In a recent interview, Jason Fried discussed what he's learned from building a successful Web-based software company and shared his take on marketing, product focus, and growing the business.
Whether you want to build applications or just use them, Jason Fried has some ideas on how to do it a better way. His emphasis has been on staying small and agile and building from the user backward. Jason started 37signals in 1999 as a Web design firm and began building out the tools he needed to do business. In the process, he realized that building the tools was an even more successful business. Since then, 37signals has transitioned to being one of the biggest names in the dynamic world of online Web tools. In 2006, the company got the attention of Jeff Bezos, who is now their sole investor.
You have probably heard of some of the tools, even if you're not one of the three million users of the über-intuitive and contract-free applications: Basecamp (project-planning), Highrise (contact management), Campfire (collaborative group chat), and Backpack (document management). You may also be familiar with Ruby on Rails, the open source Web framework developed in 2004 by 37signals partner David Heinemeier Hansson. Rails is used to enable applications like Hulu and Twitter.
Jason talked with me recently about the secrets of his success, how he defines his business and his competition, and the myriad ideas he's poured into his new book, REWORK, about how to build a business.
Note: This article is also available as a PDF download.1. Jeff: You describe the 37signals audience as the Fortune 5,000,000. Is there a sweet spot in this group that's the real heart of the market for your tools? Jason: It's really small businesses with 10 people or less, but it could be small groups within larger companies. That's our true sweet spot; small companies and work teams, independent contractors, and freelancers. There's an incredible range of big companies like Sun, Adidas, Best Buy, and a host of others using our products, but they do that within their design, marketing, or PR departments. 2. Jeff: In terms of the kinds of business you are in and who you're competing with, are you a cloud computing company? Jason: Some people might say that, but I don't consider us a cloud computing company. We are a tool-making company, and those tools happen to be on the Internet. Beyond that, I think the popular terms are potentially confusing to people, so we don't use them.
For Web-based companies like ours, there are some perceived issues out there that in time will go away. For example, Web-based software from a reputable company like 37signals and others is significantly safer than desktop software in terms of security. I've visited lots of small businesses over the years with a computer under the desk that's not backed up or password protected. Someone who comes in could fairly easily walk out with that computer — the cleaning crew or a delivery man. There's this perception that if it's something you can see and hold, it's safer. Online banking and using credit cards online used to be considered crazy, and now it's the status quo. I think things will continue to go that way.3. Jeff: In technology companies and software companies in particular, there's often a tendency to look at the tech function and the marketing function as more disparate and insular, like the Eloi and the Morlocks. One of your business points is that "marketing is not a department." Can you expand on that? Jason: My feeling is that everything you do is marketing all the time. Your products are marketing. Your Web sites and your customer service are marketing. All of those things to me are what marketing is all about; it's not a department.
What I don't like about department-based marketing is the belief that the only people who can send the messages about what the products are, who the company is, and what they believe in are the people in the marketing department. That's the way I see most companies today operating. In reality, it's everybody, every single person. The customer service department has some of the most important marketing people, but they're not traditionally in the marketing department. Their impact is marginalized, when actually they have a huge impact. I don't mean to say we're perfect at this, but everything we do considers the overall impression we make on our customers to be our marketing. We want all our employees to worry about that.4. Jeff: Do you keep track of what your competitors in Web-based solutions are doing? Jason: No, we really don't concern ourselves with the competition. We're focused on what we do and not what other people are doing. There are hundreds of competitors out there in the business-apps space, and there will certainly be more in the future. For the most part, we try to do less than our competition and just do a few things but do them better. That's what people really want; they want the basics to work well. In the software world, it's easy to be obsessed with adding more features. What our competitors do is try to add more stuff to outdo the competition. We take a different route by just being focused on the basics and delivering at a high level. 5. Jeff: So in terms of your business strategy of "getting real," does that look more like specialization or simplification? Jason: It's really more a matter of clarification. I think the meaning of "simplification" has been somewhat perverted. Even if you are doing a lot of different things, you just want them to be very clear. Sometimes simple has come to mean less stuff, and fewer options, and that's not what simplicity is about to us. I would encourage companies to be as clear as possible, in their writing and in their purpose. That's what really matters. 6. Jeff: 37signals went for six years without accepting any outside funding, and in fact one of your essays is titled "Outside money is plan Z." But in 2006, you came to an agreement with Jeff Bezos of Amazon, and he agreed to underwrite you. How did that come about and what has it allowed you to do? Jason: Right, we've always been opposed to funding and my big opposition is really to funding upfront, where companies are started by an initial investment. That leads to bad things. We started in 1999 as a self-funded startup and have always done well. We've been profitable every year we've existed. But I got a call from one of Jeff Bezos' assistants saying he was interested in chatting with us. We had been approached by dozens of venture capital firms in the past, and we just didn't need the money, but Jeff Bezos is someone I admired and respect greatly so I was interested in meeting with him.
