience with Six Sigma, Lean, TQM under the belt.  As Theo put it:

I disagree somewhat on that point, whilst those methods are ‘nice to haves’ they shouldn’t be prerequisites of a Biz Arch and certainly not as steeped in the skills that they can’t accept outside influences. I’ve seen this among a lot of Master Black Belts and I don’t think they have what it takes to be a Biz Arch on this alone. Needs to be cross-skilled and understand architecture on a wider scale outside of process alone.

I think the key point Theo makes is that if you have adopted the religion of Six Sigma, or Lean or <fill-in-your-favorite-improvement-methodology>, you may be too inflexible to solve BPM problems in the most effective way.  A simple example I’ve seen of this is the Lean and Six Sigma ideal of ignoring technology while improving the process.  As with most doctrines, there is a kernel of a good idea there, but too often it is taken too far – to the point where many six sigma and Lean practitioners seem to be saying that technology can’t inform process improvement approaches – which any software engineer can disprove.  The real point of course is to not let technology slow down the process improvement, which is a very different thing altogether, and something I very much agree with.

Ok, its no secret that I love coffee and cafes with wireless.  But as I’ve said before, I think having an office is important.

But recently two authors have made the case much more eloquently than I have.  James Reinhart’s post, “Why your start-up needs to get out of Starbucks and into an office right now” makes a great case for why working at the local coffee house can be undermining your start-up.

He points out the main deficiencies:

• 75% productivity (this might be generous)
• Lack of space for whiteboards, etc.  The virtual tools don’t replace real stuff yet.
• Boundaries between work and play dissolve in an unhealthy way.
• It doesn’t save much money (office space is cheap).

I’d add to this:

• If you have to take professional calls, the coffee house, and the busy street outside, are *not* appropriate places to do so.  Neither is home, with the dog barking in the background.
• You can often sublet space cheaper than the market rate from another company that isn’t able to fully utilize their space yet.

So he’s given us the cost-benefit justifications… and that’s where the “Locker Room Theory” comes in, which captures the essence of how I feel about having an office.

Today, many people believe in the distributed model – many executive teams are spread all over the country (or globe) and connect only virtually.  Many start-ups believe in the model.  But David Dufresne’s reaction:

I’m sorry, but I don’t buy that at all. As far as I am concerned, business is all about people. Building a winning tech company is mostly about people and having a strong team dedicated to a strategy and executing it together. Being a hockey fan, I will use a hockey team as the analogy for a portfolio company. Being on the road is like being on the ice. That’s where you score goals. That’s where you win that big contract. That’s where you build momentum; grow a sales pipeline, forge partnerships, hurt your opponent, drop the gloves if needed, etc.

But, when players are not on the ice, they are in the locker room. The locker room is where it’s hot and where it stinks of hard work and empty cups of coffee. It’s where you regroup in between periods, look your teammates in the eyes, listen to your coach and team captain, get ice for that bloody bruise, adjust your strategy and tactics. It’s also where you celebrate after a game. Open that case of cold beers every Friday at 4PM. Get back to the whiteboard to figure out what went wrong on that goal against or sale lost to a competitor.

I think this is great insight, and if you don’t mind a hockey analogy, it works well.  In our business (business process management consulting), we can’t avoid being a distributed team.  But we do our best to make it feel closer (investing in videoconferencing, for example), and we very much believe in our investment in a headquarters so that when we are together, we can *really* be together and hash things out.

When people ask me why BP3 has office space, I don’t have trouble explaining why.

“I know how eggs are sucked.” – Theo Priestley, in reference to a vendor giving a 90-minute overview of BPM to someone who has been an expert in the space for years.

I personally prefer the “Teach me to suck eggs” formulation, but this one works quite well also. Theo’s blog is definitely refreshing in its candor!

Fascinating notes were taken at a talk Tim Cook gave earlier today, in which he explicitly laid out the fact that Apple benefited from its narrow product focus, a $40B company whose entire product portfolio could fit on a single table.

So given that focus, why invest in custom silicon?

“We felt that we had the best knowledge of what we wanted the silicon to do,” he said.

By designing its own silicon, he said, Apple can create chips that are best-suited for the company’s products, allowing them to run cooler and more power efficient.

“Apple has, for years, been in the silicon design business,” he said. “When we were on the PowerPC architecture, Apple always personally crafted the northbridge and southbridge chipset, and so it’s not new to us.”

