I spent this weekend with my two sons in Ft Myers, Florida as part of our annual pilgrimmage to the Red Sox spring training camp.  While not chasing after foul balls (thanks, Youk!) and autographs, we spent some time talking about what the future might look like.  We ended up making a provocative list of what we called “10, 2030” – ten predictions for the year 2030.

For context, my sons are 8 and 11.  Looking back 19 years ago (1992), I realize that I had my first cell phone, dial up access to bulletin boards, a love affair with email, and was doing consulting for AT&T on Apple’s first mobile computing device, the Newton.  In short, nearly 20 years ago, the fingerprints of the future were evident in the present.  Similarly, my sons are seeing fingerprints of the future in what they see, read and hear about today.  Trying to focus on the right things to extrapolate off, and having some fun with it, provided us with great entertainment.

 So here are their top ten predictions for the year 2030:

1. Two out of three of my children, as a reflection of the entire US car market, will own an electric car (they are convinced oil will be a thing of the past, although according to the International Energy Association and The Economist, oil demand in the US will shrink only modestly in the next 20 years)
2. School classrooms will be converted into all digital environments where Individual student desks will be converted into desk/tablet computers with a touch screen per child linked to SmartBoards and the Internet with a host of applications available.
3. Advanced techniques in genomics will results in a cure for both cancer and ALS (others I’m sure, but those are the diseases my sons were most focused on due to our family history)
4. Super-fast, high speed trains will finally be installed on the Northeast Corridor, allowing Boston to NY travel to take 2 hours and NY-DC a mere 1.5 hours.  My sons seem to think magnetic technology is the state of the art.  I'm not sure where they got this factoid, but it sounded good to me.
5. Commercial travel to the moon will be possible and relatively common for super-rich thrill-seekers.  Sort of like private jet travel today.
6. Voice-controlled, self-driving cars will be prevalent.  Perhaps not even brought to you by Google.
7. No one will carry wallets any more – all functionality of a wallet (payment, coupons, identity) will be embedded in your mobile device
8. No wires anywhere – wireless power/electricity, wireless Internet, high bandwidth data will result in the taking down of telephone polls in large parts of the country.  A corollary to this one is that my sons don't think hardly any homes will have landline, wire telephones any more.
9. Hover boards will be sold commercially – still high-end devices, but useful for urban transportation as an alternative to bicycles.  This one struck me as a stretch, but they're quite convinced of it, and they haven't even seen this hilarious AliG clip.
10. A woman will be elected president of the United States.  I pointed out to them that there would only be four elections (not counting 2012 – sorry Sarah Palin) between now and 2030 for an American female head of state to be elected but they were bullish on this one as well.

Here were a few that we discussed but were ultimately rejected as plausible, but not likely by 2030:

1. Humans landing on Mars
2. Hover cars (i.e., cars that floated above roads at high speeds)
3. Cars that converted into airplanes
4. Home robots that do household chores – dishes, laundry, changing diapers
5. Life discovered on another planet
6. Electronic ink on flexible, paper-thin screens that mimic a book – but, like a Kindle, download wirelessly and electronic

At one point, I mentioned to my sons that I might blog about their predictions because I thought they represented an interesting window into the future.  My oldest got concerned and objected, "But Dad, what if we want to invent some of this stuff and people steal our ideas?".  And that's when the lecture on execution began…

I had the pleasure of teaching a new case at HBS yesterday on foursquare that I co-authored with Professors Tom Eisenmann and Mikolaj Piskorski as part of Tom's new course "Launching Technology Ventures".  Foursquare executives Dennis Crowley, Naveen Selvadurai and Evan Cohen were kind enough to allow us to interview them in preparation for the case, which framed some of their current key strategic issues and looked back on the choices they made in the early days to draw pedagogical lessons of lean start-up best practices, building a platform business, network effects and running monetization experiments.

The foursquare team was consumed this week with SXSW preparations, but we were fortunate to have as class guests Charlie O'Donnell, who wrote the original blog post on foursquare that got many in the community excited about the company, and Andrew Parker, who was an associate at Union Square Ventures at the time of their Series A investment. 

As I did with the class a few weeks ago when Fred Wilson visited, I asked the students to pull out their phones and tweet throughout the class.  You can see the rich "dialog behind the dialog" here, using the Twitter hash tag #hbsltv.  Here were some of the takeaways I had from the class discussion framed around three major questions I posed to the students:

1) Why did foursquare succeed as compared to the same founder (Dennis) in a similar venture (Dodgeball) in a different era and as compared to other teams pursuing LBS services in the same era?  

