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2009</a></li> <li><a href='https://steveblank.com/2009/11/'>November 2009</a></li> <li><a href='https://steveblank.com/2009/10/'>October 2009</a></li> <li><a href='https://steveblank.com/2009/09/'>September 2009</a></li> <li><a href='https://steveblank.com/2009/08/'>August 2009</a></li> <li><a href='https://steveblank.com/2009/07/'>July 2009</a></li> <li><a href='https://steveblank.com/2009/06/'>June 2009</a></li> <li><a href='https://steveblank.com/2009/05/'>May 2009</a></li> <li><a href='https://steveblank.com/2009/04/'>April 2009</a></li> <li><a href='https://steveblank.com/2009/03/'>March 2009</a></li> <li><a href='https://steveblank.com/2009/02/'>February 2009</a></li> </ul> </li> <li id="pages-2" class="widget widget_pages"><h2 class="widgettitle">Other Stuff</h2> <ul> <li class="page_item page-item-2"><a href="https://steveblank.com/about/">About Steve</a></li> <li class="page_item page-item-22"><a href="https://steveblank.com/tools-and-blogs-for-entrepreneurs/">Startup Tools</a></li> <li class="page_item page-item-62"><a href="https://steveblank.com/secret-history/">Secret History</a></li> <li class="page_item page-item-68"><a href="https://steveblank.com/books-for-startups/">Books for Startups</a></li> <li class="page_item page-item-11025"><a href="https://steveblank.com/slides/">Slides/Videos</a></li> <li class="page_item page-item-25609"><a href="https://steveblank.com/raising-money/">Raising Money</a></li> </ul> </li> </ul> </div>  <div class="narrowcolumnwrapper"><div class="narrowcolumn"> <div id="content" class="content"> <div class="post-3070 post type-post status-publish format-standard hentry category-secret-history-of-silicon-valley tag-cold-war tag-electonic-warfare tag-fred-terman tag-steve-blank" id="post-3070"> <h2><a href="https://steveblank.com/2009/08/03/the-secret-history-of-silicon-valley-part-vii-we-fought-a-war-you-never-heard-of/" rel="bookmark">The Secret History of Silicon Valley Part VII: We Fought a War You Never Heard Of</a></h2> <div class="postinfo"> Posted on <span class="postdate">August 3, 2009</span> by steve blank </div> <div class="entry"> <p>These next series of posts chronicles the untold story of how one professor returning from one war decides to enlist Stanford University in waging the next one and by accident, laid the foundation for Silicon Valley, venture capital and entrepreneurship as we know it today.</p> <p>These posts cover two distinct periods – the first, the rise of “<em>Microwave Valley</em>” chronicles the decade of 1946-1956 as Stanford University became the hub of military/industry contracting in the Bay Area.</p> <p>The second series of posts, the rise of “<em>Spy Satellite Valley</em>,” starts in 1956 with two game changing events– one very public – the valley’s first semiconductor company and one very, very private – the valley as the home of the first optical and ELINT spy satellites and submarine-launched ballistic missiles. That story ends in <a href="https://www.thespacereview.com/article/3066/2" target="_blank" rel="noopener">1969 with campus riots at Stanford</a> during the Vietnam War.</p> <p>————–</p> <p>These posts will make a lot more sense if you look at the <a href="http://steveblank.com/category/secret-history-of-silicon-valley/">earlier Secret History posts</a>. If you read only one previous post, read this <a href="http://steveblank.com/2009/04/27/the-secret-history-of-silicon-valley-part-vi-the-secret-life-of-fred-terman-and-stanford/">one</a> (or this <a href="http://steveblank.com/2009/04/20/the-secret-history-of-silicon-valley-part-v-happy-100th-birthday-silicon-valley/">one</a>.)</p> <p>————-<br /> <strong>The Birth of Entrepreneurship in The Hot Cold War<br /> <span style="font-weight: normal;">Silicon Valley entrepreneurship was born in the middle of a secret war with the Soviet Union. It’s a war you probably never heard of since most of it was classified, and both parties never wanted it public lest it got out of hand. Yet it was a war in which tens of thousands of Americans fought and hundreds died. Frederick Terman, Stanford’s Dean of Engineering, enlisted Stanford University as a major arms suppliers in this war. In doing so he accidentally launched entrepreneurship in Silicon Valley – with the help of the U.S. military, the CIA and the National Security Agency.</span></strong></p> <p><strong>Stanford as a Center of Microwave and Electronics<br /> </strong>In 1946 after running the military’s secret 800 person <a href="http://steveblank.com/2009/04/27/the-secret-history-of-silicon-valley-part-vi-the-secret-life-of-fred-terman-and-stanford/">Electronic Warfare Lab</a> at Harvard, Fred Terman returned to Stanford <span style="color: #000000;">as the dean of the engineering schoo</span><span style="color: #000000;">l</span>. Terman’s goal was to build Stanford’s electrical engineering department into a center of excellence focused on microwaves and electronics. Having already assembled one of most advanced electronic labs in World War II, Terman was one of the few academics who could do it.</p> <div id="attachment_3131" style="width: 270px" class="wp-caption aligncenter"><a href="https://i0.wp.com/steveblank.com/files/2009/08/terman.jpg"><img data-recalc-dims="1" fetchpriority="high" decoding="async" aria-describedby="caption-attachment-3131" data-attachment-id="3131" data-permalink="https://steveblank.com/2009/08/03/the-secret-history-of-silicon-valley-part-vii-we-fought-a-war-you-never-heard-of/terman/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/terman.jpg?fit=260%2C303&ssl=1" data-orig-size="260,303" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":""}" data-image-title="terman" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/terman.jpg?fit=257%2C300&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/terman.jpg?fit=260%2C303&ssl=1" class="wp-image-3131 size-full" title="terman" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/terman.jpg?resize=260%2C303&ssl=1" alt="terman" width="260" height="303" /></a><p id="caption-attachment-3131" class="wp-caption-text">Fred Terman</p></div> <p>Terman’s first step was to recruit 11 former members of his staff from the Harvard <a href="https://www.thecrimson.com/article/1945/11/30/harvard-radio-research-lab-developed-countermeasures/">Radio Research Lab</a> — “Congratulations, you’re now Stanford faculty.” Not only were they all great researchers, but they also had just spent three years <span style="color: #000000;">building</span><span style="color: #000000;"> electronic warfare systems that were used in World War II</span>. They would become the core of Stanford’s new Electronics Research Lab (ERL.) While officially in the electrical engineering department, the lab reported directly to Terman.</p> <p>Next, Terman used his military contacts to secure funding for the Lab from the Office of Naval Research, the Air Force and the Army Signal Corps. (Although the country had returned to peace, some in the military wanted to preserve our ability to fight the next war.) By 1947 the U.S. military was funding half of Stanford’s engineering school budget. Terman proudly <a href="http://books.google.com/books?id=JJKgq1YCkeAC&printsec=frontcover&source=gbs_v2_summary_r&cad=0">pointed out</a> that only Stanford, MIT and Harvard had a military sponsored electronics program.</p> <p><strong>Stanford Leads in Electronic Intelligence and Electronic Warfare<br /> <span style="font-weight: normal;">In the 1950’s Stanford Engineering Research Lab (ERL) made major contributions to electronic intelligence and electronic warfare. Its basic research focused on three areas: microwave receiving and transmitting tubes, radar detection and deception techniques and understanding the earth’s ionosphere.</span></strong></p> <p>Stanford became one of the leading research centers in advancing the state of microwave tubes including the <a href="http://books.google.com/books?id=DSHSqWQXm3oC&pg=PA421#v=onepage&q=&f=false" target="_blank" rel="noopener">klystron</a> which could provide high-power microwave in pulses, <a href="http://books.google.com/books?id=DSHSqWQXm3oC&pg=PA444" target="_blank" rel="noopener">magnetrons</a> which could provide continuous wave microwave power, and <a href="http://books.google.com/books?id=ssuuNm9RcYQC&pg=PA54" target="_blank" rel="noopener">backward wave oscillators</a> and <a href="http://en.wikipedia.org/wiki/Traveling-wave_tube" target="_blank" rel="noopener">traveling wave tubes</a> – both electronically tunable microwave tubes.</p> <p>Stanford’s research on the earth’s ionosphere would lead to <a href="http://en.wikipedia.org/wiki/Meteor_burst_communications" target="_blank" rel="noopener">meteor-burst communication</a> systems and <a href="http://geimint.blogspot.com/2008/11/oth-radar-and-asbm-threat.html" target="_blank" rel="noopener">Over the Horizon Radar</a> used by the NSA and CIA to detect Soviet and Chinese missile tests and ultimately to the research that made Stealth technologies possible.</p> <p>Its studies in radar detection and deception techniques would lead Stanford to the <em>applied </em>part of it mission. Stanford would build prototypes of electronic intelligence receivers (high probability of intercept/rapid scan receivers) for use by the military. These applied systems were prototypes of the jamming devices found on our bombers and receivers found in NSA ground stations and the fleet of ELINT aircraft flying around and in the Soviet Union and later on in the U-2, SR-71 and ELINT ferret subsatellites.</p> <p>Later posts will talk about these technologies and the startups that spun out of Stanford to build them. But first, to understand what happened at Stanford and in Silicon Valley under Fred Terman, some context about the Cold War is helpful. (Skip the next section if you’re a history major.)</p> <p><strong>The Cold War<br /> <span style="font-weight: normal;">After World War II ended, our wartime ally the Soviet Union kept its army in Eastern Europe and forcibly installed Communist governments in its occupied territories. Meanwhile the U.S. demobilized its army, sent its troops home, scrapped most of its Air Force and mothballed almost all its Navy. As tensions rose, there was a growing fear that the Soviets could invade and occupy all of Western Europe.</span></strong></p> <p>In 1949, the Soviets exploded their first nuclear weapon and ended the U.S monopoly on atomic weaponry. That same year China fell to the communists under Mao Zedong, and the Nationalist government retreated to Taiwan. A year later the Korean War turned the cold war hot, as communist North Koreans attacked and overran most of South Korea (except for a small <a href="http://en.wikipedia.org/wiki/Battle_of_Pusan_Perimeter" target="_blank" rel="noopener">defensive perimeter in the south</a>.) American and United Nations troops entered the war fighting North Koreans and then Communist Chinese ground troops, and <a href="http://www.acepilots.com/russian/rus_aces.html" target="_blank" rel="noopener">Soviet fighter pilots</a> for three years. 34,000 U.S. soldiers died in battle.</p> <p>To the U.S. the Soviet Union seemed bent on world conquest with Korea just a warm-up for an atomic war with massive casualties. (This was not an unreasonable supposition after a conventional world war which had left 50 million dead.) Faced with the reality of the Korean War, the U.S. began to rebuild its military. But now the Soviet Union was its target enemy, and nuclear weapons had become the principal instrument of offense. Instead of rebuilding its WWII forces, the U.S. military embraced new technologies (jets, electronics, missiles, nuclear subs) and built entirely new weapon systems (bombers with nuclear weapons, ICBMs, SLBM’s) for a new era of international conflict.</p> <p>Europe, completely outnumbered and outgunned by the Soviet Union, built the <a href="https://en.wikipedia.org/wiki/NATO" target="_blank" rel="noopener">North Atlantic Treaty Organization</a> (NATO) as a bulwark against ground Soviet attack. And the U.S. planned <a href="https://nsarchive2.gwu.edu/NSAEBB/NSAEBB31/index.html" target="_blank" rel="noopener">strikes with nuclear armed bombers</a> if war in Europe broke out.</p> <p>Stanford’s Electronic Research Lab (ERL) which had focused<span style="color: #993300;"> <span style="color: #000000;">on basic research on microwave tube</span></span><span style="color: #000000;">s from 1946 was about to scale up for the Cold War</span>.