In other words, even when it appears that they are straying from their focus, Apple’s management team has identified an opportunity to use their laser-focus to their advantage, upstream and downstream of the core product the consumer is buying.  (In my way of thinking, silicon is downstream, and retail would be “upstream” of the product itself)

Coincident to this talk, there was new data out showing that the iPhone’s unit shipments *and* market share grew more than any of its rivals in the smart phone space (and honestly, the research firms are being generous when they apply the “smart” label to some of the phones included).

And meanwhile, they’re getting some good news from their major US partner: AT&T.  A recent report from PCWorld shows that AT&T has dramatically improved the reliability and speed of its network.  Not that I can feel these improvements from a particular square block in downtown San Francisco (and the AT&T network gets its lowest scores in San Francisco!), but I’ll take the study at its word that on the whole these improvements are real.

Oh, and, happy birthday, Steve.

Theo Priestly on BPM Redux wrote about ArisAlign and its lack of “buzz”.  I’ve had similar feelings about Aris’ user experience, and the feeling that some of the enthusiasm espoused is a little forced – sort of trying to hard with the “I (heart) ArisBPM” pins, etc.

But the post reminded me of a theme that has been on my mind a lot over the last year: Design Matters in BPM. As if there was any doubt, I see more and more evidence that in the Second Decade of BPM, design will matter.  Not just a little bit.  I believe design will dictate whether BPM achieves ubiquity in the business. Design will dictate which tools will benefit from that ubiquity.

Apple serves as a good example of how much design matters in an industry that appeared to be commoditized (personal computing, cell phones).  Some might argue that BPM software isn’t commoditized yet, and therefore the focus might be on features/functions rather than “design”.  But I think the key elements of BPMS are, by enterprise software standards, fairly commoditized:  there are many players in the space, customers have a difficult time discerning the differences from a feature/function point of view, and ASP (Average Selling Price) is likely declining for most BPM vendors.  There are also a couple of open-source BPM software offerings on the make.

Combine the above with a trend toward putting BPM suites “in the cloud” and offering them in a SaaS model, and it really starts to look more like a utility.  But what takes it to the next level?  Here are some areas of BPM and my thoughts about how well they’ll differentiate vendors…

• Execution.  I think everyone agrees execution is nearly commoditized.  There are *real* differences at the execution level, but the market doesn’t recognize these differences in a way that channels dollars to the best execution engines.
  
• Simulation. Many of the vendors offer this.
• More modeling constructs? Already, vendors barely provide a fraction of the BPMN modeling capabilities defined in BPMN 2.0 (or even 1.0).  So, there’s an opportunity here, but fast-following will be pretty easy.
• Process Discovery? This holds some promise for differentiation in the short-to-medium term, in my view (there are only a few vendors who even claim this ability).
• Optimization? This has potential, but the current solutions simply don’t achieve it.  They work really well on small data sets and don’t (yet) let you efficiently do “optimization” on enterprise production data.  There’s a significant software investment to make here, and opportunity for differentiation.  Pair optimization with process discovery and you’ve got something really interesting…
  
• Modeling tools?  This is heading toward commodity rapidly.  Absent the advent of SaaS software I would have predicted an open source modeling tool would gain pre-eminence and get embedded in a lot of commercial products.
  
• SaaS / Cloud offering? There are already numerous choices and prices are heading toward standard increments.
  
• Community / Collaboration?  Outside of BPM, these are already fairly commoditized from a feature/function point of view.  Wikis, chats, Instant Messaging, Videochats, Communities – these features will not provide differentiation on their own.  In fact, vendors may rely on Wave or similar technologies to incorporate collaboration without making some of the IT investments that early adopters have had to make.
  
• “Dynamic” BPM or “Case Management”.  Call me crazy, but I remember CASE tools being all the rage in the mid-90’s.  I think unstructured, dynamic, and case management style processes are important, but I don’t think the technology required will offer differentiation to vendors for long from a feature/function point of view.  What they offer is a “better fit” to these use cases, but they’re not solving a problem that couldn’t be solved before.  (Note: Better fit matters, its why you should use BPM tooling to solve process problems rather than just slinging some Java or PHP code or hoisting a SOA stack into place)  To the extent that these “case management” tools are better, its a result of better design to suit the problem, not a case of out-featuring the other guys…
  

The opportunity for BPM vendors will be to produce differentiation based on the design of their products and offerings, by producing designs that engage the users, that elicit effective and efficient usage.  Collaboration, Unstructured BPM, Process Discovery, and Optimization all offer the biggest opportunities for differentiation by product design, in my opinion.

