Josh Padnick’s Blog

I may write more on this later, but just a quick thought:

“Business is nothing more than managing constraints and doing a good job of predicting the future.”

That’s what Seth Godin asks in his new book The Dip. It’s a question my sister got me thinking about not so much in relation to what I do, but about people in general.

And got me thinking it has. How many times do we engage a professional and really feel that this person is one of the TOP professionals in what they do? How inspired do we feel when we encounter such a person?

This idea got reinforced in the most unexpected of places recently. It takes a man to admit it, but someone recently gave me a gift to get a massage at Massage Envy. I was a bit trepidacious about it, but I figure I work hard, and it couldn’t be that bad, so maybe it’s okay to indulge.

Embarrassed as I am to admit it, I realize now I had some unconscious prejudices about a masseuse. I assumed that if they were highly ambitious they would have undertaken a more “clinically significant” field like becoming a nurse or doctor. I assumed that it wasn’t that hard to become a masseuse. I assumed the massage field was mostly for people who weren’t sure what they wanted to do, but thought they could make some money doing this.

I knew very little about the whole idea of massage so I found myself asking the masseuse a lot of questions. It quickly became apparent that she took an enormous amount of pride in her work. She worked out 5 days a week to stay in good shape since she felt it allowed her to have increased strength. She closely watched her diet and water intake to ensure she was always well-nourished and well-hydrated. She studied up on various schools of thought in massage. She explained that she felt all these things made her clients that much more likely to choose her.

I’ve encountered $300/hour attorneys who don’t take that kind of pride in their profession. It dawned on me that it kind of doesn’t really matter WHAT you do, but something truly magical happens when, for whatever it is that you do, you resolve to be the BEST at it.

It started making me sensitive to how much of the “I want to be the best” factor different people have at different jobs. If the masseuse was a 10, I rate most professionals I encounter a 6. They work, it pays the bills, they enjoy it, and then they go home and live their lives. I suppose there’s nothing wrong with that approach, but, well, that’s what will give you a 6. I think the 9’s and 10’s internalize their work so much that how good they are at it becomes a point of personal pride. Going physically home doesn’t always mean going mentally home.

I think “liking what you do” has an enormous amount to do with it. Even though my company provides numerous visual design services by employing some very talented visual designers, I myself HATE doing visual design (mostly because I’m so bad at it). If I endeavored to be the best visual designer around, I could only tolerate it for so long. But being the best, say ASP.net 2.0 programmer I know, would be very challenging, but an exciting challenge.

I guess in the end, it makes me think about what I want for myself. When people ask me what I do, when I ask myself about what I do, how do I feel about the quality of what I produce? How proud am I of my skill at my profession, vs complacent that I’m “doing pretty well”? It made me realize that for me personally, the desire to create the best company in our industry, to offer the best service, to offer the best value, to provide the best product, those are things that would make me feel great.

I’ll be honest. We’re not there yet. I personally am not there yet. But it’s a goal that’s starting to overtake my mindset…we’ll see what happens.

I just read a great article on FoundRead:

Check it out

I could not agree more with this, and major props go to Chris Michel for admitting it took him years to fully absorb a seemingly simple lesson.  There’s a certain angst we all have when we first start and aren’t sure what to do with ourselves.  I like how Chris points out that activity in the absence of defined, measurable outcomes is just haphazard random motion.

Cool stuff.

When I was in college and dreaming about my super-success story in “someday” mode, it was typically a vision of pure ambition. The “who” part about the people I’d actually be working with remained mostly unspecified. The “how” part didn’t really matter. The “what” part just had to involve my core interests of technology and business.

So, in 2003, I started doing entrepreneurship for the first time. I lived in an apartment alone at the time, and decided that I would be a Web/marketing consultant and work out of my home. I had good credentials, so I was fortunate to get a $12,000 contract by being introduced to a company through a family connection. I had no budget, no strategy, no vision, no plan. I basically had one room dedicated to being my office and I had a client.