</p> <p><strong>Smarter Intelligence<br /> <span style="font-weight: normal;">One of the major differences between the war with Germany and the cold war confrontation with the Soviet Union had to do with access. The Soviet Union was a closed country. Unlike Germany in World War II, the U.S. could not fly across the Soviet Union to learn how their defenses were set up. We did not have radar maps of their cities. The Soviet’s secrecy fed our cold war paranoia. The U.S. was determined to find out what was going on inside. And the way we were going to do it was with electronic/signals intelligence.</span></strong></p> <p style="text-align: left;"><strong><span style="font-weight: normal;">But the technology that supported intelligence gathering against our WW II enemies was not sufficient to penetrate the Soviet Union. The U.S. military had to develop new ways to collect intelligence. The engineering department and labs that Fred Terman established at Stanford University would play a key role in advancing electronic intercept and jamming technology to support the more sophisticated intelligence systems that the Cold War required.</span></strong></p> <p><span style="font-weight: normal;"><strong>The Air Force Needs to Know<br /> <span style="font-weight: normal;">By the Korean War, <a href="http://www.fas.org/irp/offdocs/nsc-hst/nsc-162-2.pdf" target="_blank" rel="noopener">U.S. policy held that the Air Force</a>, carrying nuclear weapons into the Soviet Union, would be the means to fight World War III.</span></strong></span></p> <p>Through World War II, the U.S. Air Force had been a part of the U.S. Army. It split off into a separate service in 1947. By the 1950’s, the Strategic Air Command (SAC) had become the U.S. Air Force’s long range bombing arm and the designated instrument of Armageddon.</p> <p>On the other side of the Iron Curtain, the defense of the Soviet Motherland lay with the <a href="http://www.airpower.maxwell.af.mil/airchronicles/aureview/1979/mar-apr/cobb.html">Soviet Air Defense Forces</a>, called <a href="https://en.wikipedia.org/wiki/Soviet_Air_Defence_Forces" target="_blank" rel="noopener">PVO Strany</a>, a separate branch of the Soviet military formed in 1948 designed to detect U.S. bomber raids, target and aim radar-guided weapons and destroy the U.S. bombers.</p> <p><a href="https://i0.wp.com/steveblank.com/files/2009/07/img_7175.jpg"><img data-recalc-dims="1" decoding="async" data-attachment-id="2990" data-permalink="https://steveblank.com/2009/08/03/the-secret-history-of-silicon-valley-part-vii-we-fought-a-war-you-never-heard-of/img_7175/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7175.jpg?fit=2746%2C1881&ssl=1" data-orig-size="2746,1881" data-comments-opened="1" data-image-meta="{"aperture":"5.6","credit":"","camera":"Canon EOS 20D","caption":"","created_timestamp":"1248201078","copyright":"","focal_length":"53","iso":"400","shutter_speed":"0.016666666666667","title":""}" data-image-title="Radar Coverage of Japanese Mainland" data-image-description="" data-image-caption="<p>Example of Radar Coverage – Japan in WWII</p> " data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7175.jpg?fit=300%2C205&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7175.jpg?fit=468%2C321&ssl=1" class="alignnone wp-image-2990 size-full" title="Radar Coverage of Japanese Mainland" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7175.jpg?resize=468%2C321&ssl=1" alt="Example of Radar Coverage Map- Japan in WWII" width="468" height="321" /></a>Example of Early Warning Radar Coverage – Japan in WWII</p> <p style="text-align: left;">SAC needed intelligence to understand the components of the PVO Strany air defense system in order to shut them down and make them ineffective so our bombers with their nuclear payloads could reach their targets. (The information we collected would be passed on to contractors who would build jamming devices the bombers would carry.) <span style="color: #000000;">It sought answers to tactical questions like: </span><span style="color: #000000;">What was the </span><span style="color: #993300;"><span style="color: #000000;">Radar Order of Battle</span> </span>a penetrating bomber would face? (Were there holes in their radar coverage our bombers could sneak through? What was the best altitude to avoid the Soviet defenses?) What were the different types of Soviet fighter planes? How many? How effective? What about the anti-aircraft (AAA) gun defenses? In addition the Soviets were adding a new type of defensive radar-guided weapon called the Surface to Air Missile (SAM).</p> <div id="attachment_2989" style="width: 3027px" class="wp-caption aligncenter"><a href="https://i0.wp.com/steveblank.com/files/2009/07/img_7178.jpg"><img data-recalc-dims="1" decoding="async" aria-describedby="caption-attachment-2989" data-attachment-id="2989" data-permalink="https://steveblank.com/2009/08/03/the-secret-history-of-silicon-valley-part-vii-we-fought-a-war-you-never-heard-of/img_7178/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7178.jpg?fit=3017%2C2102&ssl=1" data-orig-size="3017,2102" data-comments-opened="1" data-image-meta="{"aperture":"5.6","credit":"","camera":"Canon EOS 20D","caption":"","created_timestamp":"1248201090","copyright":"","focal_length":"41","iso":"400","shutter_speed":"0.0125","title":""}" data-image-title="Jammer versus Radar Coverage over Germany" data-image-description="" data-image-caption="<p>Example of Jammer versus Radar Coverage- Germany in WW11</p> " data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7178.jpg?fit=300%2C209&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7178.jpg?fit=468%2C326&ssl=1" class="wp-image-2989 size-full" title="Jammer versus Radar Coverage over Germany" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7178.jpg?resize=468%2C326&ssl=1" alt="Example of Jammer versus Radar Coverage- Germany in WW11" width="468" height="326" /></a><p id="caption-attachment-2989" class="wp-caption-text">Example of Jammer versus Radar Coverage – Allied Jammers over Germany in WW11</p></div> <p style="text-align: left;">The Strategic Air Command also needed to know what the navigational waypoints and the target would look like on their <a href="https://www.youtube.com/watch?v=lFGco9ZsFGE&t=432s" target="_blank" rel="noopener">air-to-ground bombing radars</a>. (These radars painted a map-like picture of the ground and prior to GPS, this is how bombers navigated their way to the target.)</p> <p style="text-align: left;">And on top of all this the Strategic Air Command needed <span style="color: #333333;">to understand </span><span style="color: #333333;">the current state of the Soviet Air Defense Force readiness and deployment updated on a daily basis.</span></p> <p style="text-align: left;"><strong><span style="color: #333333;">The CIA Needs to Know<br /> </span> <span style="font-weight: normal;"><span style="color: #333333;">While the Air Force was working on collecting intelligence to execute their tactical missions, the CIA, founded in 1947, was responsible for providing U.S. political leadership with a much bigger picture. They developed the <a href="https://www.cia.gov/readingroom/nic-product-type/national-intelligence-estimates" target="_blank" rel="noopener">National Intelligence Estimate</a> – a series of reports which summarized their judgment about the <a href="https://www.cia.gov/readingroom/docs/CIA-RDP85M00364R001101630006-7.pdf" target="_blank" rel="noopener">size of the Russian threat</a>. Also seeking to learn more about the Soviet Union’s offensive weapon systems, the CIA wanted intelligence to help them understand: What type of strategic bombers did the Soviets have? How many did they have? How would they reach the U.S.? How would we know if they were coming? (Have they moved to their forward operating bases in the Artic?) The same was true about the Soviet defensive systems – how many fighters would they build and of what type? How man</span><span style="color: #333333;">y Surface to Air Missiles</span><span style="color: #333333;"> – what</span> was their range and accuracy?</span></strong></p> <p style="text-align: left;">And by the mid 1950’s the Soviets were testing <a href="https://www.archives.gov/files/declassification/iscap/pdf/2010-005-doc2.pdf" target="_blank" rel="noopener">ballistic missiles</a>, both intermediate range that could reach Europe and intercontinental range that could reach the U.S. <a href="http://www.foia.cia.gov/wizards/osi_pdf/case_of_the_ss-6.pdf" target="_blank" rel="noopener">Wh</a><span style="color: #000000;"><a href="http://www.foia.cia.gov/wizards/osi_pdf/case_of_the_ss-6.pdf" target="_blank" rel="noopener">a</a></span><span style="color: #993300;"><span style="color: #000000;"><a href="http://www.foia.cia.gov/wizards/osi_pdf/case_of_the_ss-6.pdf" target="_blank" rel="noopener">t</a></span><span style="color: #000000;"><a href="http://www.foia.cia.gov/wizards/osi_pdf/case_of_the_ss-6.pdf" target="_blank" rel="noopener">was their range</a></span><span style="color: #000000;"><a href="http://www.foia.cia.gov/wizards/osi_pdf/case_of_the_ss-6.pdf" target="_blank" rel="noopener">?</a></span></span><a href="http://www.foia.cia.gov/wizards/osi_pdf/case_of_the_ss-6.pdf" target="_blank" rel="noopener"> What was their accuracy</a>? How big of a nuclear warhead could they carry (throw weight and yield)? The military needed to answer these same questions about the nuclear armed missiles the Soviets were putting on their submarine force.</p> <p style="text-align: left;">To give our leadership an estimate of the Soviet’s nuclear production capacity, the CIA also had to estimate how many nuclear weapons could the Soviet Union make. Where were their production facilities? What was the yield of the weapons and their weight and size?</p> <p style="text-align: left;">Throughout the 1950’s the CIA’s Office of Scientific Intelligence was heavily involved in the development of Electronics Intercept and Electronic Warfare Intelligence – and Stanford and the emerging startups around it would provide the systems and concepts to help.</p> <p><strong>The NSA and ELINT<br /> <span style="font-weight: normal;">In the 1950’s the Strategic Air Command and the U.S. <a href="https://www.nsa.gov/portals/75/documents/about/cryptologic-heritage/historical-figures-publications/publications/coldwar/dangerous_business.pdf" target="_blank" rel="noopener">Navy were the airborne ELINT</a> assets for the U.S. Beginning in the mid/late 1950’s the <a href="http://www.fas.org/irp/nsa/almanac-elint.pdf" target="_blank" rel="noopener">National Security Agency (NSA) starting taking more and more responsibility for collection</a> – first in communications intelligence, then in signals and telemetry intelligence. The NSA ultimately built up hundreds of ground stations, satellites and aircraft manned by tens of thousands servicemen (under the cover of the Air Force Security Service, Army Security Agency and the Naval Security Group.)</span></strong></p> <p><strong>The “Hot” Cold War<br /> <span style="font-weight: normal;">Remember the Soviet Union was a closed country. To collect the intelligence to answer its questions about the Soviet threat, the U.S. military resurrected the <a href="https://nsarchive2.gwu.edu/NSAEBB/NSAEBB260/index.htm">signals Intelligence</a> lessons and skills we invented in World War II. Starting in 1946 ELINT aircraft had been <a href="https://www.airandspaceforces.com/article/0601overfly/#:~:text=Normally%20the%20flights%20were%20a,from%2045%2C000%20to%2048%2C000%20feet." target="_blank" rel="noopener">probing and overflying</a> the Soviet Union. SAC, the CIA, the <a href="http://www.coldwar.org/Histories/HistoryofUSNavyFleetAirReconnaissance.htm" target="_blank" rel="noopener">Navy</a> and our British allies flew modified planes called Ferrets around the periphery of the Soviet Union to understand their air defense system (the crews were called Crows). (What isn’t well known is that the U.S. and Britain <a href="http://www.pinetreeline.org/giebelstadt/gieb-other/other/ogieb-8.html" target="_blank" rel="noopener">flew planes </a>on <a href="http://www.spyflight.co.uk/yar.htm" target="_blank" rel="noopener">deep penetration missions</a> into and across the Soviet Union numerous times – well before a <a href="http://en.wikipedia.org/wiki/1960_U-2_incident" target="_blank" rel="noopener">U-2 spy plane was shot down over the Soviet Union in 1960</a>.)