The Business of Software

As customers, employees, shareholders or consultants, most of us have have witnessed moronic behavior in companies and managers (and even software developers).

Yet somehow these companies still make money, and many have been making huge amounts of money for years.

I keep thinking that I would wipe the floor with my competition if I started my own company, but the fact that they are making money while being morons has me wondering what else is really going on.  I fear that if I don't know what are the real reasons how and why they make their money (because apparently it isn't good products or service) that my business will fail.  How do they do it?

Confidence, schmoozing, making connections with people are much more important qualities than mere technical excellence.  If people want to do business with you, then they'll be patient while the bugs are worked out.

As a technical person, this may be a side you tend to ignore, or at least undervalue.  But I too have seen people I consider Technology Challenged maintain friendly relationships with the customer which survived their broken promises, too early schedules, and disappointments.

They're not really morons.  Just very skilled in an area you may not understand.

Right. Production is no longer the issue, and hasn't been for decades; Convincing customers to buy more stuff is. Hence the bigger paychecks to suits.

The reason morons succeed is that they don't know any better.

lol

And they relate to other morons better!

The crappiest company in the world can make money, assuming a good product that people need, and an ample sales infrastructure.  I am continually amazed at how a business can survive and grow despite perennially bad decision making from senior managers.

It's my opinion that a sound business has stewards, not managers.

"They're not really morons.  Just very skilled in an area you may not understand."

+1 for morons.

It may be true that techies as a population tend to under-value non-engineering activity. But that doesn't mean that the world isn't chock-full of morons. :-)

Rather than asking what it is that morons might know, it might be more instructive to ask why the morons are behaving the way they are.

Knowing why they behave that way won't help me ... I just want to know how they make money even while giving bad service and doing other wasteful things.

>> The reason morons succeed is that they don't know any better. <<

That's why.  Persistence is the key to being successful in most things in life.  Morons don't know when to quit so they keep pushing.  They also aren't smart enough to know their own limitations so they don't psyche themselves out before they even begin.  As the saying goes "fools rush in where angels fear to tread".

Here's how many of the big consulting houses work*:

The A-Team comes in, does the presentation, stuns the client with their skill, expertise, and understanding and the contract is won for N years.

The company - knowing that without the A-Team, they're screwed - moves them onto the next project/client that they want to win and fills in with the B and C-Teams for the duration of the project.

Therefore, by the time other groups come into the project, the A-Team has moved on and you're meeting the B and C-Teams.

Yes, these people are morons...


* From personal experience working with teams from most of the Big 5 and the big government contractors.

KC -

The A-team has the advantage that the people to whom they're selling are very likely all morons as well.  As long as they show up with their "exhibits" or "artifacts" or "delivery methodology" and dazzle the cross-eyed clients, they'll sign the deal.

Running a business requires something I saw referred to as "trade sense" CEOs and butchers have it: i.e., people at the very top and bottom. Middle managers and engineers do NOT have it.

Running a business requires that you do about 4 things ADEQUATELY.  VERY FEW businesses do all of them even adequately, much less well:

1. Product that solves a problem.
2. Price < cost of the problem.
3. Marketing that gets your potential customers to look at your product.
4. Sales that can explain benefits.

SW engr is just 1/4 of this.  Many companies have better products thatn M$, but M$ does ALL of the above well.


I highly recommend the book "Growing a business". It's based on a PBS special. One of the best books I've read on the subject.

http://www.amazon.com/exec/obidos/tg/detail/-/0671671642/102-0876156-1168922?%5Fencoding=UTF8&v=glance

"I just want to know how they make money even while giving bad service"

Is that your goal then? To give bad service? Why is this your goal?

We are all morons.

If you start a company...
- You will attempt to avoid (and may succeed in avoiding) the moronic mistakes of your old company
- But your new employees will soon believe (sometimes* correctly) that they see moronic behaviour in you. 

The reason that your new employees will sometimes* be correct in diagnosing moronic behaviour in your new company, is that you will just be a moron in a different way to your previous boss/employer/whatever.

* Note: Following thru on the "we are all morons" theory it makes sense that your new employees will be morons too. The consequence of this is they can be incorrect in diagnosing moronic behaviour, but even a moron can be correct sometimes , even if its for completely the wrong reasons or just by chance.

P.S.
While made in facetious way, substitute "moron" for "person who make mistakes because of lack of skills, application, or understanding of the underlying issues", and it would make a serious point. I'm just not entirely sure what the serious point is.

The goal is not to provide bad service. The goal is to find out the other factors that drive the success of those that give bad service.

"From personal experience working with teams from most of the Big 5 and the big government contractors."

Also (from experience working with a big government contractor) keep in mind that getting the contract almost always comes down to two things:

1. personal friendships
2. price

There's a reason retired generals jump right into six figure salaries in private industry. And no matter how good your product is, if the other guy says he meets the absolute minimum requirements and beats you on price, he wins. There is no reward for producing a product better than what the spec calls for.

And in case you're wondering where the friendship part comes in, how do you think the winner knew to lower his bid at the last minute by just enough?

Time and time again we see inferior products that are successful. At the end of the day it all comes down to good marketing.

If you think of the business as a money-generating engine, the most important metric is that it generates dollars. It can be greasy, noisy, and ugly, but if it runs reasonably efficicently and generates dollars, it'll sustain. So the guy operating the engine doesn't need to be a genious. He just needs to know how to run the engine and make sure it continues to produce dollars.

On the other hand, if you have a clean, quiet, beautiful engine, operated by really smart guy, but the output gear slips on the drive shaft (and therefore doesn't efficiently generate dollars), the engine is not very valuable.

I'm suggesting that it comes down to the business model--it's either effective or it's not. All kinds of people can stumble onto good business models.