The students concluded that the context around a venture matters tremendously – that smart phones, the explosion of apps and social networking all were important enablers that allowed foursquare to succeed at this particular moment in time.  At the same time, the foursquare team was incredibly skilled at applying lean start-up best practices, specifically:

• Product-obsessed founders:  both Dennis and Naveen were consumed with the product.  Always interacting with users in bars and over Twitter, thinking less about strategy, analytics and monetization and focusing more on a great user experience. 
• Hunch-driven:  they had deep domain knowledge and didn't need outside studies or market research to guide their prioritization.  One of the key takeaways that both Charlie and Andrew emphasized to the students was to be power users in whatever area of focus they choose to develop those instincts.
• Minimum viable product:  they didn't wait years and years to perfect the product but instead got it out there to solicit user feedback.
• Modest burn:  the company only raised $1.35 million in its series A financing and kept the burn rate at less than $100k per month to make he money last.  Dennis wrote a great post at the time of the financing that showed just how product obsessed he was, even after taking the seed money.  There's no bravado or BS – just a list of the great features they're going to roll out as a result of having the extra capital.

2) What was the magic of the foursquare system that drove rapid adoption that so many other consumer Internet companies fail to achieve?

• Game mechanic - students really honed in on the playfulness of the service, both the entertainment value and the addictive nature of competing for badges and mayorships.
• NYC launch – the fact that the service started in such a perfect venue gave it great advantage – a highly concentrated, very social community.
• VC validation - having Fred Wilson invest and promote the company helped provide it credibility with an insider crowd that may have provided some strong tailwinds.
• Win-win for all constituents – unlike many services, the students understood a key insight about foursquare:  the local merchants make the service.  The fact that merchants are so incented to promote, discuss and reward consumers creates a positive feedback  loop that transcends the power of a consumer-only service.
• Online – offline combination.  Another aspect of the magic of foursquare is that it is not an online only service.  In fact, the ability to drive consumers to actually walk into local venues is a special dimension of the service.  As one student pointed out:  "Facebook tells me what my friends are doing.  foursquare tells me where they are and where I can meet them."  This is a unique and powerful aspect of the service.

3) Once a company achieves product-market fit and starts to scale, how do their priorities, and burdens, shift?

• Raising money, scaling the team.  A rich discussion ensued about what it means to raise big money.  When foursquare took $20 million in venture capital at a reported valuation of $100 million, suddently they had transformed the company from a lean, product-obsessed start-up to a company that would need to generate tens if not hundreds of millions of dollars in cash flow to justify a billion dollar valuation.  A product-obsessed management team suddenly had to transition to become an operational scale management team.
• Monetization.  Consumer Internet companies have to decide when they begin to monetize – as part of the lean start-up experimentation or only after they achieve enough scale to attract partners and advertisers.  But it's not a binary decision.  Foursquare has run monetization experiments from the beginning, but to justify the big valuation they will have more pressure to show real financing results, perhaps at the expense of the user experience.  It takes a strong founder to resist that temptation (think Jesse Eisenberg playing Mark Zuckerburg in "The Social Network", sneering:  "No advertising.  Advertising isn't cool.")
• Vision/Becoming a platform.  What does the company want to be when it "grows up"?  To be a generation-defining company and enter the ranks of Facebook and, arguably, Twitter, foursquare needs to evolve from a great application into a platform.  But becoming a platform company requires a whole different approach and set of priorities.  Do you build out your own features or expand your APIs and invest in supporting third party developers to build applications to your platform. One of the students had coincidentally tried to work with the foursquare API to develop an application and complained that it was very rudimentary and limiting relative to the Facebook and Twitter API.  

The verdict?  I ended the class by polling the students – who would buy foursquare stock at a $200-250 million valuation (my very rough estimate of the current trading on the secondary market) and who would sell?  One third of the students were buyers at that price at the end of the class.  Two thirds were sellers.  One student pointed out in a tweet that the voters were unfairly negatively biased because only 10% of their classmates had even tried the application and, besides another tweeted, 3/4 of HBS students apparently wanted to sell Amazon short in 1998!  Another student tweeted that if there was even a 3% chance that the company could be a $10 billion company, it was worth buying at $200 million.  Now there's a future venture capitalist in the making!