In closing, I should clarify that product design is not just skin deep.  Some make this mistake when they look at Apple Products and see only the outer shell.  Good product design goes much deeper than the UI, than the outer shell of the product.

Sandy Kemsley has a few good updates on these topics.

In the first, she releases a review on IBM’s BlueWorks online community for BPM.  Some of the interesting tidbits:

• IBM BlueWorks uses Flash.  Interestingly, Lombardi started with a flash interface (and it was a very slick prototype) and scrapped it for GWT/Ajax.  Why?  Because Flash was just not stable enough to support what they wanted to do (even in the early stages), and they could see that they were going to run out of “room to run” with Flash, whereas in GWT they felt the sky was the limit in terms of layout and functionality over time.  Quote from her blog: “The process designer is Flash-based, and it only took me about 5 minutes to crash it; luckily, it saved as I worked, so I didn’t lose any work.”
• She gives pretty good marks to the content they included, which might form the basis or significant contribution to a CoE.

Speaking of BPMN modelers in the cloud… Sandy followed up with a good post about why locating your hosting services in different locales matters (a lot) to customers.  Although I can point anecdotally to data points (companies) that don’t have an issue with the location of servers (unless it affects performance), I can also attest that quite a few customers in other geographies *do* have an issue with hosting location.

Hopefully as these services mature they can offer more options for their customers.  Certainly IBM has the global reach to put its cloud / community offerings in as many geographies as it needs to to be sufficient for its customers.

Great article from Jeff Jarvis advising companies with nonphysical goods to stop selling scarcity and start selling value. It is a principle that can be applied to a great many businesses, not just the “Web 2.0″ world, but as he points out, education and consulting as well.

His advise to advertising businesses: sell the outcome, don’t sell the scarcity of your space!In the Content world, he points out that content just isn’t scarce any more.  The existence of this blog is actually just one more data point to that effect!  Information is not scarce either – with Google at our fingertips. He goes on:

Thus we have performers and consultants. There is still value in unique performance. We will continue to buy tickets to concerts by stars (but we won’t pay for the Muzak covers of their songs on elevators). We will buy books. We will pay to sit in a movie theater with popcorn. The new competition in the case of media and performance isn’t that someone will make a good-enough version of what we do but that there is more call for the public’s attention.

Quality is a scarcity. But it is a real scarcity.

The challenge is, there has to be recognition that:

• You (your company, your product, your content, etc.) represent quality, and
• Your level of quality is discernably and valuably differentiated from other sources of similar product, content, expertise, etc.

In BPM, we’re suffering a scarcity of BPM-related skills.  We already have a general shortage of technical skills in the world, but on top of that, having the technical skills combined with the understanding of business and process improvement – we’re talking about a real scarcity for the right talent and skills.  But as I’ve argued previously, BPM isn’t hard because it is rocket science – each component task we do in BPM isn’t hard – its hard because knowing the right combination of tasks is a subjective, judgmental activity that depends on experience.

But the *real* scarcity isn’t the BPM bonafides.  The real scarcity is quality BPM skills and personnel.  Because what we’re selling isn’t truly our hours of labor.  What we’re truly selling is the outcome: a successful BPM deployment; a successful BPM program; or a successful transfer of skills and methods to a COE. My shorthand for this is that our customers are buying success.

One of the popular sessions at bpmCamp was a session on offshoring, from which we have a few notes preserved.  Steve Lang from Ford moderated the discussion, which by all accounts was a lively one.

Several of the teams in attendance pointed out that they already have distributed teams, geographically, within the United States.  So the teams are accustomed to conference calls, IM chats, etc.  The teams are largely effective at handing off work remotely as well.

The challenge of a lack of timezone overlap hurt some off-shoring efforts.  Also, a reliance on “hand-offs” (ie, throwing a spec over the wall and expecting to get back a finished deliverable) was not working well for BPM deliverables.  There was a big challenge around how to structure teams and deliverables to get maximum “yield” out of the combined onshore-offshore teams.  One participant pointed out that the problem of hand-offs not working was between roles in the same geography – not just between geographies.  And everyone had problems with attrition undercutting their efforts to onboard staff.  Interestingly there wasn’t much discussion of different locations for the offshore work – not sure if this is because almost all of these projects were considering off-shoring in India or if the geographic differences weren’t that interesting to get mentioned.