</span></strong></p> <div id="attachment_3137" style="width: 410px" class="wp-caption aligncenter"><a href="https://i0.wp.com/steveblank.com/files/2009/08/canberra_pr31.jpg"><img data-recalc-dims="1" loading="lazy" decoding="async" aria-describedby="caption-attachment-3137" data-attachment-id="3137" data-permalink="https://steveblank.com/2009/08/03/the-secret-history-of-silicon-valley-part-vii-we-fought-a-war-you-never-heard-of/canberra_pr3-2/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/canberra_pr31.jpg?fit=400%2C274&ssl=1" data-orig-size="400,274" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":""}" data-image-title="canberra_pr3" data-image-description="" data-image-caption="<p>British Canberra PR3 – Overflew Kapustin Yar 1953</p> " data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/canberra_pr31.jpg?fit=300%2C206&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/canberra_pr31.jpg?fit=400%2C274&ssl=1" class="wp-image-3137 size-full" title="canberra_pr3" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/canberra_pr31.jpg?resize=400%2C274&ssl=1" alt="British Canberra PR3 - Overflew Kapustin Yar 1953" width="400" height="274" /></a><p id="caption-attachment-3137" class="wp-caption-text">British Canberra PR3 – Overflew Kapustin Yar 1953</p></div> <p style="text-align: left;">The Air Force adopted a cover story that these were weather data gathering missions. These flights were no secret to the Soviets, (given the sheer number of surveillance flights around the Soviet Union it’s surprising they didn’t need their own air traffic control system,) and they started to protest diplomatically in 1948. When our flights continued, the Soviets took direct action. In 1950, two months before the Korean War started, the Soviets shot down an ELINT plane over the Baltic. All ten crew members were killed. This was the beginning of a Soviet policy to stop ignoring incursions. They would attempt to force the ELINT planes to land in the Soviet Union or they would destroy them. Every year through the the 1950’s and the early ’60’s the Soviets attacked and shot down <a href="https://media.defense.gov/2021/Jul/14/2002762176/-1/-1/0/COLD_WAR_RECON_SHOOTDOWN_60528.PDF" target="_blank" rel="noopener">at least one</a> of our ELINT ferret aircraft. This was a deadly game.</p> <div id="attachment_3129" style="width: 903px" class="wp-caption aligncenter"><a href="https://i0.wp.com/steveblank.com/files/2009/08/pb4y-2_convair_privateer_vp-23_1951.jpg"><img data-recalc-dims="1" loading="lazy" decoding="async" aria-describedby="caption-attachment-3129" data-attachment-id="3129" data-permalink="https://steveblank.com/2009/08/03/the-secret-history-of-silicon-valley-part-vii-we-fought-a-war-you-never-heard-of/pb4y-2_convair_privateer_vp-23_1951/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/pb4y-2_convair_privateer_vp-23_1951.jpg?fit=893%2C702&ssl=1" data-orig-size="893,702" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":""}" data-image-title="pb4y-2 Privateer Navy ELINT" data-image-description="" data-image-caption="<p>pb4y-2 Privateer Navy ELINT</p> " data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/pb4y-2_convair_privateer_vp-23_1951.jpg?fit=300%2C236&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/pb4y-2_convair_privateer_vp-23_1951.jpg?fit=468%2C368&ssl=1" class="wp-image-3129 size-full" title="pb4y-2 Privateer Navy ELINT" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/pb4y-2_convair_privateer_vp-23_1951.jpg?resize=468%2C368&ssl=1" alt="pb4y-2 Privateer Navy ELINT" width="468" height="368" /></a><p id="caption-attachment-3129" class="wp-caption-text">pb4y-2 Privateer Navy ELINT</p></div> <p style="text-align: left;">We kept on probing their defenses convinced that it was in our national interest to continue. The low-level conflict continued until the height of the Cuban Missile Crisis when the local <a href="http://www.gwu.edu/~nsarchiv/nsa/cuba_mis_cri/dobbs/anderson.htm" target="_blank" rel="noopener">Soviet commander shot down a U-2 over Cuba</a>. Both countries realized that a miscalculation could have been a catalyst for World War III and the Soviets stop attacks on U.S. spyplanes. (The Communist Chinese continued to shoot down U-2’s flown by Nationalist Chinese pilots until 1970, and the Soviet Union accidently attacked two Korean airline passenger planes in the Far East, one damaged in 1978 and one destroyed in 1983.)</p> <p style="text-align: left;">During the Cold War <em>32 </em>U.S. ELINT <a href="https://spyflight.co.uk/operations/#Losses">planes were shot down</a> <span style="color: #333333;">by Soviet pilots</span> with 225 U.S. airmen killed. (The numbers vary depending on <a href="http://www.nsa.gov/about/cryptologic_heritage/center_crypt_history/publications/dedication_sacrifice.shtml" target="_blank" rel="noopener">the sources</a> you read.) Regardless of the number, this was a deadly shooting war.</p> <p style="text-align: left;"><em>Stanford and an emerging set of Silicon Valley startups would be deeply involved in designing the technologies, techniques and ELINT systems on these planes.</em> Microwave Valley was about to take off.</p> <p style="text-align: left;"><em><span style="font-style: normal;">Details in the next post, <a href="http://steveblank.com/2009/08/06/the-secret-http://steveblank.com/2009/08/06/the-secret-history-of-silicon-valley-part-viii-the-rise-of-entreprenuership/" target="_blank" rel="noopener">Part VIII of the Secret History of Silicon Valley</a>.</span></em></p> <div class="sharedaddy sd-sharing-enabled"><div class="robots-nocontent sd-block sd-social sd-social-official sd-sharing"><h3 class="sd-title">Share this:</h3><div class="sd-content"><ul><li class="share-print"><a rel="nofollow noopener noreferrer" data-shared="" class="share-print sd-button" href="https://steveblank.com/2009/08/03/the-secret-history-of-silicon-valley-part-vii-we-fought-a-war-you-never-heard-of/" target="_blank" title="Click to print" ><span>Print</span></a></li><li class="share-email"><a rel="nofollow noopener noreferrer" data-shared="" class="share-email sd-button" href="mailto:?subject=%5BShared%20Post%5D%20The%20Secret%20History%20of%20Silicon%20Valley%20Part%20VII%3A%20We%20Fought%20a%20War%20You%20Never%20Heard%20Of&body=https%3A%2F%2Fsteveblank.com%2F2009%2F08%2F03%2Fthe-secret-history-of-silicon-valley-part-vii-we-fought-a-war-you-never-heard-of%2F&share=email" target="_blank" title="Click to email a link to a friend" data-email-share-error-title="Do you have email set up?" data-email-share-error-text="If you're having problems sharing via email, you might not have email set up for your browser. 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data-name='like-post-frame-6599589-3070-674302e7d0be7' data-title='Like or Reblog'><h3 class="sd-title">Like this:</h3><div class='likes-widget-placeholder post-likes-widget-placeholder' style='height: 55px;'><span class='button'><span>Like</span></span> <span class="loading">Loading...</span></div><span class='sd-text-color'></span><a class='sd-link-color'></a></div> <p class="postinfo"> Filed under: <a href="https://steveblank.com/category/secret-history-of-silicon-valley/" rel="category tag">Secret History of Silicon Valley</a> | Tagged: <a href="https://steveblank.com/tag/cold-war/" rel="tag">Cold War</a>, <a href="https://steveblank.com/tag/electonic-warfare/" rel="tag">Electonic Warfare</a>, <a href="https://steveblank.com/tag/fred-terman/" rel="tag">Fred Terman</a>, <a href="https://steveblank.com/tag/steve-blank/" rel="tag">Steve Blank</a> | <a href="https://steveblank.com/2009/08/03/the-secret-history-of-silicon-valley-part-vii-we-fought-a-war-you-never-heard-of/#comments">10 Comments »</a> </p> </div> </div> <div class="post-2962 post type-post status-publish format-standard hentry category-customer-development category-market-types category-zilog tag-customer-development tag-steve-blank tag-tips-for-startups" id="post-2962"> <h2><a href="https://steveblank.com/2009/07/30/hes-only-in-field-service/" rel="bookmark">He’s Only in Field Service</a></h2> <div class="postinfo"> Posted on <span class="postdate">July 30, 2009</span> by steve blank </div> <div class="entry"> <p>The most important <em>early</em> customers for your startup usually turn out to be quite different from who you think they’re going to be.</p> <p><strong>He’s Only in Field Service</strong><br /> When I was at Zilog, the Z8000 peripheral chips included the new “<a href="http://www.zilog.com/docs/serial/z85c30.pdf" target="_blank" rel="noopener">Serial Communications Controller</a>” (<a href="http://www.systemyde.com/resume.html" target="_blank" rel="noopener">SCC</a>). As the (very junior) product marketing manager I got a call from our local salesman that someone at Apple wanted more technical information than just the spec sheets about our new (not yet shipping) chip. I vividly remember the sales guy saying, “It’s only some kid in field service. I’m too busy so why don’t you drive over there and talk to him.” (My guess is that our salesman was busy trying to sell into the “official” projects of Apple, the <a href="http://en.wikipedia.org/wiki/Apple_Lisa" target="_blank" rel="noopener">Lisa</a> and the <a href="http://oldcomputers.net/appleiii.html" target="_blank" rel="noopener">Apple III</a>.)</p> <p>Zilog was also in Cupertino near Apple, and I remember driving to a small non-descript Apple building at the intersection of Stevens Creek and Sunnyvale/Saratoga. I had a pleasant meeting and was as convincing as a marketing type could be to a very earnest and quirky field service guy, mostly promising the moon for a versatile but then very buggy piece of silicon. We talked about some simple <a href="http://www.cs.inf.ethz.ch/37-023/mat/zilog/chapter7.pdf" target="_blank" rel="noopener">design rules</a> and I remember him thanking me for coming, saying we were the only chip company who cared enough to call on him (little did he know.)</p> <p>I thought nothing about the meeting until years later. Long gone from Zilog I saw the picture of the original Macintosh design team. The field service guy I had sold the chip to was <a href="http://en.wikipedia.org/wiki/Burrell_Smith">Burrell Smith</a> who had designed the Mac hardware.</p> <p><em>The SCC had been designed into the Mac</em> and became the hardware which drove all the serial communications as well as the AppleTalk network which allowed Macs to share printers and files.</p> <p>Some sales guy who was too busy to take the meeting was probably retired in Maui on the commissions.</p> <p><strong>Your Customers are Not Who You Think<br /> <span style="font-weight: normal;">For years I thought this “million unit chip sale by accident” was a “one-off” funny story. That is until I saw that in startup after startup <em>customers come from places you <span style="text-decoration: underline;">don’t</span> plan on.</em></span></strong></p> <p><strong><span style="font-weight: normal;">Unfortunately most startups learn this by going through the “Fire the first Sales VP” drill: You start your company with a list of potential customers reading like a “who’s who” of whatever vertical market you’re in (or the Fortune 1000 list.) Your board nods sagely at your target customer list. A year goes by, you miss your revenue plan, and you’ve burned through your first VP of Sales. What happened?</span></strong></p> <p><strong><span style="font-weight: normal;">What happened was that you didn’t understand what “type of startup” you were and consequently you never had a chance to tailor your sales strategy to your “<a href="http://www.amazon.com/Four-Steps-Epiphany-Steven-Blank/dp/0976470705" target="_blank" rel="noopener">Market Type</a>.” Most startups tend to think they are selling into an <em>Existing market</em> – a market exists and your company has a faster and better product. If that’s you, by all means hire a VP of Sales with a great <a href="http://en.wiktionary.org/wiki/Rolodex" target="_blank" rel="noopener">rolodex</a> and call on established mainstream companies – and ignore the rest of this post.</span></strong></p> <p><strong>Market Type</strong><br /> But most startups aren’t in existing markets. Some are r<em>esegmenting an existing market–</em>directed at a niche that an incumbent isn’t satisfying (like Dell and Compaq when they were startups) or providing a low cost alternative to an existing supplier (like Southwest Airlines when it first started.) And other startups are in a <em>New Market — </em>creating a market from scratch (like Apple with the iPhone, or iPod/iTunes.)</p> <p>(“Market Type” radically changes how you sell and market at each step in Customer Development. It’s one of the subtle distinctions that at times gets lost in the process. I cover this in the <a href="http://www.amazon.com/Four-Steps-Epiphany-Steven-Blank/dp/0976470705" target="_blank" rel="noopener">Four Steps to the Epiphany</a>.)