Read the rest of this entry »

Recently, we’ve been hiring several new people for Omedix. The nice thing about hiring someone is that they have no prior expectations about how things work. There’s no prior expectations about salary, bonus, benefits, commissions, work/life balance, degree of responsibility, etc. I basically get to establish a fresh baseline for their expectations based on the initial employment offer I make.

So, that’s caused me to think pretty hard about what kind of company *I* would want to work for, and what kind of employment situation *I* would want if I were applying for a job. After all, working today is a 2-way street. The “employee” (I hate that word but at least it conveys my point for this posting) — anyways, the “emplolyee” has to prove they can make worthwhile contributions to the company, and the company has to prove they’ll provide a rewarding, fun, well-compensated work experience. If the employee can’t cut it, the company hires someone else. It the company can’t cut it, the employee goes to work for someone else.

That got me thinking: I would HATE to work in a purely salaried position. It’s not so much that money is everything; I would just hate the idea of having a fixed compensation regardless of how much value I actually created for the company. Sure there might be a “you did well” bonus at the end of the year, and incremental raises, but for the most part my compensation would be fixed.

On the other hand, one of the things I really love about my current job is that, financially, if I create a lot of value in the world, I will be financially compensated for that. Conversely, if I royally screw up and wind up using a lot more of the world’s value than I create (otherwise known as when expenses exceed revenue), then I have to live with that. It can be nerve-racking sometimes, but also thrilling, and I like that.

So, anyway, my thinking is that today is just a different world. Back in the day, people would go to work for a large, established company, earn a flat salary, have a fairly predictable job, and be rewarded with pension plan and other long-term benefits after something like 30 years of service to the company. Yuck!

Today, people are constantly hearing about billion-dollar acquisitions ($1.6 billion for YouTube), and it no longer seems completely shocking when we hear about a 30-year old multi-millionaire. The super-fast rise of the Internet created a sort of “anything’s possible” mentality, and I think a lot of people in the “Net Generation” (let’s say that means anyone born in 1975 or later) have encountered the idea of working hard on an idea that might change the world, that there’s something intoxicating about it. The romance of it is alluring to our generation in a way that just wasn’t that common 50 years ago.

We see 30-year old Google billionaires, and use websites created by some guy out of his college room, or download software written by some guy who was a high school dropout, or visit the restaurant of some guy who’s only 35 that we all, I think, have a desire to taste the nectar of “anything’s possible”.

Set against that kind of backdrop, how exciting can it be to work at a predictable, corporate job earning a straight salary mostly independent of how well you do? I say that our generation demands something spicier. We want our companies to throw down the gauntlet and say “If you can produce, we will deliver.” We want to work in an environment where our salary, our potential, and our responsibility are limited only by what we think we’re capable of, not constrained by the shackles of bureaucracy or “how we do things here.”

And so, with Omedix, I’ve tried to do the best job I can to create that. My goal is to make “mini-entrepreneurs” out of every single member of our team. People shouldn’t be asked to bear the financial/emotional risk of starting a new business, so a base salary with benefits is still appropriate. But we also shouldn’t be constrained, so I think a very potent bonus structure is important.

We should each know how much we “cost” the company — the total cost of our salary, benefits, and bonuses. And we should each know how much value we GENERATED for the company. And so we should each have a sort of “profit”. And since it takes time, money, and energy to create the infrastructure in which that profit is created, most of the profit should go to the infrastructure — to the company — but a healthy share of that profit should go to the person that earned it in the first place. The more “value profit” you earn, the more you should be compensated.

I haven’t perfected the system just yet, and I’ll be honest — it sometimes feels like I’m playing with volatile chemicals when structuring incentive programs — but the right chemicals mixed together creates a powerful “chemistry” and lot of energy, and drives people to work harder, have more fun, make more money, and love their job. What could be better?

Details to follow…

I am by no means the first (or last) person to say this, but services like Skype are changing all the dynamics of phone systems.

