You’re reading Signal v. Noise, a publication about the web by Basecamp since 1999. Happy .

Signal vs. Noise: Business

Our Most Recent Posts on Business

Acquisitions is where good ideas go to die, part 457

David
David wrote this on 2 comments

Remember the really cool Farecast app that would tell you whether prices for airline tickets go up or down? We featured them back in 2011, after they had been bought in 2008 by Microsoft for $115M. Then, the story from CEO Etzioni was:

So I’m very pleased that Farecast was picked up by Microsoft, was enhanced to become Bing Travel, and is now widely available and broadly used.

I was just tipped to this story from April: Farewell, Farecast: Microsoft kills airfare price predictor, to the dismay of its creator. Not surprisingly, the attitude post-exit of what happened to Etzioni’s idea isn’t quite as bright:

So, we end up with Bing travel as a thin veneer that redirects users to Kayak, while Google innovates with Google.com/flights, which I now use all the time. Google 1, Bing 0.

Getting access to all that money, all those resources, is always the glitter story that surrounds acquisitions. The drab reality is often a lot like the hangover you had after celebrating the check clearing.

Big news for Highrise

Jason Fried
Jason Fried wrote this on 50 comments

Today we have a major announcement to make regarding Highrise, our popular CRM tool. It’s a good one!

The story starts back on February 5, 2014, the day we announced that we were becoming Basecamp. We announced we’d be renaming the company from 37signals to Basecamp, and we’d slimming our product line down to one product – Basecamp. This meant we’d be finding new homes for our other products. We said we’d either sell them or spin them off into stand-alone companies.

And wow! Right after making the announcement, floods of emails came in from companies, investors, and individuals who were interested in buying one or more of these products. I expected some interest, but I never expected so much so soon. We were off to a great start!

We decided to start the process with Highrise, since it was our second most-popular product behind Basecamp and it would command the highest price. On its own, Highrise generates multi-million dollar annual profits, so it’s very much the real deal and very attractive to a wide variety of potential suitors.

We fielded the interest, vetted the buyers, and narrowed down the field to about a dozen companies that we felt would provide a great home for our customers and fertile soil to grow Highrise to its full potential. The fit was critical – we outright rejected a few deep-pocket buyers because their plans included shuttering Highrise and rolling the customers into their existing product. That wasn’t an outcome we could live with.

The finalists were notified, we shared the prospectus, and they had a few weeks to submit their bid package and long-term plan for how they’d improve Highrise. I can’t say who was involved in the bidding, but it was some of the usual suspects (big software companies) and some unusual suspects (smaller software companies and PE firms with great track records). A healthy mix, for sure.

In the end, we couldn’t make a deal. Ultimately the sticking point wasn’t the valuation or price, it was the fact that Highrise didn’t come with a team. Everyone who worked on Highrise would be staying at Basecamp. All the serious buyers wanted the team too. No deal. We weren’t downsizing the company, we were just slimming back the product line. Everyone would be staying on board to work on Basecamp.

This meant selling Highrise was off the table. Next we turned to a spin-off. We successfully spun-off Know Your Company a few months prior, so we had some experience with this. Claire Lew was an awesome fit to take the reins and run Know Your Company, but who would be the right fit for Highrise?

A couple names came to mind, but I felt one was a perfect fit. I knew him, I knew his background, I knew people who worked with him, and I admired his energy and drive. He was a great programmer, a great product thinker, a great leader, a hell of a nice and decent guy, and he just happened to be in Chicago. We’d talked before about working together somehow, but there was never anything to do. Until now.

I dropped him an email. I heard back. And a few months later – today – we have a big deal to announce. We just signed the official papers last week. Argggg lawyers!!

Highrise is now its own company (legally it’s a subsidiary of Basecamp). Highrise will run as its own company with its own leadership, its own team, its own board, and its own budget (fully funded by customer revenues). During the transition period, Highrise will lease some infrastructure from Basecamp, but ultimately it’ll be completely self-sufficient. Plus, because Highrise is profitable, no outside money is required to get it off the ground. It’s on very stable ground right from the start.