</p> <p><a href="https://i0.wp.com/steveblank.com/files/2009/03/market-type.jpg"><img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="471" data-permalink="https://steveblank.com/2009/03/26/supermac-war-story-4-repositioning-supermac-market-type-at-work/market-type/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/03/market-type.jpg?fit=340%2C255&ssl=1" data-orig-size="340,255" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":""}" data-image-title="market-type" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/03/market-type.jpg?fit=300%2C225&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/03/market-type.jpg?fit=340%2C255&ssl=1" class="aligncenter wp-image-471 size-full" title="market-type" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/03/market-type.jpg?resize=340%2C255&ssl=1" alt="market-type" width="340" height="255" /></a></p> <p><strong><span style="font-weight: normal;"><strong>Five Signs You Can Sell to a Large Company</strong><br /> If you’re resegmenting an existing market or creating a new market, the odds are low that your target list of market leaders will become your first customers. In fact having any large company buy from you will be difficult unless you know how to recognize the <em>five signs you can get a large company to buy from a startup:</em></span></strong></p> <ul> <li>They have a problem</li> <li>They know they have a problem</li> <li>They’ve been actively looking for a solution</li> <li>They tried to solve the problem with piece parts or other vendors</li> <li>They have or can acquire a budget to pay for your solution</li> </ul> <p>I advise startups to first<em> go after the companies that</em> <em>aren’t the market leaders</em> in their industries, but are fighting hard to get there. (They usually fit the checklist above.) Then find the early adopter/internal evangelist inside that company who wants to gain a competitive advantage. These companies will look at innovative startups to help them gain market share from the incumbent.</p> <p><strong>Sell to the Skunk Works</strong><br /> The other place for a startup to go is the nooks and crannies of a market leader. <em>Look for some “<a href="http://en.wikipedia.org/wiki/Skunkworks_project" target="_blank" rel="noopener">skunk works</a></em><em>” project where the product developers are actively seeking alternatives to their own engineering organization</em>. In Apple’s case Burrell Smith was designing a computer in a skunk works unbeknownst to the rest of Apple’s engineering. He was looking for a communications chip that could cut parts cost to build an innovative new type of computer – which turned out to be the Mac.</p> <p><strong>Lessons Learned</strong></p> <blockquote> <ul> <li>Early customers are usually not where you first think they are</li> <li>Where they are depends on Market Type</li> <li>Look for aggressive number 2’s or 3’s who are attacking a market leader</li> <li>Look for a “skunk works” inside a market leader</li> </ul> </blockquote> <p class="getsocial" style="text-align: left;">Download the podcast <a href="https://soundcloud.com/clearshore/hes-only-in-field-service" target="_blank" rel="noopener">here</a> or <a href="http://www.clearshore.net/2009/07/30/hes-only-in-field-service/" target="_blank" rel="noopener">here</a></p> <p class="getsocial" style="text-align: left;"><span style="font-family: Consolas, Monaco, monospace; font-size: 12px; line-height: 18px;">an early version of this story appeared on <a href="http://www.folklore.org/StoryView.py?project=Macintosh&story=Hes_Only_in_Field_Service.txt&sortOrder=Sort+by+Date&author=steve+blank" target="_blank" rel="noopener">folklore.org</a></span></p> <div class="sharedaddy sd-sharing-enabled"><div class="robots-nocontent sd-block sd-social sd-social-official sd-sharing"><h3 class="sd-title">Share this:</h3><div class="sd-content"><ul><li class="share-print"><a rel="nofollow noopener noreferrer" data-shared="" class="share-print sd-button" href="https://steveblank.com/2009/07/30/hes-only-in-field-service/" target="_blank" title="Click to print" ><span>Print</span></a></li><li class="share-email"><a rel="nofollow noopener noreferrer" data-shared="" class="share-email sd-button" href="mailto:?subject=%5BShared%20Post%5D%20He%27s%20Only%20in%20Field%20Service&body=https%3A%2F%2Fsteveblank.com%2F2009%2F07%2F30%2Fhes-only-in-field-service%2F&share=email" target="_blank" title="Click to email a link to a friend" data-email-share-error-title="Do you have email set up?" data-email-share-error-text="If you're having problems sharing via email, you might not have email set up for your browser. 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I even had time to find a girlfriend who was a contractor to the company. One of her first comments was, “I didn’t know you even worked here. Where were you hiding?” <a href="http://steveblank.com/2009/07/23/the-road-not-taken/" target="_blank" rel="noopener">If she only knew</a>.</p> <p><strong>What’s the Worst that Can Happen?</strong><br /> Our small training department had been without a manager for months and finding a replacement didn’t seem to be high on the VP of Sales list. We four instructors would grumble and complain to one another about our lack of leadership. Then it hit me – no one else wanted to be manager – what was the worst that could happen? I walked into the VP of Sales’ office and with my knees trembling, I politely asked for the job. I still remember him chuckling as I nervously babbled on what I good job I would do, what I would change for the better in the department, why I was qualified, etc. He said, “you know I figured it would be you to come in here and ask for the job. I was wondering how long it would take you.” I was now manager of Training and Education at Zilog.</p> <p>All I had to do was ask.</p> <div id="attachment_2992" style="width: 1432px" class="wp-caption aligncenter"><a href="https://i0.wp.com/steveblank.com/files/2009/07/img_7172.jpg"><img data-recalc-dims="1" loading="lazy" decoding="async" aria-describedby="caption-attachment-2992" data-attachment-id="2992" data-permalink="https://steveblank.com/2009/07/27/ask-and-it-shall-be-given/img_7172/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7172.jpg?fit=1422%2C1963&ssl=1" data-orig-size="1422,1963" data-comments-opened="1" data-image-meta="{"aperture":"5.6","credit":"","camera":"Canon EOS 20D","caption":"","created_timestamp":"1248201006","copyright":"","focal_length":"135","iso":"400","shutter_speed":"0.016666666666667","title":""}" data-image-title="Zilog Matchbook Cover" data-image-description="" data-image-caption="<p>Zilog Correspondence Course Matchbook Cover</p> " data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7172.jpg?fit=217%2C300&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7172.jpg?fit=468%2C646&ssl=1" class="wp-image-2992 size-full" title="Zilog Matchbook Cover" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/07/img_7172.jpg?resize=468%2C646&ssl=1" alt="Zilog Correspondence Course Matchbook Cover" width="468" height="646" /></a><p id="caption-attachment-2992" class="wp-caption-text">Zilog Correspondence Course Matchbook</p></div> <p>From that day forward, in my business and personal relationships, I would calculate the consequences of a “No” for an answer against the benefits of getting a “Yes.” The math said that it was almost always worth asking for what you want. And the odds in your favor are even higher, as most of your peers wouldn’t even get into the game due to some unspoken belief that in a meritocracy, good things will come to those who wait. Perhaps if you have a union job based on seniority, but not in any startup I’ve ever seen.</p> <p><em>For entrepreneurs good things come to those who ask.</em></p> <p><strong>What’s Marketing?<br /> <span style="font-weight: normal;">As part of the sales organization, I thought I kind of figured out what the function of the sales department was. (In reality it would be another 20 years.) And I understood engineering since I interacted with them almost daily. And since Zilog still had a semiconductor fab next door, I learned what manufacturing did in a chip company, as every training class wanted to see their chips being made. But the one group that had me stumped was something called “marketing.” “Explain it to me again,” I’d ask.</span></strong></p> <p>After a year and a half of <a href="http://steveblank.com/wp-content/uploads/2009/07/img_7181.jpg" target="_blank" rel="noopener">running training</a> and teaching the new Z-8000 and its <a href="http://www.zilog.com/docs/serial/ps0113.pdf" target="_blank" rel="noopener">peripheral</a> chips, I began to figure out that one of the jobs of marketing was to translate what engineering built into a description that our salesmen could use to talk to potential customers. I distinctly remember this is the first time I head the phrases “features and benefits.” And since I saw our ads (but didn’t quite understand them,) I knew marketing was the group that designed them, somehow to get customers to think our products were better than Intel and Motorola’s.</p> <p>But <a href="http://books.google.com/books?id=WhfGfbX-JdgC&pg=PA3" target="_blank" rel="noopener">Intel was kicking our rear</a>.</p> <p>One day I heard there was an opening in the marketing department for a product marketing manager for the Z-8000 peripheral chips. The department had hired a recruiter and was interviewing candidates from other chip companies. I looked at the job spec and under “candidate requirements” it listed everything I didn’t have: MBA,<br /> 5-10 years product marketing experience, blah, blah.</p> <p>I asked for the job.</p> <p>The response was at first less than enthusiastic. I certainly didn’t fit their profile. However, I pointed out that while I didn’t have any of the traditional qualifications I knew the product as well as anyone. I had been teaching Z8000 design to customers for the last year and a half. I also knew our customers. I understand how our products were being used and why we won design-in’s over Intel or Motorola. And finally, I had a great working relationship with our engineers who designed the chips. I pointed out it that it would take someone else 6 months to a year to learn what I already knew – and I was already in the building.</p> <p>A week later Zilog had a new product marketing manager, and I had my first job in marketing.</p> <p>Now all I needed to do was to learn what a marketeer was supposed to do.</p> <p><strong>MBA or Domain Expert<br /> <span style="font-weight: normal;">Years later when I was running marketing departments I came up with a heuristic that replicated my own hire: <em>in a technology company it’s usually better to train a domain expert to become a marketer than to train an MBA to become a domain expert</em>. While MBA’s have a ton of useful skills, what they don’t have is what most marketing departments lack – customer insight. I found that having a senior marketer responsible for business strategy surrounded by ex-engineers and domain experts makes one heck of a powerful marketing department.</span></strong></p> <p><span style="font-weight: normal;"><strong>Entreprenuers Know How to Ask<br /> <span style="font-weight: normal;">Successful entrepreneurs have the ability to ask for things relentlessly. In the face of rules that stand in their way they find a way to change the rules. (To an entrepreneur comments like, “you need an MBA, we don’t fund companies like yours, we don’t buy from start-ups, you have to go through our vendor selection committee” are just the beginning of a negotiation rather than the end.) Entrepreneurs are fearless, persistent and uninhibited about <em>asking</em> – whether it’s asking to assemble a team, get financing, sell customers, etc. or whatever is necessary to build a company. If you are on the path to be a successful entrepreneur, hopefully you are already asking for things you want/need/aspire to. If not, don’t wait. Get started asking. It is a skill you need to either have or develop.</span></strong></span></p> <p><strong>Lessons Learned</strong></p> <blockquote><p><strong><span style="font-weight: normal;"><em>Ask, and it shall be given you; seek, and you shall find; knock, and it will be opened to you.</em></span></strong></p> <p><strong><span style="font-weight: normal;"><em>King James Bible, New Testament – Matthew 7:7 </em></span></strong></p> <p class="getsocial" style="text-align: left;"><img data-recalc-dims="1" decoding="async" style="border: 0; margin: 0; padding: 0;" src="http://getsocialserver.files.wordpress.com/2009/02/gs1004.png?w=468" alt="" /><a title="Add to Facebook" href="http://www.facebook.com/sharer.php?u=http://steveblank.com/2009/07/27/ask-and-it-shall-be-given" target="_blank" rel="noopener"><img data-recalc-dims="1" decoding="async" style="border: 0; margin: 0; padding: 0;" src="http://getsocialserver.files.wordpress.com/2009/02/gs1014.png?w=468" alt="Add to Facebook" /></a><a title="Add to Digg" href="http://digg.com/submit?phase=2&url=http%3A%2F%2Fsteveblank.com%2F2009%2F07%2F27%2Fask-and-it-shall-be-given&title=Ask%20and%20It%20Shall%20be%20Given" target="_blank" rel="noopener"><img data-recalc-dims="1" decoding="async" style="border: 0; 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And one of my conclusions was that I needed to pick one job not two. I had to decide what I wanted to do with my career – go back to ESL, try to work for the Customer, or stay at Zilog?