Thanks again to the foursquare team for letting us write the case and adding to the HBS community's intellectual capital.

It was a treat to host Fred Wilson of Union Square Ventures at Harvard Business School today – his first time attending a class at the school.  Fred, as most readers of this blog know, is a venture capital legend in the making and the investor in some of today's leading consumer Web properties, including Twitter, Zynga and Four Square [Fred's post on his visit can be found here].

Fred and I had a discussion about lean start-ups and pattern recognition with the HBS students in Professor Tom Eisenmann's class "Launching Technology Ventures".  If you want to see some of the Tweets that came out of the class (imagine a professor encouraging students to grab their smart phones and live Tweet in class!) you can check them out here (#hbsltv was the hashtag).

A few takeaways from our session that I thought were particularly insightful:

• Early on in a start-up, entrepreneurs should be hunch-driven more than data-driven.  If you are only data-driven, the risk is that you will move too slowly.  It's more important to have a hypothesis about what might work and what might not work and then see what happens in the marketplace to prove or disprove that hypothesis.
• Lean start-up as a methodology or approach is very useful, but isn't a guarantee for success by any stretch.  Think of the methodology as a machine.  If you have garbage inputs, you will still have garbage outputs.  There's no substitute for good strategy, great entrepreneurs and a very large market opportunity.
• When considering when to monetize your new product/service, think carefully about whether the monetization strategy actually improves the service or is a distraction.  Banner ads on Facebook are a distraction (as Zuckerburg supposedly said in the movie Social Network, "No ads. Ads aren't cool.")  But, for example, on Etsy if someone pays for a product, it inspires producers to create more products.  Thus, the monetization is harmonious with building the service.
• If you are going to fail, and certainly with more start-ups being created and seeded we will see more failure, be sure to fail gracefully.  How you handle yourself as you unwind / seek a soft landing will reflect heavily on you and will cement your reputation.
• Don't worry about whether you are building a feature, a product or a company.  Build something great, have huge passion for it, engender affection with a large customer base, and let the rest follow.
• If you get traction, transform your company into a platform.  The most valuable companies are those where third parties help you grow by plugging into your services like a utility.
• VCs don't make companies successful.  They can believe in and support a company, but ultimately the entrepreneurs make or break the company's success and don't let anyone (particularly an egotistical VC!) imply otherwise.

As we ended the class, we tried to inspire the students to "go for it" and become entrepreneurial.  I am always pushing students to consider if now is the right time for them (see my recent blog post:  "Should I become an entrepreneur?") and pointed out that this was a time in their lives where they could afford taking more risk.  Once they get married, have kids, buy a house and get a mortgage, it's a different ballgame.  Fred quoted a friend who once told him there were three addictions in life:  "calories, heroine and a paycheck".  If you can break the last addiction, you are well positioned to become a potent entrepreneur!

The Wall Street Journal's article today about the existence of "alcoholism genes" and what the future might bring ("imagine you go to your doctor and say 'I'm drinking I need help.' and they do a blood test and, if you qualify [based on genetic markers], they give you medicine the next day.") is a part of a larger trend that will radically change the world's health care system.  With a nod to my friends at Hubspot, I'll refer to this future phenomenon as "inbound marketing comes to health care".

First, some background.  The cost of mapping your genes is falling rapidly.  Today, you can get your genes mapped and analyzed for $10k.  In 3-5 years, that price will fall to $1k.  Harvard Medical School Professor George Church, one of the great pioneers in this field, observed recently to one of my partners that, "people will spend $10k per year on insurance but over a 70+ year lifespan are not yet comfortable spending $10k for their genome to be sequenced." As the process gets cheaper and the data and analytics gets better, that will change.  I'd be shocked if you, dear reader, did not have an analytical report in your files somewhere in 5 years about your personal genome and insight into its health implications.

And that gets me to the concept of inbound marketing.  Inbound Marketing (as captured nicely in the book by Dharmesh Shah and Brian Halligan), is the notion that the new era of marketing is about pull, not push.  Rather than producers pushing their products onto consumers, consumers have the tools and means to show up at the producer's door "inbound" and identify their needs and interests.  

It's become very clear how this technique applies to products – consumers research their needs by searching this huge information database in the cloud called "Google" and find what products and services might serve their needs and proactively contact and, eventually, purchase those products.  This technique is why many companies invest so much money in search engine optimization (SEO) and search engine marketing (SEM) – a business that has grown to tens of billions of dollars and fueled Google's meteoric rise as one of the most successful companies and global brands in business history.  Businesses are redirecting their tens of billions of "push" marketing dollars  into other mechanisms that set themselves up to be found by intelligent, informed consumers.