And who’s running this new company? Nathan Kontny!

Nathan’s a Y Combinator alum (founder of Inkling & Cityposh). He was also an engineer on the second Obama for President campaign. And you may know him for his latest product, Draft. In fact, I’m using Draft to write this very announcement. It’s an outstanding product.

As CEO, Nathan will be tasked with building the team and executing his vision for Highrise. We couldn’t be happier with Nathan. Highrise is going to get a whole lot better.

What does this mean for the product and our customers? Like any transition, it’ll take some time to get up to speed, but he’s already been digging into the code, getting to know the customer base, and riffing on some ideas. There will be no interruption in service during the transition.

We couldn’t be more confident in Nathan and we’ll do everything we can to support him. If you’re a Highrise customer, we know you’ll be thrilled with his leadership, vision, and dedication to making Highrise the best it can be. If you’re not a Highrise customer, you may want to check it out once Nathan and his team hit full stride. 2015 should be a great year for Highrise.

So please wish Nathan and his team well on their new journey! Here’s to Highrise thriving again!

RELATED: Nathan wrote a story about taking over Highrise on Fast Company and a more personal story on his blog.

Clutter is taking a toll on both morale and productivity. Teresa Amabile of Harvard Business School studied the daily routines of more than 230 people who work on projects that require creativity. As might have been expected, she found that their ability to think creatively fell markedly if their working days were punctuated with meetings. They did far better if left to focus on their projects without interruption for a large chunk of the day, and had to collaborate with no more than one colleague.


Decluttering the company [The Economist]
uberrounddown.png

Just took an Uber Black Car to the office today and noticed that they round down the price and make it clear on the receipt. $21.00 is definitely more luxurious than $21.71. Nice touch.

Jason Fried on Jul 31 2014 9 comments

One-hit wonder

David
David wrote this on 15 comments

It’s incredibly hard to trace the success of any business, product, or project down to the skill of the founders. There’s plenty of correlation, but not much causation.

That’s a scary thought to a lot of people: What if my success isn’t based solely on my talent and hard work, but rather my lucky timing or stumbling across an under-served market by happenstance? What if I’m just a one-hit wonder!?

And I say, so what? So what if you are? I, for one, am completely at peace with the idea that Basecamp might very well be the best product I’ll ever be involved with. Or that Ruby on Rails might be the peak of my contributions to technology.

What about my life would be any different if I could truly trace down the success to personal traits of wonder? Even if I somehow did have a “magic touch” — and I very much believe that I don’t — why would I want to leave those ventures, just to prove that I could do it again?

Yet that siren song calls many a founder, entrepreneur, and star employee. The need to prove they’re not a one-hit wonder. That they’re really that good because they could do it again and again.

For every Elon Musk, there are undoubtedly thousands of people who left their one great idea to try again and fell flat on their faces, unable to go back to the shine and the heyday of that original success, and worse off for it in pride, blood, and treasure.

Life is short. Move on if you don’t love what you’re doing. But don’t ever leave a great thing just because you want to prove to others or yourself that you’re not a one-hit wonder.

Captured by quality

David
David wrote this on 7 comments

Making stuff good is rewarding, making stuff great is intoxicating. It’s like there’s a direct line from perfection and excellence to the dopamine release. And the reverse is true as well. When you make crappy stuff, you feel crappy. No one likes to work in a broken shop on a broken stool.

So it’s hard to fault people from being attracted to sayings like “Quality is Free”. It validates the good feelings that flow from making stuff perfect, and it makes it seem like it’s a completely free bargain. Win-win and all that.

But like anything, it’s easy to take too far. Almost everything outside of life-critical software has diminishing returns when it comes to quality. Fixing every last bug, eradicating every last edge case, and dealing with every performance dragon means not spending that time on making new things.

You can make the best, most polished, least-defective saddle out there, but if the market has moved on from horses to cars for general transportation, it’s not going to save your business. And it doesn’t even have to be as dramatic as that. Making the best drum brakes is equally folly once disc brakes are on the market.