Consider the following: Right now Omedix pays about $185/month for a basic phone system that allows incoming calls to be answered by a main receptionist and routed to the appropriate person. We all have voicemail, conference calling, and two lines.

Some people at Omedix work remotely full-time so if I were to call them on the phone, I’d be looking at a long-distance call, which by the way we pay $0.12/minute for (ouch!). So on average our phone bills hover around $300/month –> almost $4,000/year.

Now consider skype. Skype is an Internet-based phone service that lets me download skype software and talk to anyone else who also downloaded Skype software for free. The quality is actually *better* than what we get over our old school phone system.

But we can’t expect all our business partners and clients to be using Skype, right? That’s true, which is why Skype has “SkypeOut” which lets me call any phone number in the USA or Canada for free. Actually, that “for free” part is a temporary promotion which may or may not end by the end of the year, but even if it did end I think the standard long-distance rates are around $0.02 or $0.03/minute.

Oh, and there’s SkypeIn so that people have a number to call us. How much does that cost? About $4/month. Of course, we want to have a PhoneTree , and of course it’s only a matter of time before some enterprising entrepreneur sets that up. In fact, one entrepreneur may have already set that up: check out Sky-Click.

In fact, Sky-Click sets you up for an entire call center. Wow! So I’m sure there’s something out there that turns your Skype number into a PhoneTree System. Or suppose I decide to use AllDayPA and have the Omedix phone lines staffed by a 24-hour receptionist, and with a sophisticated sounding British accent no less! I don’t know the pricing there, but since I’m only paying for time used, it’s still much less expensive than the system we currently use.

So, basically, we could set up Skype to make our long-distance calls free or virtually free. We could setup All-Day PA to eliminate the need for a phonetree (you can provide a script to help them direct your callers). We could all receive our voicemails off of Skype or messages from the receptionist off an e-mail. *Every* message is retrievable remotely, and we save money.

We are definitely living in a different world. If you call Omedix and hear a British voice, now you’ll know why!

Josh

P.S. We switch out a few different people to answer the phones now (versus having a dedicated receptionist) so these comments wouldn’t place anyone’s job in jeopardy.

I just finished Watching the 60 Minutes piece on Starbucks. They featured Howard Schultz, the founder of Starbucks, told his story of going from the projects to today’s Starbucks which boasts over 11,000 stores in 37 countries and $27+ billion in annual revenue. But they also threw in an element of “inexplicable business genius” that I think does a disservice to educating people about what entrepreneurship really involves.

Now, don’t get me wrong. I think Howard Schultz is an amazing guy, and his achievements are just awesome. For any entrepreneur, he’s it — one cannot fathom achieving more than what he’s achieved.

But in the retelling of his story as told by 60 Minutes, Schultz just showed up at one of the very first Starbucks stores (which at the time sold only beans and latte machines, but no drinks), decided he could do something with it, took a job there, and later bought out the company.

Well, having read the official Starbucks Story as told by Schultz himself in “One Drip at a Time” (I think that’s the title; check Amazon), that glosses over pretty much everything. They didn’t talk about how Schutlz signed on not as “entrepreneurial visionary” but as a marketer for the company to help them expand the reach of their coffee beans business becuase at the time Starbucks sold only beans. They didn’t talk about how Schultz didn’t even get the idea to sell latte’s in Starbucks until he visited Milan for some conference a few years after working there. They didn’t talk about how Schultz opened one small test store selling actual drinks that was so small you couldn’t even sit down and how it did well.

They didn’t talk about how Schultz couldn’t convince the original Starbucks founders to move into the coffee *drinks* business so he formed his own company with investments from anyone he could get his hands on in a company called “Il Giornale”. They didn’t talk about how the first Il Giornale stores were total replicas of the authentic Italian espresso bar experience, complete with opera and a complete Euro feel — the Americo-Euro feel of Starbucks today was a slow evolution.