Now, let's go back to health care.  Imagine that in 5-10 years that tens or even hundreds of millions of people have their genomic data stored in the cloud.  Imagine that this data can be indexed, analyzed, parsed, sliced and diced.  And imagine that it is very, very secure.

What might happen with that kind of large-scale genomic data available in that format?  Inbound marketing.  Rather than pharmaceutical companies pushing drugs through their large sales force, they can access this database and alert consumers as to what drugs might fit what genomic profile.  Rather than hunt for clinical trial candidates in hospitals throughout the world, drug companies can email the relevant 1000 patients that precisely fit the indication they would like to test. 

Let's make this very personal.  My father-in-law recently died of ALS.  His older brother also died of ALS a number of years ago.  Thus, there is a reasonable chance that my wife's family has some genetic predisposition to ALS.  In today's health care environment, where genomic information is expensive and sitting in silos, there is nothing much we can do about it but wait and worry.  But someday in the future, perhaps as soon as 10 years from now, we will have the opportunity to opt-in to a service that will alert us via email or text when ALS drugs that might address this particular issue enter clinical trials.  Or perhaps even approved by the FDA.  We might all register our genomic data into this service so that we can receive alerts and information about any range of insights or treatments that might be relevant to our personal make-up.  This is "personalized medicine" in the extreme.

One of our portfolio companies, Predictive BioSciences, is pioneering a urine biomarker technique – pee in a cup, and Predictive will tell you if you have cancer.  In the future, we might all be swabbing our cheeks, peeing in cups, and pricking our fingers to tell us much, much more.  And when that information is available to our trillion-dollar health care infrastructure, imagine the possibilities.

With big tech companies awash in cash, nearly every analyst out there is predicting that the M&A market will heat up in 2011.  At a (pre-blizzard) conference I attended today run by Gridley & Co, this theme was reinforced, with rosy predictions of an M&A boom.

If this boom comes to pass, everyone will cheer.  Yet a strong M&A market won't be a panacea for all.  It will cause good companies to face perhaps the singular hardest decision in their lives:  whether to walk away from an opportunity for positive liquidity. 

Two of my companies have just gone through this process.  In each case, a strong unsolicited offer came in that would have yielded "VC-like" returns (5-10x) and many millions for the founders and senior executives.  But in both cases, everyone around the table unanimously, courageously (and hopefully not foolishly) voted to turn down the offers and walk away.  Having just lived through two of these episodes in the last few weeks, and having lived through many others in the past, I thought I'd share a few observations on this classic conundrum.

When to sell a company is one of the hardest decisions a board and entrepreneur face, and it's a decision made even more difficult if there is a lack of alignment around the table.  If different investors have invested at very different prices, or if the entrepreneur has not made money before and this is their first shot, there can be greater tension inserted into a naturally tense situation.  For example, if the Series A investor has a blended average post-money valuation of $20 million across three rounds, they may be happy with a $100 million exit.  But the Series C investor who just invested at an $80 million post-money valuation would be bitterly disappointed.  Meanwhile, the founder who owns 10% is looking at a $10 million payday – a heady sum for someone who still has a mortgage and is worried about saving enough money to pay for her kids to go to college.

It's all very theoretical, of course, until an actual offer is put on the table and everyone starts to calculate their share of the proceeds.  There is no easy answer to help determine which path to pursue, but here are five considerations that can help an entrepreneur frame the decision:

1. Passion. Do you still love running the business? Does it feel like you can’t imagine doing anything else with your life? Do you still feel like you have something to prove or do you feel tired and worn out?  Do the problems in the business energize you or drain you?
2. Belief.  Do you still believe in the business’s potential? Does it appear that the major proof points are still ahead of the company?  Do you feel as if the value will be meaningful greater after you have achieved a few more milestones – and that those milestones are well within reach?
3. Economics.  How much is the offer as compared to what it might be a year or two from now if the company were to successfully execute on its plan and hit its numbers? What might the company’s value be in a year or two if it falls short of its plan by 30 percent? How would you assess the probability of either path and then calculate the expected value of holding on for a few more years as compared to taking the money off the table by selling now?
4. Dilution Risk.  Does the business require more capital and, if so, can that additional capital be raised easily at a reasonable (and therefore not too dilutive) price?  What must the business be valued at after the additional capital to be equivalent to your dilution-adjusted payout today?  In other words, let's say you own 10% today and can sell for $100 million.  If your post-financing ownership will be 5%, then you are betting that you can sell for more than $200 million down the road.  Risk adjust this number and take into account the time value of money, and then assess the trade-off.
5. Team.  Do the people around you (i.e., your management team, your VCs, your family) want you to sell out or are they encouraging you to keep going?  When you look your team in the eye and tell them they are walking away from $x million each, do they stiffen their spines and project bravado – or do they look at you longingly, with regret?