</p> <p>While it may seem like an easy choice, few people who love technology and who work on <a href="http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB35/">black projects</a> leave. These projects are incredibly seductive. Let me explain why.</p> <p><strong>National Efforts<br /> <span style="font-weight:normal;">In World War II the U.S. put its resources behind a technical project that dwarfed anything every built – the atomic bomb. From a standing start in 1942 the U.S. scaled up the production of U-235 and plutonium from micrograms to tens of kilograms by 1945. We built new cities in Hanford, Oak Ridge and Los Alamos and put 130,000 people to work on the project.</span></strong></p> <p>During the cold war, the U.S. government kept up the pace. Hundreds of thousands of people worked on developing strategic weapons, bombers, our ICBM and SLBM missile programs, and the Apollo moon program. These programs dwarfed the size that any single commercial company could do by itself. They were <em>national </em>efforts of hundreds of companies employing 10’s or 100’s of thousands of engineers.</p> <p><strong>ESL – National Technical Means of Verification</strong><br /> The project I was working on at ESL fit this category. The 1970’s and ‘80’s were the endgame of the cold war, and the U.S. military realized that <a href="http://steveblank.com/2009/04/06/story-behind-“the-secret-history”-part-iii-the-most-important-company-you-never-heard-of/">our advantage over the Soviet Union was in silicon, software and systems</a>. These technologies which allowed the U.S. to build <a href="http://stanford.edu/dept/france-stanford/Conferences/Risk/Perry.pdf">sensors, stealth and smart weapons</a> previously thought impossible or impractical, would give us a major military advantage. Building these systems required resources way beyond the scope of a single company. Imagine coming up with an idea that could work only if you had your own semiconductor fab and could dedicate its output to make specialized chips just for you. Then imagine you’d have to get some rockets and put this reconnaissance system in space – no, make that several rockets. No one laughed when ESL proposed this class of project to “the customer.”</p> <p>If you love technology, these projects are hard to walk away from.</p> <p><strong>The Road Not Taken<br /> <span style="font-weight:normal;">At first, I thought my choice was this: working on great technology at ESL or continuing to work on these toy-like microprocessors at Zilog.</span></strong></p> <p><strong><span style="font-weight:normal;">But the more I thought about it, the choice wasn’t about the hardware or systems. There was something about the energy and passion Zilog’s customers had as they kept doing the most unexpected things with our products.</span></strong></p> <p>While I couldn’t articulate at it at the time (it would take another 25 years) at ESL the company and the customer had a <em><a href="http://www.slideshare.net/startuplessonslearned/eric-ries-lean-startup-schematic-view-of-agile-development-and-customer-development" target="_blank">known problem</a></em> and were executing to building a <em><a href="http://www.slideshare.net/startuplessonslearned/schematic-view-of-product-development-waterfall-agile-lean" target="_blank">known solution</a></em>, with a set of desired specifications and <a href="http://en.wikipedia.org/wiki/Program_Evaluation_and_Review_Technique" target="_blank">PERT charts</a> telling them what they needed to do and in what order to achieve the goal. There was a ton of engineering innovation and coordination along the way, and the project could have failed at any point. But the insight and creativity occurred at the project’s beginning when the problem and solution was first being defined. Given where I was in the hierarchy, I calculated that the odds of me being in on those decisions didn’t look high – ever.</p> <p>In contrast, my customers at Zilog had nothing more than a set of visions, guesses and hallucinations about their customers; who they were, what they wanted to achieve and what was the right path to get there. At these startups both<em> the</em><em> </em><em><a href="http://www.slideshare.net/startuplessonslearned/schematic-view-of-product-development-waterfall-agile-lean" target="_blank">problem and solution were unknown</a></em>.</p> <p><em>Startups were not just smaller versions of a large company, they were about invention, innovation and iteration –</em> of business model, product, customers and on and on. Startups were doing discovery of the problem and solution in real-time. I could see myself doing that – soon.</p> <p><em>Unbeknownst to me, I was facing a choice between becoming an entrepreneur or working for a large company.</em></p> <p><em> </em></p> <p>I chose a path and never looked back.</p> <p>——</p> <p><em> </em></p> <blockquote><p>Two roads diverged in a yellow wood,<br /> And sorry I could not travel both<br /> And be one traveler, long I stood<br /> And looked down one as far as I could<br /> To where it bent in the undergrowth;<br /> Then took the other, as just as fair,<br /> And having perhaps the better claim,<br /> Because it was grassy and wanted wear;<br /> Though as for that the passing there<br /> Had worn them really about the same,<br /> And both that morning equally lay<br /> In leaves no step had trodden black.<br /> Oh, I kept the first for another day!<br /> Yet knowing how way leads on to way,<br /> I doubted if I should ever come back.<br /> I shall be telling this with a sigh<br /> Somewhere ages and ages hence:<br /> Two roads diverged in a wood, and I—<br /> I took the one less traveled by,<br /> And that has made all the difference.</p> <p><em>Robert Frost – The Road Not Taken – 1916</em></p></blockquote> <p><strong> </strong></p> <p><strong>Lessons Learned</strong></p> <ul> <li>There is no “right” choice for a career</li> <li>There’s only the choice you make</li> <li>Don’t let a “career” just happen to you</li> <li>A startup is not a smaller version of a large company</li> </ul> <p class="getsocial" style="text-align:left;"><img data-recalc-dims="1" decoding="async" style="border:0;margin:0;padding:0;" src="http://getsocialserver.files.wordpress.com/2009/02/gs1001.png?w=468" alt="" /><a title="Add to Facebook" href="http://www.facebook.com/sharer.php?u=http://steveblank.com/2009/07/23/the-road-not-taken" target="_blank"><img data-recalc-dims="1" decoding="async" style="border:0;margin:0;padding:0;" src="http://getsocialserver.files.wordpress.com/2009/02/gs1011.png?w=468" alt="Add to Facebook" /></a><a 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Burnout can turn productive employees into emotional zombies and destroy careers. But it can also force you to hit the pause button and perhaps take a moment to reevaluate your life and your choices.</p> <p>Hitting “burnout” changed the trajectory of both ends of my career in Silicon Valley. This post, which is divided in two parts, is the story of the first time it happened to me.</p> <p><strong>Zilog<br /> <span style="font-weight: normal;">Zilog was my first Silicon Valley company where you could utter the <a href="http://steveblank.com/category/esl/">customer’s name</a> in public. <a href="http://archive.computerhistory.org/resources/text/Oral_History/Zilog_Z80/102658073.05.01.pdf">Zilog</a> produced one of the first <a href="http://www.ibm.com/developerworks/library/pa-microhist.html">8-bit microprocessors</a>, the <a href="http://www.z80.info/">Z-80</a> (competing at the time with <a href="http://www.antiquetech.com/chips/8080.htm">Intel’s 8080</a>, Motorola 6800, and MOS Technology 6502.)</span></strong></p> <p>I was hired as a training instructor to teach microprocessor system design for the existing <a href="http://tiggerfox.tibsfox.com/zylog_z80_cpu.jpg">Z-80</a> family and to write a new course for Zilog’s soon to be launched 16-bit processor, the<a href="http://www.old-computers.com/history/detail.asp?n=52&t=3"> Z-8000</a>. Given the hardware I had worked on at ESL, learning microprocessors wasn’t that hard but figuring out how to teach hardware design and assembly language programming was a bit more challenging. Luckily while I was teaching classes at headquarters, Zilog’s field application engineers (the technical engineers working alongside our salesmen) would work side-by-side with our large customers as they designed their systems with our chips. So our people in the field could correct any egregious design advice I gave to customers who mattered.</p> <p><strong>Customers<br /> <span style="font-weight: normal;">The irony is that Zilog had no idea who would eventually become its largest customers. Our salesmen focused on accounts that ordered the largest number of chips and ignored tiny little startups that wanted to build personal computers around these chips (like Cromemco, Osborne, Kaypro, Coleco, Radio Shack, Amstrad, Sinclair, Morrow, Commodore, Intertec, etc.) Keep in mind this is still several years before the IBM PC and DOS. And truth be told, these early systems were laughable, at first having no disk drives (you used tape cassettes,) no monitors (you used your TV set as a display,) and no high level programming languages. If you wanted your own applications, you had to write them yourself. No mainframe or minicomputer company saw any market for these small machines.</span></strong></p> <p><strong>Two Jobs at Once<br /> <span style="font-weight: normal;">When I was hired at Zilog part of the deal was that I could consult for the first six months for my last employer, <a href="http://steveblank.com/2009/04/06/story-behind-“the-secret-history”-part-iii-the-most-important-company-you-never-heard-of/" target="_blank" rel="noopener">ESL</a>.</span></strong></p> <p>Just as I was getting settled into Zilog, the manager of the training department got fired. (I was beginning to think that my hiring managers were related to <a href="http://en.wikipedia.org/wiki/Redshirt_(character)">red-shirted guys on Star Trek</a>.) Since the training department was part of sales no one really paid attention to the four of us. So every day I’d come to work at Zilog at 9, leave at 5 go to ESL and work until 10 or 11 or later. Repeat every day, six or seven days a week.</p> <p>Meanwhile, back at ESL the project I was working on wanted to extend my consulting contract, the company was trying to get me to return, and in spite of <a href="http://steveblank.com/2009/04/13/story-behind-“the-secret-history”-part-iv-undisclosed-location-library-hours/">what I had done on the site</a>, “the customer” had casually asked me if I was interested in talking to them about a job. Life was good.</p> <p>But it was all about to catch up to me.</p> <p><strong>Where Am I?<br /> <span style="font-weight: normal;">It was a Friday (about ¾’s through my work week) and I was in a sales department meeting. Someone mentioned to me that there were a pile of upcoming classes heading my way, and warned me “remember that <a href="http://www.wisegeek.com/what-does-the-devils-in-the-details-mean.htm">the devil is in the details</a>.” The words “heading my way” and “devil” combined in my head. I immediately responded, “well that’s OK, I got it under control – as long as the devil coming at me isn’t an <a href="http://www.fas.org/nuke/guide/russia/icbm/r-36m.htm">SS-18</a>.” Given that everyone in the room knew the NATO codename for the <a href="http://www.astronautix.com/lvs/r36m.htm">SS-18</a> was <a href="http://www.youtube.com/watch?v=PnUiG9Nb1lI">SATAN</a>, I was thinking that this was a witty retort and expected at least a chuckle from someone.</span></strong></p> <p>I couldn’t understand why people were staring at me like I was <a href="http://en.wikipedia.org/wiki/Glossolalia">speaking in tongues</a>. The look on their faces were uncomfortable. The VP of Sales gave me a funny look and just moved on with the agenda.</p> <p>VP of Sales? Wait a minute.. where am I?</p> <p>I looked around the room thinking I’d see the faces of the engineers in the <a href="http://steveblank.com/2009/04/06/story-behind-“the-secret-history”-part-iii-the-most-important-company-you-never-heard-of/" target="_blank" rel="noopener">ESL</a> M-4 vault, but these were different people. Who were these people? I had a moment of confusion and then a much longer minute of panic trying to figure out where I was. I wasn’t at ESL I was at Zilog. As I realized what I had said, a much longer panic set in. I tried to clear my head and remember what else I had said, like anything that would be really, really, really bad to say outside of a secure facility.