They didn’t talk about how the original Starbucks founders (still purveyors of beans only at this point) eventually decided they wanted to move on to something else with their lives and *that’s* one of the main reasons they decided to offer Stabucks for sale. They didn’t talk about how Schultz pitched to practically every human being on earth about his vision for Starbucks to take the now matured concept and go across America with it — this wasn’t in the book, but I heard anecdotally that Schultz even targetted physicians at medical conferences to be prospective investors.

They didn’t talk about how Starbucks was unprofitable for nearly 5 years after Schultz took over. They didn’t talka bout how if Schultz hadn’t achieved profitablity in the sixth year the Board of Directors would have absolutely kicked him out.

Now, my point in all these “they didn’t talk about’s” is simply this: to say that Howard Schultz woke up one day and said “I’m going to make coffee a $4 premium item and brand it as Starbucks and create a cool atmosphere” is absurd. Entrepreneurial genius rarely strikes in such a fashion.

Instead, I say Howard Schultz is not a genius because he had the amazing Starbucks concept in mind — I say Howard Schultz is a genius because he sacrified a good job to do something he was passionate about, he was *undeniably* passionate about the notion of bringing Italian-level coffee into America with all its according romance and folklore, and he was absolutely as tenacious as a person can be. He did have a flash of brilliance in Milan, Italy visiting the espresso cafe’s, but that was not a random stroke of genius. In fact, in a lot of ways, he got lucky. What if his conference in Milan had been cancelled and he wound up not going? Would we still have Starbucks today?

To summarize, I just want to make the case that entrepreneurship is hardly about the great idea. As Paul Graham (www.paulgraham.com) points out, there is a very convincing way of pointing out that an idea itself has almost no value — there’s no market for ideas. I can’t go on the Internet and pay $5,000 to read a 2-paragraph description of the next great idea, and I certainly can’t sell any ideas I have for $5,000 or probably even $5.

Ideas are nothing. After college, when I moved back to Phoenix, got into my car in the dead of summer, and nearly suffered third-degree burns because it was so hot, I had the idea that I would sell portable air-conditioning units for cars that woudl cool them using solar power so that when I did get in, it would be nice and cool. Sounds like a great idea to me, but it never went anywhere because I never did anything with it. I share it freely with you, dear reader, here because it will be useless for you too unless you decide to act on it.

So, that’s my point in all of this — there’s no question Howard Schultz is *the* American entrepreneur, the epitome of the American Dream, an incredible success story. But I feel it has much less to do with his business genius and much more to do with his passion, his tenacity, and a whole lot of luck.

Okay, so, I don’t know if I’ll be able to articulate this concept well, but here goes.

One of the best parts about entrepreneurship is that you find yourself in the position of leveraging resources. What do I mean by that? Well, one example is that we license very high-quality patient education content from a company. So how can that resource be leveraged?

Option #1: Do Nothing
Hey, it’s an option, albeit not a very good one.

Option #2: Just tell clients that we have patient education and see what they want
I don’t love this option; it’s not very proactive and it means we wait around to see what happens.

Option #3: Re-package the content in ways uniquely valuable for each practice and offer it for sale
Getting warmer! Let’s see what else we can do…

Option #4: Make the content available dynamically to patients based on patient-specific data
Okay, I really like this one since now patients get a personalized experience!

Option #5: Who knows what the future holds?
I don’t want to give away all our plans for the future, but I think the progression here is clear — increasing value to the customer.

Now here’s the really exciting part of all of this. As a company, our licensing agreement for this content is not dependent directly on the value we provide to our clients. Sure we use proxies for determing that value, but whether we use the lackluster Option #1 or the blockbuster Option #4, our costs stay the same.

But the revenue side is much different. If we add more value, we can charge more. I don’t think that’s greed or bad business. On the contrary, we can’t charge more unless we really do genuinely add more value. So we’re incentivized to make our product better.

