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Lean Spin-Off: What you can learn from Jack Stack about growing your company via spin-off

For the better part of 4 years I led a team to find, fund and launch new web businesses on behalf of a mid-market company. My client was generating cash hand over fist, but they knew their business model and market were likely short-lived (highly regulated, faltering demand).

We set out to quickly and cheaply develop new web-based products & services in their vertical. We identified a few promising opportunities, but we were struggling to find a workable and repeatable process for launching these spinoffs. That is until I happened upon the book, "A Stake in the Outcome" by Jack Stack and Bo Burlingham (of "Great Game of Business" fame). It's a good read if you're interested in open-book management, but the key gems for our project were buried deep.

/ Jack Stack "A Stake in the Outcome"

Back story: Jack Stack and his management team took over a failing engine re-manufacturing company and over time turned it into a growing, profitable employee-owned company. But a number of years into the turn-around they faced a tough challenge - generating enough cash to payout employee-shareholders who retired, left the company, or simply wanted to sell their shares. Big liability headache.

After trials and tribulations, Stack and his management team found a solution. Build equity in spin-off companies and use the equity they built to fund the Mothership's ESOP liabilities. Their method:

Find a leader to build the spinoff, who:

understands the startup process

knows how to make the most of limited resources

has skin in the game (equity, pay for performance)

aligns their interests (goal: equity growth)

Determine a single project to develop that:

solves a problem for the Mothership

meets demand of Mothership's customers (non-core)

Fund the new entity with a small loan.

See here: for eye-opening math

Build overhead absorber

overhead starts from day one

generate cash

Build for cash

build the company around cash cycles

large % payments up front

recurring revenue/long-term partnerships

Never-never-never risk the Mothership

external offices

external operations

external people

separate financials

Scale for equity

build scalable sales engine

build scalable product

build scalable systems

According to the book, in 5 years they built enough equity in spinoffs to fund projected ESOP liabilities (this is a few biz cycles back, so I'd love to see an update).

Bottom line: Every business owner I've ever known has a surplus of opportunities. They see the inefficiencies in their own business, are plagued by expensive component parts, wish for better suppliers, see the needs in their market and have tried over and again to get their employees to tackle these opportunities.

These same entrepreneurs would be exploiting these inefficiencies and building more companies if they had the time/energy. But there are only so many hours in the day.

We found Jack Stack's model and a bit of Steven Blank's "Epiphany" book to be the best model available. In future posts I'll talk a bit more about lessons learned.

Until then, one hint: Finding the right leader is the key constraint. It's surprisingly hard to find the right person to lead the charge.

#lean spinoff #lean startup

Evolution of Marketing Integration Needs

A post over at Econsultancy got me thinking about the evolution of integration needs in the past decade. As the social web increases touch-points for Marketing Sales and IT, integration needs have dramatically increased.

/via Econsultancy

Marketing and Sales' job of connecting with people in a coherent way, answering complaints and helping prospects solve problems now means connecting a huge array of cloud and legacy technologies together. The sheer number of connections needed for a modern marketing machine is daunting.

Evolution > Today Here's another, more expansive look at the same technologies. This gives you an idea of the scale of the integration problem. With each technology set, there's likely two or more vendors to integrate, business processes to adopt and (hopefully) automation to undertake. Not a small integration challenge, no?

/via @chiefmartec

Fortunately, cloud integration and iPAAS vendors are answering the call -- and once a coherent cloud architecture is in place, adding new channels and media doesn't have to mean a big integration bill.

#marketing-integration #cloud-integration

Foo-Dee: Easy Breakfast (and dinner) Migas

Growing up in the North, I missed out on a few delectables we take for granted here in Austin.

On my first visit to Austin 10 years ago, I was introduced to Migas for lunch with a side of charro beans and a ice-cold Shiner. Nearly wept. After some trial and error I found a passable version even the Northerners can enjoy.

Note: I'm convinced the best Migas down here are fried in lard or bacon fat. I present you with a more 'figure-friendly' version. And, if you can't find Rotel in your supermarket aisle, my Northerner reporters have confirmed sightings in their local Wal Mart.