So we flew out to Seattle, and I was highly impressed by everything he said, his intelligence, and everything about him. We told him that we didn't need his money, but he said he would be interested in providing us guidance and advice when we needed it, having built a business from scratch himself. There's still a financial piece, but it is more of an investment for the purpose of gaining access to Jeff's advice and insight.7. Jeff: What a great story — I don't imagine there are many people who fly out and tell Jeff Bezos they don't need his money. For your current customers, the primary applications 37signals offers are around project management, customer relations management, document management, and group chat for remote teams. Where do you go from here? Jason: We are continuing to stay focused on our existing products and making them work more smoothly together. The integration piece is one area where we know we can do an even better job. We're also just working on getting to what we call "polished," which involves making our products continue to move forward all the time by simplifying, clarifying, and sometimes adding new things as well. We do have ideas for some other new things, but we don't really talk about them until they're ready. 8. Jeff: In your new book, REWORK, which is coming out next month, you have a lot of ideas that upend the status quo thinking in the workplace. A couple of them are about "emulating the drug dealer" and "emulating the chef." Could you talk about those? Jason: The book is all about our take on business, ideas on how to start a company and then how to grow it. People tend to make business difficult by worrying about a lot of things that don't matter. We've learned things along the way about how to get the word out, the marketing side, doing a launch, and how to deal with outside money. These are all the things we've been through over the past few years.
The part on emulating the drug dealer is about giving a little away for free and then charging for the rest. The problem with the tech world is that they tend to give a lot away for free. The way to emulate the chef is to understand how chefs promote by writing cookbooks, doing cooking shows, and teaching people how to cook. A lot of companies won't talk about how to start a business or build a business. They are extremely reluctant to share that kind of thing, ever. We think the chef model is better. When you're good at something, you share it, get the word out, and teach people. So REWORK is really our cookbook for how to do business.9. Jeff: When you were watching the ads during the Super Bowl this year, did you see any you really liked? What would an ad for 37signals look like if you were to do one? Jason: I liked the Letterman, Leno, and Oprah ad, which was completely off the beaten track and unexpected. Google's ad was very interesting. We don't advertise, but we're experimenting with some basic things. If we did run an ad, it would be about our book because it's a summary of who we are and what we stand for. I'm more inclined to invest in promoting our ideas than any of our specific products. It would be similar to the Google ad in that way. I've thought about doing an ad that's just a still image for 30 seconds, so it becomes a video billboard — the cover of our new book, for example. That's something I think would catch people's attention. 10. Jeff: You travel around the world speaking about entrepreneurship, good design, and management strategy. When you put together your presentations, do you have any specific techniques or tips on what you do to make your talks effective? Jason: Something I've started doing more recently is speaking without slides, or if I use slides, they are just pictures with few or no words. There's certainly nothing where I'm reading or anyone is reading off the screen. I have a set of ideas I like to use for topics and I just run with them and see where it goes. I much prefer the question and answer part of things anyway. I want to be prepared, but I don't want to over-prepare or think too hard about it. I avoid getting to a place where I'm thinking about what I wanted to say.
No matter how long the talk is, I'll try to talk for about 15 minutes and get to the Q&A, and then spend the rest of the time on that. That allows me to talk about the things people want to hear about. Sometimes I find it comes back to things I didn't get to, and other times it may go in an entirely different direction, which is something that I'm always interested in doing.
- The name "37signals" was picked by one of the original partners, in a semi-spontaneous moment, and refers to the number of signals from space that stand out from the fray as potentially originating with some sort of extraterrestrial intelligence.
- REWORK is scheduled to come out on March 9, 2010.
- If you have other questions about 37signals, you can contact Jason Fried at email@example.com. Follow on Twitter: @37signals.
- You can contact Jeff Cerny at firstname.lastname@example.org or on Twitter @jeffcerny. Jeff's blog is www.jeffcerny.com.
Jeff Cerny has written interviews with top technology leaders for TechRepublic since 2008. He is also the author of Ten Breakable Habits to Creating a Remarkable Presentation.