So you have to weigh the value of continuing to hone and perfect the existing with pursuing the new and the novel. This often happens in waves. You come up with a new idea, and a crappy first implementation. You then spend a couple of rounds polishing off the crap until the new idea is no longer new and crappy, but known and solid. Then it’s time to look hard at whether another round is worth it.

The bottom-line is to make that which is not good enough, good enough, and then skate to where the puck is going to be next.

Introducing THE DISTANCE - the business magazine about businesses that haven't gone out of business

Jason Fried
Jason Fried wrote this on 19 comments

I’ve always had a fascination with old. Old trees, old buildings, old people, old objects, and old businesses.

The world is constantly pushing the old out of the way to make room for the new. So if something can stand up to the world, push back, and go the distance, then there’s probably something special about it. I believe those things are worth celebrating.

Today we launch THE DISTANCE, an online magazine that celebrates one type of old thing – the old business. THE DISTANCE is about interesting private businesses that have been in business for 25 years or more.

Everyone talks about how hard it is to start a business. It is hard, but it’s not as hard as staying in business. Every business is new at least once, but very few actually survive to old age (or even adolescence). We want to celebrate those who’ve figured out the hardest thing to do in business: how not to go out of business.

Some of the businesses we’ll be covering have been in business for a hundred years or more. Some are still run by the original founder. Some are now run by a long-time employee. Some are run by the son or daughter of their father’s grandfather who founded the business way back in the day.

Every month we’ll be publishing a new article about one of these businesses to thedistance.com. We’ll introduce you to some real characters, some amazing stories, a few secrets, and the sustained blood, sweat, tears, and persistence required to keep the lights on for so many years.

Our first article is about the Horween Leather Company out of Chicago Illinois. A fourth-generation business founded in 1905, Horween makes leather the old fashioned way. As the last remaining tannery in Chicago, they’ve stood strong, learned how to survive – and thrive – in a challenging environment. They have a lot to teach us.

If you like these kind of stories, we invite you to follow @distancemag on Twitter. We’ll be sharing all sorts of things about old businesses, long-time employees, and other tidbits you may find interesting. Whenever we publish a new story to THE DISTANCE, we’ll announce it first on the Twitter feed.

So, here we go! Head over to thedistance.com to read the story of Horween Leather, the last tannery in Chicago.

And BTW, if you know of great little 25+ year private businesses that would be a good fit for THE DISTANCE, we’d love to hear about them. Could be the mom and pop shop around the corner. Could be the holdout manufacturer on the edge of town. They’re all interesting to us! Drop an email to tips@thedistance.com and we’ll follow up. Thanks for helping us with THE DISTANCE.

My door is always open... Whatever.

Jason Fried
Jason Fried wrote this on 8 comments

Nearly every boss has said it. And just about every employee has heard it. Yet it’s one of the most meaningless lines ever spoken in the office:

“My door is always open.”

The statement usually is followed up with some version of, “If you ever have an issue with anything, please come talk to me.”

What’s wrong with this? Isn’t it important for your employees to know that you are open to hearing their suggestions, concerns, and criticisms? Of course it is.

But let’s be real here: In most cases, “My door is always open” isn’t really an invitation to speak up. It’s a cop-out. It makes the boss feel good but puts the onus entirely on the employees. You might as well say, “You find the problems and then take all the risk of interrupting my day and confronting me about them.” How many people have taken you up on that offer?

Your employees have lots of opinions about everything—your strategy and vision; the state of the competition; the quality of your products; the vibe in the workplace. There are tons of things you can learn from them.

But how many of these ideas and opinions have you actually heard? A tiny fraction, I’d bet. The reality is that companies are full of things that are left unspoken. And even when they are out in the open, the CEO is almost always the last to know.

I like to think of myself as a leader whose door is always open. But I recently learned that an open door isn’t enough…

Read the rest of the article at Inc.com

Marketing around situations

Mig Reyes
Mig Reyes wrote this on 6 comments

Before he made The Simpsons, Matt Groening’s famous comics and illustrations graced the covers of Apple brochures. The writing inside—from 1989, mind you—still does a great job selling the Mac.