Easy Breakfast Migas

teaspoon corn oil

3 oz sausage (any - see note)

1 half-can Rotell

6 oz stale tortilla chips or corn tortilla (or fresh if you must)

6 eggs scrambled

1 half white onion, diced

Shredded cheese (cheddar or your fav)

Optional: sliced black olives, cilantro, lime, flour or corn tortillas

Heat non-stick fry pan to medium. Add oil, heat a couple minutes, brown sausage until it's no longer pink. Add onions & tortilla chips, frying until onions are translucent. Add Rotel (or half can diced tomatoes and a teaspoon of canned Jalapenos. Pickled jalapenos give a nice kick as well). Fry for 5 minutes or until most of the tomato juices are absorbed. Stir in eggs and cook, stirring to taste. When eggs are nearly done, stir in cheese, olives and cilantro. Serve with tortillas, salsa and lime wedges on the side.

Migas for dinner: Even better than breakfast -- when you add a side of Shiner. I kick the recipe up to 10 eggs, double the sausage and add a full can of Rotel. Served with charro beans, tortillas, a nice salad and some pickled red cabbage, makes for a quick, cheap, filling and easy dinner. Kids love it.

#recipe #austin-food

Foo-Dee: Easy Pickled Red Cabbage

By request. When we're looking to feed a crowd, my go-to meal is soft taco bar. A bit of pressure-cooker shredded chicken, some tortillas, taco fixins and some queso makes adults and kids smile. My favorite of the fixins? Pickled red cabbage. Adds a hit of color and one heckuva tasty crunch to soft tacos. Bonus? It's really easy to make -- as I've told all the folks who've asked. Here's proof:

Ingredients:

1/4 medium size red cabbage, sliced thin

1 tablespoon salt

1.5 tablespoons white sugar

1 half white onion, slice thin

12 oz white vinegar

Slice the cabbage thin. Best way I've found is to cut the cabbage in half, then cut each in half again (aka, quarter the cabbage). Slicing at an angle, remove the core, then slice remaining cabbage thin (cole slaw thin not shredded thin). Repeat with the onion. Meanwhile in a medium sauce pan, heat the vinegar. Stir in salt and sugar until dissolved. Once vinegar boils, remove from heat, add cabbage and onions with tongs. Turn cabbage and onion a couple times to coat with vinegar.

Cover pan and let steep for 3-5 minutes. Strain, reserving pink juices if you like. Chill in non-reactive bowl for an hour (up to a couple days) before serving.

Serve along side taco bar, but it's also a great fixin for Texas bbq brisket and shredded bbq pork.

Easy no?

The Power of Open APIs ... a simple look at the simple power of open APIs.

"This is our shot at a clear, plain English explanation of APIs and why they're important."

/via @BBYOpen

"The IT trains don't run on marketing's timetable."

@chiefmartec

Evernote: Fixing "Syncronization Failed" & "Cannot Connect" Errors

I spend most of the day in Evernote -- the perfect spot for To-Do lists, screen shots for 'cases' and general idea-keeping.

This past week, I was plagued with weird syncing errors. Finally found a few minutes to troubleshoot (successfully!) Here's the fix if you find yourself in my shoes:

Troubleshooting: Find the Evernote Log File

From Evernote choose Tools -> Options then Open Log folder. There, browse to the latest log file (saved by date). Open in your favorite text browser:

Evernote Log file: Windows System in Offline Mode?

Internet Explorer Thinks We're Offline

Turns out when my router went offline last week, IE was open. After a router reboot, nobody told Mr. IE that we were back online (though Firefox and Chrome worked perfectly for 5 days).

Solution? Open IE and surf a bit. One successful 'net page, and we automatically exited Windows Internet subsystem offline mode.

Log back into Evernote, sync, and Voila!

#evernote

Lab Notes: Getting Started with Redis, Codeigniter & PHPRedis

Got a wild hair and needed a quick and dirty hacking server. Codeigniter (CI) has been my go-to framework for some time and figured it was high-time I try the new/improved Reactor edition (community-driven MVC goodness).