Ignorance is bliss.

Morons know to take clients to tittiie bars, get them drunk, and pay for their kids college. Sometimes the old ways are best. Saying our product is better because feature X is 9.99% more efficient doesn't have quite the same impact.

"We are all ignorant, just about different things."

Will Rogers

OK then, so providing bad service is not an option. That's good to hear.

There are some products I use where the service is the WORST ever. Really terrible. It can take six months for them to ship software, aften they cash your check. Bug reports and service requests are ignored. And yet I use them and recommend them ONLY because their software is the best by a wide margin. I know the engineers there. Great guys. They HATE what the sales and service departments have done to their work. They are not allowed to even talk to customers, so they have to do it in secret from their home accounts since their work is monitored. They are a European company. When I recommend them to others, it comes with a big warning that their service is the worst. I firmly believe that if they had even half-decent service, they would be able to triple their sales. But as it is, they are successful.

There are also products with good service and bad quality. Microsoft comes to mind here. Their brand name and market penetration certainly help here. With a more secure OS and better usability, MS could own 100% of the market, but doing so would cost them twice times as much in development costs and they'd only increase sales by 5%, so they have made a decision that it's not worth it to deliver a quality product.

So there are two situations I'm dealing with today.

Two aphorisms give the reason:

"Eighty percent of success is showing up."
 -- Woody Allen

"Sturgeon's Law:  90% of Everything is Crap"
 -- Theodore Sturgeon

If you show up and produce something that's ony 75% crap, you're ahead of the game.

If you neither show up nor produce anything, you've already lost.

Agreed.

To expound, you don't have to be good to be successful. You just have to not completely suck.

Smart people know the odds of winning the lottery are infinitessimally small, and don't buy tickets. Hence, all the lottery milionaires are stupid people that got lucky.

Smart people know their app either sucks, or is trivial, and never dream of selling such crap. Hence, all software on the market is there because at least the guys selling it are morons.

Technical excellence, critical thought, engineering precision ... are all at odds with making sales. Obvious intelligence is threatening to most people. Sales are usually made based upon rapport, and you can't have rapport when you're scaring the customer.

Extremely intelligent people are stereotyped by popular culture as domineering, dogmatic, unpleasant, and just not much fun.

The most successful technology companies know how to keep the highly intelligent but threatening "worker bees" in the background so that the comparatively shallow and less intellectually gifted salespeople can "work their magic".

I mean, think about it: "critical thought"... CRITICAL? Why, that's not "NICE" as seen by most people.

"Eighty percent of success is showing up."

Microsoft, which at the time was a very small company, got their deal to provide DOS to IBM because they showed up and the other guy didn't.

"Extremely intelligent people are stereotyped by popular culture as domineering, dogmatic, unpleasant, and just not much fun. "

Extremely intelligent people are often smarter than people that simply think they are extremely intelligent.  As such, they don't need to make other people feel dumb and don't come off as domineering, dogmatic, or unpleasant.

Great topic.  I remember reading about a psychologist who was doing a study on this very issue.  It was titled "Too Dumb To Fail" and it's main thesis was that people with high IQ's are destined to be less successful than people with low to average IQ's(within reason).

The author theorized that those with high IQ's tend to see more variables when starting a new project. When quantifying these variables, they see all the ways a project can fail and focus on avoiding failure. However someone with a lower IQ doesn't realize all the problems inherent in a new project and just plows ahead fat, dumb and happy.

I wish I could find the research article, I tried to Google it, but found a bunch of crap.  I'll look again when I have more time and post the article if I find it.

Oh, do I ever agree with that!

The more I think about how bloody complex my products are, how much could go wrong in the field and how variable the marketplace is, the more I wonder how I could possibly be earning revenue.

The crazy thing is, the more aware you are of the potential failure points, the more you test and resolve those difficulties.  The result is a superior product, but you don't normally think of it that way -- you think of how your software could break at any moment if you missed something essential-but-obvious.

>  When quantifying these variables, they see all the
> ways a project can fail and focus on avoiding failure.

Straight out of Blink. Diagnosis was made more accurate by considering a very small set of measures.

parnas, are you talking about the book Blink : The Power of Thinking Without Thinking by Malcolm Gladwell?

If so, is it worth buying?

Your earlier post about tittie bars was funny as hell(and so true). It reminded me of a funny experience I had with a software salesman.

> parnas, are you talking about the book Blink :
>The Power of Thinking Without Thinking by Malcolm Gladwell?

Yep. Some good online talks:

* SXSW Interactive 2005 - http://www.itconversations.com/shows/detail478.html
* Human Nature - http://www.itconversations.com/shows/detail230.html

> If so, is it worth buying?

I think so. It's a lot of stuff i've read before in a different format, but he is such a good writer and presenter. The kind of person you look at and say damn, i'll never be good that.

> It reminded me of a funny experience I had
> with a software salesman.

Always being in the trenches the best i get is a mug or  t-shirt, but i have heard some good stories.

T Norman,

You may like the book "E-Myth Revisited" by Michael Gerber(sp?).  He makes the point that most companies are started by people like you - people like you who have technical skills and think "I can do better".

(I guess one might ask, if companies are started by smart people, where do all the morons come from?  I don't know!)

My name is Eric.  Please send me and the others on the list below $5 and forward this to 5 more people adding yourself into the number #1 slot, bumping my name down 1 position.  We'll all get rich!

1. Eric
2. John
3. Mary
4. Tinker Bell
5. Keith

"The crazy thing is, the more aware you are of the potential failure points, the more you test and resolve those difficulties.  The result is a superior product, but you don't normally think of it that way -- you think of how your software could break at any moment if you missed something essential-but-obvious."

This is just so, so, so, true. I cannot even describe how true this is.