Some of the suggested ways to address the challenges:

• Extensive use of webcams, IM, and screen-sharing
• Don’t settle for “newbies” in the offshore team – press for the most experienced people you can get
• Don’t try to fix the scope for your BPM project – BPM scope needs to be flexible to do it right
• Use a tool (e.g. Rally) to improve tracking and transparency in an Agile project
• Eliminate barriers to communication (e.g. going through “proper channels”). People on the project should have access to communicate with anyone else on the project without asking permission. (Emphasis on collaboration)
• Increase time overlap for the onshore and offshore teams.
• Have onshore or offshore members visit opposite location to build relationships and come up to speed.

I’ll make another recommendation: use an offshore team that actually does this stuff for a living in their local geography.  There are many issues working against you when you offshore BPM work -but don’t let a lack of appreciation and experience with BPM be one of them. BPM projects are quite a bit different than the typical IT project, and the collaboration required between business and IT requires more nuance and communication than the typical project.

Giff Constable’s article addresses this age-old divide from the point of view of a software vendor.  In fact, I’ve previously written on this topic from another perspective, advising services companies to reconsider getting into the software business unless they can:

• Attract outside investment.  This acts as a proof point that your product effort has merit outside the four walls of your office.
• Separate the financial risks and incentives (form a new corporate entity).  This protects your successful consulting business from being stripped bare by the software development effort (and later, the software sales effort). And…
• Enter a market that doesn’t already have a good software solution.  In such a market, the product has time to mature through iterations and customers feedback (assuming you are mostly bootstrapping it)
• (alternately, get behind an open source project, which is a good strategy for reducing the cost of your complements)

Giff puts forward some really good advice, but it is all from the software perspective.  I’ll give my reactions to each bit of advice here, as well as my take from a “services perspective”:

“Keep it separate” – this is great advice, and mirrors my advice to services companies who want to build software products – keep it separate.  Giff doesn’t go into great detail about why, but if you keep it separate it leaves your financials a lot simpler, and makes it more clear how much capital your start-up has required to get lift-off. In fact, if you do form a services arm within your firm, you should look at the profit they generate as investment capital and reward them with equity accordingly.  Instead, product companies often resent their services counterparts and treat them as second-class members of the company.

“Focus” – If you get pulled into consulting work this will detract from your ability to deliver product.  I agree.  You need to have “someone else” deliver the consulting – this can be an employee of your separate Consulting LLC, or it can be an existing firm, or an independent contractor.  But if possible, best to avoid it being your development team.  And I mean that, sincerely, as a services guy – we want those product guys focused on making the product better.

“It is hard to turn down money” – Giff’s argument here is that the consulting revenue is tempting, but misleading – leading your firm away from its product software roots and into the world of becoming a consulting firm.  If you don’t find really good help, Giff’s imagery will be correct – subcontracting only works if you have really GOOD subcontractors.  Probably better to let them work directly for the client and get a royalty or finder’s fee.  But I disagree that if you take on consulting work that you also have to pick up a sales staff and project managers-  just stick to a small number of experienced industry veterans who can sell themselves based on their own credibility, and who can execute projects with little oversight.

“Conflicting Team Goals” – If you didn’t turn down that work (because you needed the cash) then you’ve hired people… now what?  Giff writes:

When you start talking about the glorious future of the business (i.e. the product), these hires start to question, “wait a minute, am I irrelevant to this future?”  That doesn’t help morale.

Great insight actually – this is exactly what can happen if you don’t understand how to lead a services team.  If there is an obvious services business alongside the product that you are building, then it should be obvious what the role of that services team will be in the future:  to enable partners and the channel to be successful using the product- a small number of experts to grease the wheels.  The next point he makes is a good one:

Further, you have a problem in your incentive structure.  Your business is structured like a product company, with a focus on equity, but you now have a business unit which should be structured like a services company, i.e. focused on cash flow.

Consulting doesn’t have to be cash-incentive based if you are willing to share software-company-equity with them.  The problem is that the software guys often don’t want to do this.  There are certainly consultants out there who would prefer cash over equity – put those guys on a contract, don’t hire them.

Giff’s final point on this one is that you have acquired a morale problem: your products folks are now stuck working with clients and hate it, and the client staff is jealous of the product team.  To the first part, keep your product team focused on product.  To the second part, client staff are “jealous” of product staff at software companies because software companies constantly make it clear who they care about most: the product guys – jealousy derives from being undervalued.