But think of what this means — costs are fixed, but the value we add and the revenue we generate by leveraging this resource is limited only by how clever we get. And that’s what’s so exciting about entrepreneurship! Patient Education, of course, is not the only leverage our company deals with. There’s also each person’s individual skills and contributions; there’s our collective experience and expertise; there’s any and all code we’ve already written; and probably a whole bunch of other things I can’t think of right now.

As far as I’m concerned “optimally leveraging resources”‘ is one of my chief responsibilities around here. If I do a bad job at it, our costs don’t magically go away but our revenues fall because we’re not adding value to our clients. But if I do a great job at it, then our clients ought to feel they are hugely better off as a result of having met us and done business with us, and remuneration should almost be an after-thought.

Borne Out by the Experts?
Jim Collins is famous for having authored From Good to Great, a huge bestseller where he profiled 15 public companies that performed brilliantly in the stock market from (I think) 1975 - 1995 (I might be wrong on the dates). Anyways, he found several very interesting common themes shared by these companies. One fascinating theme was that “vision” was actually less important than “getting the right people on the bus.”

The idea is that if you hire brilliant people, once you get them in the door, you can work together to figure out what you ought to be working on with them in the first place. Granted, I think if a startup just gets a bunch of smart people together but has no vision whatsoever it’s destined for failure, but isn’t this really just a restatement of the concept above? Doesn’t “getting the right people on the bus” really mean bringing on “highly leverageable resources” and then working with them to figure out how best to leverage their very impressive talents?

More to come on these thoughts…

There are certain fundamental principles that are supposed to be followed in all kinds of software development — reuse code as much as possible, work lots with the client, etc. There is another fundamental principle that is very often *overlooked* in software development, and particularly in software designed for physician practices — and get ready because it’s a boring word that’s going to make you stop reading; I present to you the stupefying concept of:

I just read this blog entry (read the intro at the top and then scroll down to the bolded comments by Dr. Kelly Clark) and I think it’s a great example of how software that fails to take account of the workflow process goes beyond simply not satisfying the customer and into the rather unpleasant realm of actually inciting anger in the customer. Yikes!

But It’s Challenging To Do This…
About 1.5 years ago, we began laying the foundation for an administrative automation system for physician practices and so one of the first tasks was to whip out our notepads, go down to physician practices and ask “Okay, so when a patient calls and makes an appointment, how does that work?”. Then we tried to document these answers on paper, then model them in a flowchart, then validate them with the practice, then inquire with another practice, update the model, etc.

This turned out to be *extremely* labor-intensive, generating 15-page Visio documents which helped somewhat, but which ultimately were shelved for a different day.

The takeaway from all of this for me is that, as a healthcare IT vendor, we *ought* to do a huge amount of workflow analysis and engineering, but it’s time-consuming, expensive, a pain for the client, and ultimately drives up the cost to the point where a customer might start to have second thoughts about whether the software is worth it in the first place.

So what’s a vendor to do? Our Solution
Well, one tenet of capitalism is that capitalism always rewards efficient use of resources. I mean, in the end, using resources efficiently is exactly what the system is designed to do in the first place. So, the way I see it, the *inefficient* way to address this issue is to painstakingly and intensively analyze the unique workflow processes of numerous practices and then try to engineer a super-model of the workflow and build our software to that spec.

I think the efficient way to do it is to interview a handful of practices, and then engineer our own workflow process, take it back to them, and say “Well, what do you think?” Obviously, any workflow that we propose had better be accepted by the client or else we’ll re-visit that awful angry zone from the link above, but personally I still think this is a more efficient way to do it.

On the downside, the client has to go through the very awkward process of re-doing their existing workflow, which I would imagine is not only logistically challenging, but risks calling into question the usefulness of some people, which creates an environment of “our software vs. your job”, which would be a terrible situation. But if that particular issue can be managed and a workflow process could be engineered that is both very well-designed and doesn’t aggravate the client, then we’ve actually succeeded in creating useful, efficiency-boosting software at a very reasonable price.

We’ll see what happens…

So, I think a healthy exercise for every company is to take a look at its competition every so often.