</p> <p>As I left this meeting I realized I didn’t even remember when I had left ESL or how I had gotten to Zilog. Something weird was happening to me. As I was sitting in my office looking lost, the VP of Sales came in and said, “you look a bit burned out, take it easy this weekend.”</p> <p>“Burned out?” What the heck was that? I had been working at this pace since I was 18.</p> <p><strong>Burnout<br /> <span style="font-weight: normal;">I was tired. No I was more than tired, I was exhausted. I had started to doubt my ability to accomplish everything. Besides seeing my housemates in Palo Alto I had no social life. I was feeling more and more detached at work and emotionally drained. Counting the Air Force I had been pounding out 70 and 80 hour weeks nonstop for almost eight years. I went home and fell asleep at 7pm and didn’t wake up until the next afternoon.</span></strong></p> <p>The bill had come due.</p> <p><strong>Recovery<br /> <span style="font-weight: normal;">That weekend I left the Valley and drove along the coast from San Francisco to Monterey. Crammed into Silicon Valley along with millions of people around the San Francisco Bay it’s hard to fathom that 15 air miles away was a stretch of California coast that was still rural. With the Pacific ocean on my right and the Santa Cruz Mountains on my left, Highway 1 cut through mile after mile of farms in rural splendor. There wasn’t a single stop-light along 2-lane highway for the 45 miles from Half Moon Bay to Santa Cruz. Looking at the green and yellows of the farms, I realized that my life lacked the same colors. <em>I had no other life than work.</em> While I was getting satisfaction from what I was learning, the sheer joy of it had diminished.</span></strong></p> <p>As the road rolled on, it dawned on me that<em> there was no one looking out for me.</em> There was no one who was going to tell me<em>, “</em>You’ve hit your limit, now work less hours and go enjoy yourself.” The idea that <em>only I could be responsible for taking care of my happiness</em> and health was a real shock. How did I miss that?</p> <p>At the end of two days I realized,</p> <ul> <li>This was the first full weekend I had taken off since I had moved to California<br /> 3 years ago.</li> <li>I had achieved a lot by working hard, but the positive feedback I was getting just encouraged me to work even harder.</li> <li>I needed to learn how to relax without feeling guilty.</li> <li>I needed a life outside work.</li> </ul> <p>And most importantly I needed to pick one job not two. I had to make a choice about where I wanted to go with my career–back to ESL, try to work for the Customer or stay at Zilog?</p> <p>More about that choice in the next post.</p> <p><strong>Lessons Learned</strong></p> <blockquote> <ul> <li>No one will tell you to work fewer hours</li> <li>You need to be <em>responsible</em> for your own health and happiness</li> <li>Burnout sneaks up on you</li> <li>Burnout is self-induced. 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The company was founded to build games with embedded video to bring Hollywood stories, characters, and narratives to a market where “shoot and die” twitch games were in vogue. But underlying the company’s existence was a fundamental hypothesis we refused to see or test – <em>customers would care if we did</em>.</p> <p>In the game business of the early 1990’s video was at best a brief narrative, a distraction you maybe watched once, not the core of the game. Our potential customers didn’t seem to be calling for Hollywood stories, characters and narrative. That’s OK, because we knew better. We thought we had figured out what the next generation of games was going to be. We were thinking we were in the movie business, but video games were more akin to pinball; both pinball and movies were entertainment but you would never confuse them with each other. Successful pinball companies didn’t hire Hollywood talent.<ins cite="mailto:steve%20blank" datetime="2009-07-15T17:23"></ins></p> <p>Meanwhile our company was pouring an enormous amount of dollars into building tools and video compression technology, while also hiring a lot of high-priced Hollywood talent like art directors, and script and story editors.</p> <p><strong>We Don’t Need Domain Experts</strong><strong><br /> </strong>When I looked around at our executive staff, there wasn’t a single founder who was a gamer. Worse, there wasn’t a single person on our executive team who had come from a game company. Nor was there anyone with game experience on our board. As the company grew a sense of unease started gnawing at the outer fringes of the “you’re in trouble” part of my brain. Meanwhile my partner was in heaven working with his newly hired group of game designers directing and producing our first games. When I pointed out my rising apprehension his response was, “I’ve been playing games since I was 10. I know what’s great and what’s not. We agreed this part of the company was my responsibility. Don’t worry the games are going to be great.” Given my fiduciary responsibility to my board and my investors did his blasé answer force me to grab him by the collar and scream, “Snap out of it, we’re in trouble!”</p> <p>Nah. Instead I said, “Oh, OK, glad it’s all under control.” Then I went back to raising more money and getting more press for our soon to be spectacular games.</p> <p><strong>Hire Advice I Can Ignore</strong><strong><br /> </strong>But the nagging little voice in the back of my head that said, “This doesn’t feel right,” wouldn’t go away. So I hired a VP of Marketing from Sega, one of the video game platforms on which our games would run. After only two weeks on the job, he came into my office and said, “Have you’ve seen the games we are building?” What kind of question was that? Of course I had seen pieces of the video we shot and beautiful storyboards. “No,” he insisted, “Have you seen the game play, the part that supposed to keep players addictively glued to the game console for hours?” Hmm. “No, not really, but my partner owns the studio and tells me it’s spectacular and everyone will love it. Don’t bother him; he knows what he’s doing. Go spend some time outside the building talking to potential distribution partners. Tell them how great it’s going to be and see how many pre-orders we can get.”</p> <p>A month later the VP of Marketing appeared in my office again. “Steve I have to tell you some bad news, I just showed our potential channel partners and customers a few completed pieces of the games we had. <em>They think the games stink</em>.”</p> <p style="text-align: center;"><strong><span style="font-weight: normal;"><a style="text-decoration: none;" href="https://i0.wp.com/steveblank.com/files/2009/08/loadstar.jpg"><img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="2849" data-permalink="https://steveblank.com/2009/07/16/rocket-science-5-who-needs-domain-experts/loadstar/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/loadstar.jpg?fit=280%2C280&ssl=1" data-orig-size="280,280" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":""}" data-image-title="loadstar" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/loadstar.jpg?fit=280%2C280&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/loadstar.jpg?fit=280%2C280&ssl=1" class="aligncenter wp-image-2849 size-full" title="loadstar" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/08/loadstar.jpg?resize=280%2C280&ssl=1" alt="loadstar" width="280" height="280" /></a> </span></strong></p> <p>Now I know I heard his words because years later I can still remember them well enough to write them down. But somehow the translation between my ears and what I was supposed to do with what I was hearing shut down. Was my response to stop development of the games? Bring in some outside professionals to review our progress? Call a board meeting and say we may have a serious problem? Nah. I said, “That can’t be true! The press is saying we are the hottest super group around. Look, <a href="http://steveblank.com/2009/07/13/rocket-science-4-the-press-is-our-product/" target="_blank" rel="noopener">we’re on the cover of Wired magazine</a>. They think we’re brilliant. Our VCs think we are visionary. Stop annoying our game designers and start working on selling and marketing the games.”</p> <p><strong>Hindsight</strong><strong><br /> </strong>In hindsight it’s easy to laugh. Saying you knew how to build great games because you played them all your life was like saying, “Hey I eat out a lot so why don’t I open a restaurant.” Or “I’ve seen a lot of movies so let’s start a movie studio.” Only in Silicon Valley could we have got funded with this idea, and not surprisingly, it was our technology that had the VC’s confused. It was more like we had invented the world’s best new kitchen utensils and wanted to open a restaurant, or had built the world’s finest movie cameras and wanted to start a movie studio. Our venture backers and our executive team confused our technology and our tools — and our passion for the games business — with any practical experience in the real business we were in. We were an <em>entertainment</em> business – and not a very subtle entertainment business. As we were about to find out, if video game players wanted a cinematic experience, they went to the movies, they didn’t buy a video game. Our customers wanted to kill, shoot or hunt for something. Fancy video narratives and plots were not video games.</p> <p><strong>Interest Alignment</strong><br /> Why VC’s invested in companies like ours is what’s great and bad about entrepreneurship. A <a href="https://gsbapps.stanford.edu/facultyprofiles/biomain.asp?id=26645669" target="_blank" rel="noopener">Venture Capitalist I respect</a> reminded me that he thought about investment risk as either:</p> <ul> <li>investing $1 million in 10 companies and have all ten succeed. With each of those ten companies returning 2x their money for $20 million. Or</li> <li>investing in 10 companies and having 8 fail – but the remaining two companies returning 20x their money for $40 million.</li> </ul> <p>His point was that it was in the VC’s interest in having entrepreneurs swing for the fences.</p> <p>However the <em>VC’s are managing a portfolio while you, the entrepreneur are managing one company – yours</em>. While VC’s might love you and your firm, a 2x return isn’t why they’re in business. It’s nothing personal, but your interests and your VC’s may not be aligned. (More on this in future posts.)</p> <p><strong>The Search for the Black Swan</strong><br /> What keeps founders and their investors going is the the dream/belief that your startup will be the <a href="http://en.wikipedia.org/wiki/Black_swan_theory" target="_blank" rel="noopener">Black Swan</a> – a company that breaks all the obvious rules, ignores tradition and does something unique and spectacular and with a result that is unpredicted and financial returns that are breathtaking.</p> <p>Think of the Microprocessor, Personal Computer, Internet, Twitter, Youtube, Facebook, Google, the iPhone. Creating those technologies and companies required entrepreneurs willing to follow their own vision and convincing others that the path is worth following.</p> <p><em>The mistake isn’t having a vision and taking risks. The mistake is assuming you are a Black Swan and continuing to ignore the facts as they pile up in front of you</em>.</p> <p><strong>Customer Development</strong><strong><br /> </strong>There was nothing wrong about Rocket Science having a vision radically different than the conventional wisdom. We could have been right and invented a new form of gaming and entertainment. What went awry was continuing to execute on the vision when all the evidence in front of us told us our hypothesis was wrong. We compounded the problem when we failed to have an honest discussion about why it made sense to ignore the evidence. (A tip-off is when you start saying, “they just don’t get it yet.”)</p> <p>At Rocket Science, hubris took over and was about to lead to the fall.</p> <p><a href="http://www.amazon.com/Four-Steps-Epiphany-Steven-Blank/dp/0976470705" target="_blank" rel="noopener">Customer Development</a> says having a vision, faith and a set of hypotheses are a normal part of the startup experience. But it is critical to build in a process for testing those hypothesis outside the building and listening to the responses – or you might as well throw your money in the street.</p> <p style="text-align: left;"><strong>Lessons learned?</strong></p> <blockquote> <ul> <li>While a lack of relevant domain expertise is not always fatal, believing you don’t need any is.</li> <li>Founders need to validate their vision in front of customers early and often.