Codeigniter? CI is a lightweight PHP framework built with MVC in mind. CI has always stayed out of the way and makes for easy-peasy DRY code. Codeigniter also drives some really neat projects besides my own hacks. If you need a quick hack-stack, Codeigniter continues to be a workable option (though won't win you much cred with the YC-hipster-digerati).

But what about data? My projects are a perfect fit for Redis db (specifically, async queuing). And I've been curious to test Redis over HTTP since I saw this project (why hello there, quick and dirty REST endpoints). Bonus, the same dude has developed a C-library, PHPRedis, to connect PHP5 and Redis.

Backend:

Codeigniter Reactor

Redis 2.2

PHPRedis module

Environment:

Slicehost 256 slice -- e.g. 'hackslice'

Fresh Directory Structure

Apache vhost, ready to receive visitors.

Install Codeigniter Reactor I prefer CI installed above my public_html folder. I share a single CI install among a few vhosts, and application specific code lives in a local application folder.

Codeigniter Reactor System Directory On my box:

/home/cir

CI Application

/home/public_html/domain.com/application/

E.g. copy default application structure to your public_html domain folder... set the location of your system folder (e.g. /home/cir/system) in your CI bootstrap, index.php file.

Redis Installed just like the page says -- really is that easy.

cd /home/

git clone

make install

start server

start client

insert key

read key

PHPRedis Pretty straight forward, only a couple hurdles.

cd home

git clone repo

phpize (if you're flying Ubuntu like me, Google for "apt-get php-dev")

./configure

make && install

Teeny hurdles:

Once compiled, I copied the /modules/redis.so file to /etc/php5/modules* directory (likely not named 'modules' on your install)

Tried the sample PHPRedis code in the docs on a test.php page. No go.

Whoops. Don't forget to restart Apache (rookie)

> apache restart

All good.

That's it. We have a fully functional MVC hack-server ready to go. Next up, some benchmarks on CI Reactor and PHPRedis (I already know both are fast -- just hoping they'll make for faster hacking).

Why virtualization? Cloud infrastructure explained... with Legos (!)

/via BlueLock

#virtualization vmware

The making of a TED event from the perspective of two speakers. Beautiful.

#TED

A few months before the [company sold], I transferred the ownership of CD Baby and HostBaby, all the intellectual property like trademarks and software, into the trust. It was irreversibly and irrevokably gone. It was no longer mine. It all belonged to the charitable trust. Then, when Disc Makers bought it, they bought it not from me but from the trust, turning it into $22 million cash to benefit music education. So instead of me selling the company - (getting taxed on the income, and giving what's left to charity) - that move of giving away the company to charity then having the charity sell it saved about $5 million in taxes. (That means $5 million more going to music education.)

The Derek Sivers Exit Model: Derek Sivers on selling his company.. Why I gave away my company to charity | Derek Sivers

#BuiltToSell #SiversExit #legacy

John Doerr [the venture capitalist] sold me on this idea of O.K.R.’s, which stands for objectives and key results. It was developed at Intel and used at Google, and the idea is that the whole company and every group has one objective and three measurable key results, and if you achieve two of the three, you achieve your overall objective, and if you achieve all three, you’ve really killed it.

Marc Pincus in NYT Q&A

66 percent of B2B marketing budgets continue to be allocated to “traditional” media channels, including trade shows and direct mail; however digital marketing accounts for 8 of the top 10 most effective channels for reaching B2B audiences.

B2B Marketing Outlook - 2011 via SpearMarketing.com

#b2b DemandGen

8 things every marketing technologist should know…

via www.chiefmartec.com

#markettech

With 79k emails, 24k unread and hundreds new each day, Priority Inbox is a life-saver. Thanks Goog!

“What should I be when I grow up?” Look to the Hedgehog Principle from Jim Collins. via eq4pm.typepad.com

Hedgehog? According to Jim Collins, the fox knows many things, while the hedgehog knows one big thing. Mr. Fox busies himself with trying to find ways to eat the hedgehog, while the hedgehog remains safe because it's good at one thing: curling up into a ball of spikes.

#hedgehog

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