It can be hard for VCs and entrepreneurs to be aligned in these situations, because the VCs have the luxury of a portfolio approach to investing in start-ups – they are looking for home runs that can move the needle on their funds.  Entrepreneurs, on the other hand, have no such luxury.  This may be their one shot to change their lives and their family's lives.  

I have found that the entrepreneurs who have made good, not great, money in the past are more likely to be both hungry and risk tolerant enough to go for the big win.  Having saved enough money to pay down their mortgages and pay for the kids' colleges, these entrepreneurs are willing to take more risk to make the kind of money that can really change their lives.  That sweet spot tends to be $2-5 million in liquidity.  More and more, I have seen investors show a willingness to allow partial liquidity for founders who have built enough value to raise money at high prices to soften the sting of walking away from an outright sale.

So the next time you hear about how robust the M&A market is going to be, remember that the real trick is for founders and boards to find that right balance between taking advantage of the robust market, and putting their collective heads down and focus on trying to build a big company. 

Thinking back on 2010, the smash hit of the iPad and the continued proliferation of great iPhone and Android apps was one of the most striking aspects of the year.  As a user, I have fallen in love with five apps and find myself using them almost daily.  Millions of others are discovering these apps – and others like them.

But the gap between product success and business success is a large one.  There's an old saying in the venture capital business:  "Fund great companies, not great products or great features." The key question for 2011, therefore, is whether these great apps will mature into great companies.  Will they cross the chasm and move beyond the early adopter market into the mainstream market?  Will they build sustainable business models?  Twitter and Facebook were in a similar position a few years ago – great utilities that initially felt niche, and are now on their way to becoming great companies (OK, some of you will argue that Twitter still has a ways to go, but you have to admit, turning down $1 billion from Google in April 2009 is looking like a good decision in retrospect given the latest round of financing, led by Kleiner Perkins, at a $3.7 billion valuation).

So, here are my picks for the Top 5 Apps of 2010 that will face the challenge of becoming great companies in 2011:

1. Flipboard.  If you aren't addicted to the Flipboard app on the iPad, you can't consider yourself an information junkie.  Beautiful graphics and layout characterize this app, but what makes it brilliant in my opinion is they way it turns Twitter and Facebook into curated content channels.  I am naturally interested in reading the articles the editors of the New York Times and the Economist think I should read.  But I am also interested in reading the articles my friends are linking to in their tweets and posts – they are also relevant editors and curators for my interests.  The Flipboard business model is obviously still evolving and the leadership and backing of this company suggest they need to be taken seriously as a next generation content curation cum general information browser.
2. FourSquare.  I have long admired FourSquare and as part of my part-time duties at Harvard Business School, I decided to co-write a case on the company, which I will be teaching in a few months.  As part of this effort, I had the opportunity to interview the management team and learn more about the company's history and future plans.  The vision for the company is compelling and what appears in the application today is a fraction of the possible (Dennis Crowley observed that he has only implemented something like 20% of his 2004 NYU thesis on location-based services).  2011 will be a pivotal year for the company to turn some of their business model experiments into something scalable. 
3. Instapaper.  The only one on my top 5 list that isn't venture-backed (as far as I know), I love this app.  It allows users to bookmark things to be read later and then turns those links into an attractive content layout – in effect, your own newspaper.  The benefit is immediate and obvious.  The long-term business model isn't  immediate and obvious to me yet, but perhaps it will emerge in 2011.
4. TweetDeck.  I am totally addicted to TweetDeck.  This leading Twitter desktop and mobile app claims to have millions of subscribers.  When I am visiting start-ups, I often notice employees have three apps open and running at all times – Google Chrome, Facebook and TweetDeck.  I use TweetDeck to pull in my Facebook updates so I can keep track of my friends and those I follow on Twitter in one app.  Again, 2011 will be a critical year for them to begin to scale their business model.  Twitter hasn't yet tipped mainstream but is well on their way.  TweetDeck is following close behind.
5. Disqus.  Another quirky pick, perhaps, but I think Disqus is awesome as a blog response tool.  I use it for my own blog and I love when I see it on others' blogs as it makes it so easy for me to respond via email off my mobile device and track feedback.  I don't know how they make money and I presume they're still in lean start-up mode given how little they've raised (only $500k according to Crunchbase), but as a user I'm finding myself as dependent on Disqus as I am on my blogging platform.