Distraction to Death – yes, if you keep the consulting in-house, inevitably a fire-drill will distract your product team unless you firewall things appropriately.  And, as Giff says, “Client services work is difficult.”  I think most folks on the product side of the house fail to understand just how difficult client services work is.  Often difficulty is judged by the complexity of the code.  But in fact the difficulty is in managing human expectations, emotions, and politics. And rarely does anyone take into account the sacrifices services teams make to travel to client sites and leave behind friends and family.

The wrong investors – Giff’s point here is that VCs and experienced Angel investors will typically not want to invest in companies with substantial services revenue.  “They want a scalable business, not one that requires an hour of work to get an hour of pay.”  This is a bit of a pet peeve of mine, that services businesses are considered to be “not scalable.”  There are multi-billion dollar businesses that would argue that services revenue is pretty scalable… and profitable.  But to Giff’s point- it is true that services companies get an hour of pay for an hour of work (or close to it).  Unfortunately for software companies, they often get much less than an hour of pay for an hour of work (lose money)…

There’s a dirty little secret in software – very few software companies are profitable on their software business.  I believe that most enterprise software companies now make most of their money on services rather than software.  Sadly, those services folks are not looked at as investors in the business, but as a drain on the business (in fact, Giff’s article makes that point: a drain on focus, morale, and priorities).

The real issue is that if you’re running a services business “right” – you don’t need outside investment.  The company organically funds its own growth.  From another post on Giff’s blog:

“the running joke [on raising VC] is that as a first-timer, if you don’t have a prototype don’t bother, then if you don’t have traction, don’t bother, then if you don’t have revenue don’t bother, and once you do have revenue – why bother?  ” — adityac, in comments of my last post

Exactly the issue with a good services company.  So investors can’t get good terms from services companies, and the services companies would be crazy to take the terms investors would want (to make their investment worthwhile).  As a result, services companies make for pretty unattractive investments unless the investor is looking for more mundane returns.  Services companies also won’t “pop” the way a service like Twitter can pop – because you *are* constrained by the number of work-hours you can deliver, and the number of skilled consultants you can bring into your firm.

Giff concludes with this:

So a consulting business can’t create a product?
That is indeed my argument: a consulting business has the wrong structure, processes, priorities and people involved to pull off a great new product.  However, a consulting business can be fertile ground for good *ideas*, because you are exposed to lots of client pain points.  If you want to be effective at creating that idea (or whatever it pivots into) and bringing it to market , you are better off spinning out a new company with a small, dedicated, product-experienced team right at the start.

Which matches well with my thoughts on the subject – in fact, at BP3 we’ve been exposed to quite a few good ideas for product.  But I’ll add another angle to this – it isn’t just about giving your product the best chance it can have of getting to market successfully – it is also about protecting your services business from being gutted by loss-leading spending on the product side of the house. I’ve seen more than one successful, profitable services company fold because they raided the cash cow to build and market a product – unsuccessfully.  And in the few cases where they raised outside capital from VC’s, the dilution to the services team was extreme. Better to keep these two organizations separate and let the investors have a bigger stake in a separate firm.

Really good, thoughtful post by Giff, and after reading it a second time, I’m even more impressed at the insights. At BP3, we’ve often been pressed by outsiders and our own team members to consider making product development investments – but so far we’re focusing on building the scale we need in our services business.  If we do something product-oriented we want to make sure it plays to our strengths and can be carved out as its own entity. Mostly, I like to think we’re mature enough to recognize that we aren’t ready for the distraction of splitting our focus on building a great services company focused on business process.

BP3 is now registered on Google Maps.  Not a bad interface for registering the map location and business summary.  And its always good to be “on the map”!

Lance Gibbs gave a well-attended talk on moving from Plan-Driven to Value-Driven delivery at bpmCamp 2010 @ Stanford.  There are some great slides in this presentation, and the approach dovetails well with Lance’s ability to get people focused on what matters most to their project success.

It starts with realizing that requirements are estimated, and resources and time are fixed, which is inverted from the typical plan-driven approach.  There’s also a focus on “should” rather than “could.” In particular, slide 4 jumps out at me, as it spells out what you should value, for example:  working software over comprehensive documentation.  Amen!

The presentation is embedded here:

Had lots of feedback in favor of adding Disqus commenting system (here and in other blogs), specifically around threading, identity, and sharing.  For example, you can login using your Twitter id or openID etc.

So we finally bit the bullet and installed it.  Hope it helps keep the discussion going in our blog and makes it easy for everyone to post their opinions!