Even though your customers might not do nearly as much research as you’ll yourself do about your competitors, if you don’t know how you compare to your competition, you’re basically at the mercy of how much a customer has chosen to research. If you offer a lesser product than your competition with a lesser marketing campaign, any success you have is by happenstance, not because you cleverly planned it out.

One truth that has consistently proven itself in capitalism is that uniqueness gives you leverage.

People and companies who bring something unique to the market are allowed to charge a premium for their services because the reality is that the thing they do can’t be found elsewhere.

Examples abound. Our company hosts hundreds of websites and so we need software to help us manage all those sites. Technically, we could do it ourselves, but what a mess that would be. So we chose to buy a “Web Host Management System”. We looked at Helm, Plesk, Ensim, and Cpanel, and ultimately went with Plesk.

Plesk has far and away the slickest-looking interface of all the systems, and our clients have to use Plesk for e-mail and account management, so a nice looking interface is an important selling point for us. But every other feature of Plesk is either mediocre or, in the case of their support infrastructure, basically sucks.

Case in point: the other day we tried to setup another layer of backup protection using the backup program that came with Plesk. The backup program failed — a software bug — so we called Plesk and asked for help. First they wouldn’t help us because we didn’t have a premium support contract (despite having paid thousands of dollars for their software to begin with). After we convinced them that this was not a support issue but a bug, they agreed to help us but first needed legal disclaimers from us that if they destroy our servers while trying to fix them we can’t sue them. Communicating all of this was quite difficult in the first place because none of the technicians had more than basic grasp of the English language.

Now, thousands of companies support thousands of websites visited by millions of users every day on Plesk software, and yet their support infrastructure is just horrific, their product is increasingly overpriced, and the stability is sometimes lacking. In spite of all this, Sw-Soft (the makers of Plesk) has been flourishing. Why? Simply because their product is uniqely user-friendly with clients, that unique feature happens to be really important for companies like us, and so we tolerate everything else.

Another example: Tommy Bahama. Tommy Bahama is a clothing line started in Seattle 10 years ago with a large presence here in Phoenix and Scottsdale. They were the pioneers of the whole “Island Lifestyle” movement, and, personally, I think their clothes look classy, relaxed, and stylish all at once. There are other imitators of the Island Lifestyle, but none have anywhere near the brand cachet that Tommy Bahama has.

And sure enough, having established their uniqueness in the form of their brand, they charge a serious premium for their clothes. A pair of Tommy Bahama shorts costs $85, and they can’t keep them in stock!

If you think about it, the whole concept of companies establishing a unique competitive feature about your product and then leveraging it is all over the place and companies are constantly trying to do it. Starbucks recently launched the Green Tea line of products in the hopes of establishing a unique product offering, whereas Coffee Bean (a Starbucks competitor) has its Blueberry Pomagranate Shake and you can’t get anything like it at Starbucks. I recently saw a product demo from Bose and they’ve integrated certain features into their product that no one else has. They’re reall cool features, too, and if I were in the market for a home entertainment system, I’d pay the extra dollars just to get that special Adaptiq technology that automatically learns my musical preferences!

On the other end of the spectrum, companies that compete in commodity markets and that struggle for differentiation have a terrible time trying to maintain profits. Just look at the grocery market industry. A grocery store is a grocery store, so all they can really compete on is price, selection, location, and quality of experience. No one can invent some super technology that allows their grocery store to surpass all other grocery stores, and so the industry remains in a neck-and-neck competitive equilibrium, and no one charges exorbitant Tommy Bahama prices because shoppers will just go elsewhere.

The Takeaway

For me, the takeaway here is that you build a successful company by building products that people want and can’t get elsewhere as easily or as conveniently or as well as they can get them from you. In MBA parlance, you need a competitive advantage, and that’s really what it comes down to. If you don’t do anything different than the other guy, all other things being equal, you’re likely to lose in the battle for marketshare.

It’s a really obvious point in a way, but I think a lot of companies still overlook it.