Instead of blanket marketing a one-size-fits-all message, Apple took the time to speak to every situation a person is in. If you’re feeling overwhelmed, the Mac is there to put order back in your life. If you’re unemployed, the Mac is there to help you chase a career. If you’re a habitual procrastinator, the Mac is there for your spark of productivity.
They’re listening to us, and our problems. Talk about empathy.
Plenty of marketing today, especially in software, is a package of feature sets, bells, whistles, and some boasting about how they’re better than the next guy. Perhaps there’s mention of “benefits,” sure, but we’re always left figuring out how a product is supposed to fit in our own lives.
Chances are, your product isn’t for everybody. It doesn’t have to be, either. Really listen to your audience—you’re lucky to have them. Instead of assuming what they need, ask where they’re coming from. How did they get to the point of finally asking your product for help? If you can figure that out, all of a sudden your marketing changes from “making sales” to “being there for friend.” That feels good.

The Category Moat

Ryan
Ryan wrote this on 15 comments

A few of us at Basecamp became fans of the “job to be done” framework taught by Clay Christensen, Bob Moesta and Chris Spiek. The core idea is that what you are selling and what people are buying are two different things. Understanding what people are trying to do with your product helps you know whether you’re getting hotter or colder as you consider changes to your product.

For example, we think we’re selling a project management product. But some people really use our tool and pay us every month to manage their clients. The projects were always fine—it’s the clients that are a challenge! That’s just one example.

Clay has suggested (eg. here) that when you identify what people truly use your product to accomplish, you protect yourself from competition. He’s a smart man, so when he says something odd like that I try to dig in. I’m starting to see what he means.

It’s natural to identify with a product category. You think “we make product management software” or “we make candy bars” because you have to explain yourself over and over. It’s always easier to use available categories than to invent new ones. It’s just like language. We speak the lexicon instead of inventing words.

But for people who want to innovate, this is a problem. Identifying with a product category is outsourcing your strategy to the past. Is the world really carved up into allowable product categories? No. We are all figuring this stuff out every day. Experience shows that amazing breakouts and surprise successes competed on unorthodox dimensions (see Blue Ocean Strategy for examples).

Bob tells the story of a clock maker. They sell an alarm clock for small kids who started sleeping in their own room. It’s not a normal alarm clock. It has an arrow that points to whether the kid is supposed to be in bed or whether he is allowed to get up. That way he doesn’t go running into his parents’ room until after a reasonable hour.

If you think this product is a clock then it’s in the clock category in the clock aisle with a clock price. But parents who bought the clock said they would pay $100 or more for it because it keeps the kid out of their room. It’s a sleep protector.

So how does thinking outside the category protect us from competition? I’ve been conducting interviews with Basecamp customers, and I’m feeling first hand how tricky it is to think outside of a category. You don’t have a shorthand. You don’t have words and feature lists given to you. It’s like you’re floating out in space with nothing to grab onto.

That’s the key. The fact that it’s so hard to think outside of a category is the moat. Staying focused on why you made the features you did, what specific situations call for them, and how that combo creates progress for people requires diligence and confidence and unyielding attention to actual behavior. Sticking to the truth of the matter instead of the walls of a category keeps you on your own path and away from the pitfalls of conventional thinking. That’s hard to compete with.

Big news

Jason Fried
Jason Fried wrote this on 27 comments

Today, February 5th, 2014, Basecamp turns 10. What an amazing ride it’s been. And since nearly all our business comes from word-of-mouth, we owe it all to our customers. We are so thankful for what you’ve helped us build.

And on this special day, we have a couple very big announcements that will define the future of our company. Click that link to find out what they are.

These are exciting times. Fifteen years into our business, we are so grateful for everyone’s support. It’s been such a blast. We’re looking forward to seeing what we can do together for the next fifteen.

Thanks for everything, everyone. Here’s to what’s next.

Bonus link: The original blog post in 2004 that launched Basecamp.