So those are my picks for great apps in 2010.  What are yours?  Will any of them  become great companies in 2011? 

A great deal has been written about Groupon’s rejection of a supposed $6 billion offer from Google.  Most of the reports breathlessly describe the explosive revenue and customer growth the company has achieved in two short years and what a breakthrough the model represents (an example can be found in John Battelle's hagiographic blog post).  With over 40 million email subscribers, Groupon’s success is based on consumers responding to their daily deal emails, and sourcing high-quality offers that compel readers to respond. The story CEO and founder Andrew Mason told in his interview with Charlie Rose last week was that when they offered helicopter flying lessons in one of their daily email blasts, they sold 2,500 in one day. This compares to a business that had acquired only 5,000 customers in its 25 year history.

But haven’t we seen this movie before in the world of direct marketing? History has shown nearly every major new direct marketing paradigm sees impressive initial response rates, but depressing response rates over time. For example, when display advertising was innovative in the late-1990s (imagine websites without ads?), publishers saw click through rates in the 1-2% range, allowing advertisers to be charged a high cost per thousand impression (CPM) in the range of $35-40. Today, iMarketer and MediaMind report that display advertising click-through rates are 0.10 – 0.20% and CPMs of $2-3 – less than one tenth what they were ten years ago.  Email has shown a similar sharp decline over time. Average click through rates for the early years of email campaigns in the 1990s were as high as 30-40 percent. Today, they range from three to five percent, again, a 10x drop.

Groupon conversion rates, supposedly, are now in the three to four percent range. What will those same response rates to the same consumers look like in five years? Will daily deals follow a fundamentally different model than every other new direct marketing medium? The benefit of being only two years old is that you don’t have a lot of vintage data to analyze.

What has impressed me about e-commerce stalwarts like Amazon.com and Netflix is that they have stood the test of time and have grown ARPU (average revenue per user) over time.  Consumers continue to have an appetite for books and movies, year-in and year-out, and the volume of new content changes rapidly. In contrast, the merchants in my community and the ones I regularly do business with do not change all that rapidly.
 
That said, Groupon is building a huge consumer database, a massive set of merchant relationships and a super-talented management team. Just as Amazon and Netflix have innovated beyond their initial model, Groupon has the capacity to replicate these results. But if it the company is going to step into the multi-billion dollar winner’s circle, it will need to find a model that stands the test of time, and the reality of depressing response rates over time.

Frankly, I hope they figure it out. Now if you'll excuse me, I have to sneak in a trip to the local indoor skydiving place before the holidays…

One of my favorite business books of all time is Patrick Lencioni’s “Five Dysfunctions of a Team”.  Like all books by Lencioni, it begins with a short fable in a corporate setting of a management team that is operating totally dysfunctionally.  Then, he provides a framework that analyzes the situation and draws out the general lessons as to why teams operate poorly together, and how to systematically combat it.  The pyramid below summarizes his advice.



Each of the layers of the pyramid resonate with me (which is probably why I have this pyramid printed and hung up in my office), but the one that I always come back to and reread is “Fear of Conflict”.  Again and again, I see management teams and boards of directors shy away from conflict.

It is quite natural for humans to avoid conflict.  In fact, our deeply programmed “fight or flight” instincts are designed to protect ourselves and run away when we sense danger.  Interpersonal conflict is a danger we all prefer to avoid as it makes us uncomfortable.  Your stomach gets a little queasy, your heart beats a little faster, and you think, “How do I get out of this situation?”.  So, you tell a joke.  You change the topic.  And you feel a sense of relief.

When I see this happening in management teams and in board rooms, it makes me uncomfortable because I know where it leads.  It leads to mistrust, simmering issues, politics and dysfunctional behavior.  Here are a few techniques I've found help address this issue, particularly in start-ups.