</li> <li>Your goals and your VC’s goals may not be aligned. 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Which at this stage of the company was marketing and financing.</p> <p>Our “Hollywood meets Silicon Valley” story played great in Silicon Valley, they ate it up in Hollywood, and the business press tripped over themselves to talk to us. The story had universal appeal, and we spun the tale and keep the buzz going. It worked. Judging by the ink we had gotten, we were the hottest company in the game business, with stories in Fortune, Forbes, Variety, The Hollywood Reporter, and the cover of <a href="http://www.wired.com/wired/archive/2.11/rocket.science.html" target="_blank" rel="noopener">Wired</a> magazine. Yet we hadn’t shipped a single product.</p> <p>While it felt wonderful at the time, this was a <em>very</em> bad idea.</p> <p><a href="https://i0.wp.com/steveblank.com/files/2009/05/wired-2-11-cover.jpg"><img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="1939" data-permalink="https://steveblank.com/2009/07/13/rocket-science-4-the-press-is-our-product/wired-2-11-cover/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/05/wired-2-11-cover.jpg?fit=290%2C360&ssl=1" data-orig-size="290,360" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":""}" data-image-title="Wired 2.11 Cover" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/05/wired-2-11-cover.jpg?fit=242%2C300&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/05/wired-2-11-cover.jpg?fit=290%2C360&ssl=1" class="aligncenter wp-image-1939 size-full" style="text-decoration: underline;" title="Wired 2.11 Cover" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/05/wired-2-11-cover.jpg?resize=290%2C360&ssl=1" alt="Wired 2.11 Cover" width="290" height="360" /></a></p> <p><strong>Everyone Else is an Idiot</strong><br /> The theme of our press blitz was all about how we were going to show the old tired game companies the right way to make video games. Our press infuriated the established companies who had spent years building games that sold well, but had zero press recognition. (They all accurately predicted our demise because of our lack of game expertise.) Ah, the arrogance of inexperience. Fortunately I’ve never been good at lying, to be effective in communicating a story I truly had to believe in what I was saying. At the time I was a true believer that Rocket Science was going to change the gaming world. The positive effect of the tidal wave of press was as a door opener for us to raise money from corporate partners. Companies in the entertainment business around the world knew who we were, and were interested in meeting us, if only to see what the hype was about. Our VP of Business Development had no problems getting meetings and fund raising was easy.</p> <p><strong>The Digital Dream Team</strong><br /> Way before the Internet phenomenon, we had created “Rocket Science <em>the brand</em>” that was much bigger in size and importance than Rocket Science the company. One magazine called us the “Digital Dream Team”, young, edgy and hip, and by the looks of the company (great building, nice furniture, and well dressed 20-year olds) we were trying to live up to the reputation. All this activity occurring before we actually shipped a product. We were larger than life, but as one potential <a href="http://www.elevation.com/EP_IT.asp?id=102" target="_blank" rel="noopener">investor</a> told us, “You guys are all hat and no cattle.”</p> <p><strong>Believing Your Own BS is Toxic</strong><br /> Lots of noise and smoke before a product ships seems to be a toxic byproduct of enthusiastic entrepreneurs. <a href="http://www.thinkbda.com/2008/08/11/cuil-demonstrates-the-risk-of-peddling-hype-and-why-microsoft-is-already-fighting-for-its-future/" target="_blank" rel="noopener">Every generation of new technology</a> seems to find a willing audience in naïve journalists and eager readers. However, when the smoke clears <em>the surviving companies are more than likely the ones that focussed on execution, not on creating a cacophony of press releases</em>. If Rocket Science wasn’t a clear enough lesson in the danger of premature enthusiasm, the dot-com bubble that followed should have been. The only difference between us and the Internet bubble that would follow was that we did branding on the cheap by creating our image with public relations, whilethe dot-bomb era was to do it by spending enormous sums on advertising (those large venture rounds had to get spent somewhere.)</p> <p>Hindsight is wonderful. For years the one solace I was able to take from the Rocket Science debacle was that I had got the branding right. Then I watched the criminally expensive dot-bomb-bust branding activities to see how futile and wasteful it was to brand a company before it has shipped products.</p> <p><strong>To a Hammer Everything Looks Like a Nail<br /> <span style="font-weight: normal;">In hindsight my failure was that I executed to my strength – telling a compelling story – without actually listening to customer feedback.</span></strong></p> <p>It wasn’t that I didn’t know how to listen to customers. It wasn’t that I didn’t have a smart VP of Marketing who was getting early feedback from customers and screaming that the games didn’t match the hype. It’s that as CEO I was too busy talking to the press and raising money to hear customer comments directly.</p> <p><em>I had outsourced customer feedback</em> and ignored the input. In fact, hearing input that contradicted the story I was telling created <a href="http://www.learningandteaching.info/learning/dissonance.htm" target="_blank" rel="noopener">cognitive dissonance</a>. So while the words may have passed through my ears I couldn’t “hear” it. Not being able to hear negative customer input is an<em> extremely</em> bad idea.</p> <p><strong>Out of the Ashes<br /> </strong>A few of the key tenets of <a href="http://www.amazon.com/Four-Steps-Epiphany-Steven-Blank/dp/0976470705" target="_blank" rel="noopener">Customer Development</a>, came from the ashes. The <a href="http://www.slideshare.net/sblank/customer-development-at-startup2startup" target="_blank" rel="noopener">Customer Discovery</a> lessons of “get outside the building and test your hypothesis with customers,” and “the founders need to hear the results,” came from this debacle.</p> <p>The Customer Validation lesson of, “no formal launch until you have early sales validating the product and sales process” was also born here. Given the lukewarm feedback we were getting from potential customers and channel buyers we should have dramatically dialed back the hype until the follow-on games could match it. Given the talented people we had, there’s no doubt they would have done so. Instead the huge mismatch between expectations and reality of our first games diminished the brand and demoralized the company – we never recovered.</p> <blockquote><p><strong>Lessons Learned</strong></p> <ul> <li>PR is not a product- it is a demand creation activity to fill a sales channel</li> <li>The product needs to come close to the hype</li> <li>Fire the CEO who insists on press and PR <em>before</em> they understand customer feedback</li> <li>Branding is a process that should happen <em>after</em> you have customers</li> </ul> </blockquote> <p class="getsocial" style="text-align: left;"><img data-recalc-dims="1" decoding="async" style="border: 0; margin: 0; padding: 0;" src="http://getsocialserver.files.wordpress.com/2009/02/gs1001.png?w=468" alt="" /><a title="Add to Facebook" href="http://www.facebook.com/sharer.php?u=http://steveblank.com/2009/07/13/rocket-science-4-the-press-is-our-product" target="_blank" rel="noopener"><img data-recalc-dims="1" decoding="async" style="border: 0; 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href="https://steveblank.com/category/rocket-science-games/" rel="category tag">Rocket Science Games</a> | Tagged: <a href="https://steveblank.com/tag/early-stage-startup/" rel="tag">Early Stage Startup</a>, <a href="https://steveblank.com/tag/steve-blank/" rel="tag">Steve Blank</a>, <a href="https://steveblank.com/tag/tips-for-startups/" rel="tag">Tips for Startups</a> | <a href="https://steveblank.com/2009/07/13/rocket-science-4-the-press-is-our-product/#comments">10 Comments »</a> </p> </div> </div> <div class="post-1914 post type-post status-publish format-standard hentry category-customer-development category-rocket-science-games tag-early-stage-startup tag-entrepreneurs tag-steve-blank tag-tips-for-startups" id="post-1914"> <h2><a href="https://steveblank.com/2009/07/09/rocket-science-2-hollywood-meets-silicon-valley/" rel="bookmark">Rocket Science 3: Hollywood Meets Silicon Valley</a></h2> <div class="postinfo"> Posted on <span class="postdate">July 9, 2009</span> by steve blank </div> <div class="entry"> <p><strong>What do you mean you don’t want to hear about features?<br /> <span style="font-weight: normal;">I was now a CEO of Rocket Science, and having a great time building the company (more about that in future posts.) Unfortunately, while I had gone through phases of video game addiction in my life, in no way could I be described as even a “moderate hard-core gamer,” which ruled me out as a domain expert. So I got out out of the building to meet and understand our customers and distribution partners. I remember after a month or two of talking to 14-22 year old male gamers (our potential target market,) I realized that for the first time in my career I had no emotional connection to my customers or channel partners.</span></strong></p> <p><strong><span style="font-weight: normal;">I was about 90 days into the company when I began to realize there was something very different about this business. In previous companies I could talk about technology details and how the product features could solve a customers problem. But people didn’t buy video games on features and they weren’t looking to solve a problem. I was in a very, very different business.</span></strong></p> <p><strong><span style="font-weight: normal;">I was in the entertainment business. </span></strong></p> <p><strong><span style="font-weight: normal;">There couldn’t have been a worse choice for CEO in Silicon Valley.</span></strong></p> <p><strong><span style="font-weight: normal;">Alarm bell one should have started ringing – for me and my board.</span></strong></p> <p><strong><a href="https://i0.wp.com/steveblank.com/files/2009/05/rocket-science-logo.jpg"><img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="1952" data-permalink="https://steveblank.com/2009/07/09/rocket-science-2-hollywood-meets-silicon-valley/rocket-science-logo/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/05/rocket-science-logo.jpg?fit=228%2C203&ssl=1" data-orig-size="228,203" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":""}" data-image-title="Rocket Science logo" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/05/rocket-science-logo.jpg?fit=228%2C203&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/05/rocket-science-logo.jpg?fit=228%2C203&ssl=1" class="aligncenter wp-image-1952 size-full" title="Rocket Science logo" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2009/05/rocket-science-logo.jpg?resize=228%2C203&ssl=1" alt="Rocket Science logo" width="228" height="203" /></a></strong></p> <p><strong>Hollywood Meets Silicon Valley was an Oxymoron<br /> <span style="font-weight: normal;">A key premise of our new company was that our video compression and authoring technology would revolutionize how games were made and played. We believed that by putting full motion video (i.e. movies) into video games we could tell stories, build characters, have narratives and bring all the 100 years of craft and cinematic experience of Hollywood to the sterile “shoot and die” twitch games that were currently in vogue. (This wasn’t just some random Silicon Valley fantasy. My partner had convinced several major Hollywood names that this was the inevitable consequence of the merger of Hollywood and Silicon Valley. And at the time it was a plausible scenario.)</span></strong></p> <p>But in reality our passionate belief that video would transform gaming <em>was just our hypothesis</em>. There was zero proof in the marketplace that was the case. And we weren’t going to be bothered to go out and prove ourselves wrong with facts. (Why should we – our VC’s had already told us what geniuses we were by fighting to even get into the deal to fund us. Never mind that no one on our board was in the game business or even played games.)</p> <p>Alarm bell two should have started ringing – for me and my board.