1. Building Trust.  The foundation for handling conflict productively begins with building trust amongst the management team.  It's easy to say, but particularly hard to do in a start-up when people have been slammed together quickly and are so crazy busy, that it's hard to stop and take the time to understand each other more deeply.  One technique I have found very helpful here is to conduct a facilitated, day-long offsite where each management team member takes the Myers-Briggs test to help surface how each party thinks,  processes information and makes decisions.  I did this with my management team at Upromise and again when we were starting of at Flybridge and in each case found it helped us understand each other at a far deeper level.
2. Annual Reviews.  It's easy to be running so hard and so fast that CEOs and boards forget to conduct systematic reviews where a broad range of feedback is collected and tough development issues are addressed head on.  I try to do this at each of my boards and at Flybridge, the general partners conduct 360 degree reviews of each other.  Done correctly, these can be emotionally draining, difficult but very productive exercises where a safe forum for brutal honesty and constructive dialog can be developed.
3. Systematic Post Mortems.  In my early product management days, I learned the value of the post-mortem – the process of gathering all the relevant team members into the room to talk about what happened after a product ships and why errors or schedule issues occurred.  Extending the post-mortem process into all business activities can be very valuable.  It allows a clinical, unemotional examination of what has happened, how everyone operated under pressure, and what process improvements can be made for next time.  Whether it is done post product release, when an executive team member departs because things didn't  work out, after a board meeting in an executive session, or after an investment goes bad, an analytical examination of what just happened is a useful exercise that forces all parties to address difficult issues.
4. Go Direct.  At Flybridge, we have developed a mantra for addressing issues amongst the partnership:  "Go Direct".  When one of us has a concern about how another partner is handling a portfolio company situation or evaluating a deal opportunity, we don't allow indirect conversations.  If two partners find themselves talking about a third partner, we stop the conversation and bring in the third partner so that the issue can be addressed directly, out in the open  rather than it festering behind closed doors.  I learned this lesson as an executive team member at a start-up that was not good at going direct.  The VP of sales would come into my office and complain that he wasn't getting good support from the VP of marketing.  Ten minutes later, the VP of marketing would storm in and complain that the salesforce wasn't properly executing on our strategy.  The entire executive team avoided going direct because it was uncomfortable, so we had false harmony in our Monday staff meetings and deep divisions the rest of the week.

Conflict can be stressful, draining and uncomfortable.  Yet, it is incredibly natural, healthy part of life, particularly in a start-up.  And creating a culture that can handle conflict effectively clearly has a positive impact on performance, as recent research has shown (see i4cp study: "Leaders With Low Emotional Intelligence May Be Depressing Bottom Line").

If you want to avoid your start-up feeling like a Soap Opera, try out some of these techniques, and let me know if there are others you've employed as well.

There has been a great deal of attention paid to the efforts led by Warren Buffet and Bill Gates to their pledge to give awway at least half of their fotunres to philanthropy.  This so-called "Giving Pledge" has garnered the support of 58 billionares, each of whom has signed up publicly to the pledge.

I am no billionare and will never be one, but today's news that the Bush tax cuts for the wealthy will be approved by the Senate has got me thinking that perhaps it's time for a "Millionare's Pledge".  The form of this pledge might go as follows: 

I promise to give away to charity the incremental tax break I will receive from the extension of the Bush tax cuts.

Philanthropy is a central part of our family's life.  We try to be very supportive to a range of non-profits, including our synagogue, Facing History and Ourselves (teacher-training organization), Progressive Business Leaders Network (progressive policy), Endeavor (promoting global entrepreneurship) and many others.  I know of many other families like me who are philanthropically oriented and have very mixed feelings about the tax cut exension. 

The simple calculus, as I understand it, is to take 5% of your annual income (upper income tax rates would have gone back to 39.6%, up from 35%).  So if you make $200,000, that's $10,000 in incremental savings that you would direct to charity in 2011 and 2012 (and perhaps beyond!).  I know it's not nearly that simple with capital gains changes, estate changes, deductions, etc.  But let's keep it simple to make it easy for everyone. 

At this point, it doesn't matter whether you are for or against the extension of the tax cuts, the reality is that they will become law, so what should progressive, philanthropically-minded individuals do now that they have an unexpected windfall?

There are 371 billionares in the US, but 3 million millionares and 6 million taxpayers with income greater than $200,000.  Now that would be a movement.

Who's in?