</p> <p><strong>Swing For the Fences</strong><br /> Since we were so smart we were going to ramp up and build not one game, but an entire game studio based on this hypothesis. Why shouldn’t we. Doing one game and seeing customer reaction meant a) acknowledging that some of our assumptions might be wrong, and 2) wasting time. We were all about scale and swinging for the fences. That’s what VC funded companies do, don’t they?</p> <p>Alarm bell three should have started ringing – for my partner and me.</p> <p><strong>Tools Are the Not the Product<br /> <span style="font-weight: normal;">We were going to build an easy to use authoring system that would revolutionize how games were made. (My partner had convinced several of the key members of the Apple Quicktime team to join us.) Our tools group became as important as our content group. Unfortunately, the market was going to remind us that <em>games are about game play</em>. </span></strong></p> <p><strong><span style="font-weight: normal;">Customers don’t care about your tools regardless of what business you’re in. Customers of software applications don’t say, “wow, elegant code base.” In movies theater-goers don’t leave talking about your cameras, just whether they were entertained, and in restaurants diners don’t care about your cooking implements, what matters is what the food tasted like. The tools may provide efficiencies, but what customers care about is your final <em>product</em>. (Later on, way too late, we’d remind ourselves <em>it’s the game stupid.)</em> </span></strong></p> <p>Alarm bell four should have started ringing louder for me.</p> <p><strong>Lessons learned</strong></p> <blockquote> <ul> <li>Never, ever, start a company when you’re not passionate about the company, product and customers</li> <li>Always validate your key assumptions on what makes your company tick</li> <li>Swing for the fences is your VC’s strategy. Make sure it is yours.</li> <li>Don’t confuse your passion for your tools with why your customers will buy your product.</li> </ul> </blockquote> <div class="sharedaddy sd-sharing-enabled"><div class="robots-nocontent sd-block sd-social sd-social-official sd-sharing"><h3 class="sd-title">Share this:</h3><div class="sd-content"><ul><li class="share-print"><a rel="nofollow noopener noreferrer" data-shared="" class="share-print sd-button" href="https://steveblank.com/2009/07/09/rocket-science-2-hollywood-meets-silicon-valley/" target="_blank" title="Click to print" ><span>Print</span></a></li><li class="share-email"><a rel="nofollow noopener noreferrer" data-shared="" class="share-email sd-button" href="mailto:?subject=%5BShared%20Post%5D%20Rocket%20Science%203%3A%20Hollywood%20Meets%20Silicon%20Valley&body=https%3A%2F%2Fsteveblank.com%2F2009%2F07%2F09%2Frocket-science-2-hollywood-meets-silicon-valley%2F&share=email" target="_blank" title="Click to email a link to a friend" data-email-share-error-title="Do you have email set up?" data-email-share-error-text="If you're having problems sharing via email, you might not have email set up for your browser. 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href="https://steveblank.com/tag/early-stage-startup/" rel="tag">Early Stage Startup</a>, <a href="https://steveblank.com/tag/entrepreneurs/" rel="tag">Entrepreneurs</a>, <a href="https://steveblank.com/tag/steve-blank/" rel="tag">Steve Blank</a>, <a href="https://steveblank.com/tag/tips-for-startups/" rel="tag">Tips for Startups</a> | <a href="https://steveblank.com/2009/07/09/rocket-science-2-hollywood-meets-silicon-valley/#comments">8 Comments »</a> </p> </div> </div> <div class="post-2761 post type-post status-publish format-standard hentry category-customer-development category-market-types category-technology tag-customer-development tag-customer-discovery tag-customer-validation tag-early-stage-startup tag-entrepreneurs tag-steve-blank tag-tips-for-startups" id="post-2761"> <h2><a href="https://steveblank.com/2009/07/07/customer-development-fireside-chat/" rel="bookmark">Customer Development Fireside Chat</a></h2> <div class="postinfo"> Posted on <span class="postdate">July 7, 2009</span> by steve blank </div> <div class="entry"> <p>I did a fireside chat with a few entrepreneurs interested in <a href="http://www.amazon.com/Four-Steps-Epiphany-Steven-Blank/dp/0976470705" target="_blank">Customer Development</a> at <a href="www.dfj.com" target="_blank">Draper Fisher Jurvetson</a>, the venture firm behind such Skype, Baidu, Overture, ….</p> <p><a href="http://ravibelani.com/about/" target="_blank">Ravi Belani</a> was nice enough to set it up, <a href="http://ravibelani.com/2009/06/15/fireside-chat-with-steve-blank/" target="_blank">blog about the talk</a> and film it. 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id='like-post-wrapper-6599589-2761-674302e7e8f70' data-src='https://widgets.wp.com/likes/?ver=14.1-a.3#blog_id=6599589&post_id=2761&origin=steveblank.com&obj_id=6599589-2761-674302e7e8f70&n=1' data-name='like-post-frame-6599589-2761-674302e7e8f70' data-title='Like or Reblog'><h3 class="sd-title">Like this:</h3><div class='likes-widget-placeholder post-likes-widget-placeholder' style='height: 55px;'><span class='button'><span>Like</span></span> <span class="loading">Loading...</span></div><span class='sd-text-color'></span><a class='sd-link-color'></a></div> <p class="postinfo"> Filed under: <a href="https://steveblank.com/category/customer-development/" rel="category tag">Customer Development</a>, <a href="https://steveblank.com/category/market-types/" rel="category tag">Market Types</a>, <a href="https://steveblank.com/category/technology/" rel="category tag">Technology</a> | Tagged: <a href="https://steveblank.com/tag/customer-development/" rel="tag">Customer Development</a>, <a href="https://steveblank.com/tag/customer-discovery/" rel="tag">Customer Discovery</a>, <a href="https://steveblank.com/tag/customer-validation/" rel="tag">Customer Validation</a>, <a href="https://steveblank.com/tag/early-stage-startup/" rel="tag">Early Stage Startup</a>, <a href="https://steveblank.com/tag/entrepreneurs/" rel="tag">Entrepreneurs</a>, <a href="https://steveblank.com/tag/steve-blank/" rel="tag">Steve Blank</a>, <a href="https://steveblank.com/tag/tips-for-startups/" rel="tag">Tips for Startups</a> | <a href="https://steveblank.com/2009/07/07/customer-development-fireside-chat/#comments">4 Comments »</a> </p> </div> </div> <div class="post-1899 post type-post status-publish format-standard hentry category-customer-development category-rocket-science-games tag-early-stage-startup tag-entrepreneurs tag-steve-blank" id="post-1899"> <h2><a href="https://steveblank.com/2009/07/02/rocket-science-2-drinking-the-kool-aid/" rel="bookmark">Rocket Science 2: Drinking the Kool-Aid</a></h2> <div class="postinfo"> Posted on <span class="postdate">July 2, 2009</span> by steve blank </div> <div class="entry"> <p align="left">Sometimes faith-based decisions can be based on too much faith.</p> <p align="left"><strong>Entrepreneur-in-Residence<br /> <span style="font-weight:normal;">After SuperMac I had been approached by one of our venture investors to be an <em>entrepreneur in residence (EIR), </em>a Silicon Valley phrase which says one thing but means another.</span></strong> </p> <p align="left">To an entrepreneur, being asked to join a venture firm with an Entrepreneur-in-Residence title means you have been tapped on the shoulder by the VC gods. It means you get to sit at a venture capital firm (some even pay you for the privilege) and stay until you have come up with an idea for your next company or have joined a company you’ve met as they passed through the VC’s offices. Depending on the size of the venture firm they may have one to three EIR’s who stay an average of a year or so. It really means that the VC’s would like to own a piece of you.</p> <p align="left">To a VC it’s a cheap investment, and if they somehow don’t bind you to their firm, someone else will. In reality an EIR is a set of wonderful golden handcuffs. Of course no VC firm will come right out and say, “If you’re an EIR for us you can’t do your next deal with any other firm.” Hmm… You’ve taken their money, eaten their food, sat in their meetings and you are going to take money from someone else? They have your soul. It sounded like a great deal. I had no idea what I wanted to do next, and would get paid to think about it? How could it go wrong? Little did I know.</p> <p><strong>Video Games<br /> <span style="font-weight:normal;"><strong><span style="font-weight:normal;">At <a href="http://steveblank.com/category/supermac/" target="_blank">SuperMac</a>, Peter Barrett was the witty and creative 24-year old Australian engineer who had designed several of our most successful products, culminating with the software for the <a href="http://steveblank.com/2009/05/11/supermac-war-story-x-the-video-spigot/" target="_blank">Video Spigot</a>. Now he wanted to go off start his own company. I offered to introduce him to the firm whose Entrepreneur-in-Residence offer I had just accepted. </span></strong>I asked Peter what kind of company he had in mind and was surprised and dismayed by the answer, “I want to make video games.” I remember thinking, “What a disappointment one of the smartest engineers I know and he is going to waste his time making games.” I didn’t give his video game idea another thought. I set up the meeting for him, and at the request of the VC who was going to see him, agreed to sit in when they met.</span></strong></p> <p align="left">It was a Friday and we showed up at the VC offices on Sand Hill road. Peter had no slides, and I had absolutely no idea what he was about to say, all I knew is that he wanted to talk about something I was utterly uninterested in – video games.</p> <p align="left"><strong>Henry the Vth</strong><br /> To this day, the VC and I still believe either Peter made what was the <a href="http://www.youtube.com/watch?v=3vMfCv5J0g8">single most compelling speech</a> we have ever heard or he had slipped something funny into our water. As Peter began to speak extemporaneously our mouths slowly fell open as he described the video game market, its size, its demographics, the state of the technology, and the state of games. He took us through a day (and a night) of a hardcore gamer and told us about the new class of CD-ROM based game machines about to hit the market. </p> <p align="left">Peter described the first company in which “Hollywood meets Silicon Valley” and we were enthralled. When he elaborated how CD-ROMs were going to change both the nature of gaming and the economics of the content business, we were certain he had a brilliant idea and by the end of the meeting convinced that this was a company would make a ton of money.</p> <p>By the end of the meeting the seasoned venture capitalist and I had signed up.</p> <p align="left">While this all might sound farcical now, a little historical context is in order. The CDROM content business in the early 1990’s was one of the many of the long line of venture capital fads. If you were a “with it” VC you needed to have a “Content” or “Multimedia” company in your portfolio to impress your limited partners – educational software companies, game companies, or anything that could be described as content and/or Multimedia.</p> <p align="left"><strong>There Ought to be a Law</strong><br /> Nowadays there are laws that allow you to back out of a time-share condo contract, or used car purchase after seven days because even the government believes there are times when grown adults lose their minds and stand up and yell “Yes I believe, sign me up!” There are still no laws like that in the venture capital business.</p> <p>A month later, after raising $4 million dollars (we literally had VC’s fighting over who else would fund us), Peter and I started our video game company, Rocket Science Games. </p> <p align="left">In reality I had been hired as CEO and the adult supervision and administrative overseer of one of the most creative talents in the valley. And I would get to use my marketing skills at generating an industry-wide reality distortion field to make this company look like the second coming.</p> <p align="left">I was going to find out why this wasn’t a good idea.</p> <p><strong>Lessons learned</strong></p> <blockquote> <ul> <li>Your level of due diligence should be commensurate with your position in the company and proportional to the reality distortion field of the presenter</li> <li>Never join (or start) a company whose business model you can’t draw</li> <li>Subjects in which you are not a domain expert always sound exciting</li> <li>Sleep on any major decision</li> </ul> </blockquote> <p class="getsocial" style="text-align:left;"><img data-recalc-dims="1" decoding="async" style="border:0;margin:0;padding:0;" src="http://getsocialserver.files.wordpress.com/2009/02/gs1005.png?w=468" alt="" /><a title="Add to Facebook" 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