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4. People Have Operating Ranges

The fact that jobs are growing so explosively at startups has other important consequences. Consider operating ranges. Everybody has one.

From $0 to $1 million per month I ran sales and brought in the orders, mostly through personal selling. After that, sales became too technical for that approach to work. Mike took over and carried the company from $1 million to $3 million per month. After a brief stall, Chuck took us to $5 million per month. John took over from Chuck to get us to $25 million per month. Then Bob took the company to $400 million per month. In each of these cases, our head of sales succeeded within his operating range. After that, a ruthless change had to be made to bring the company to its next plateau.

How do you know when it’s time for a change? How can you tell when the person who did such a great job six months ago has hit the upper limit of his or her operating range? The first sign is a decline in performance-salespeople missing quotas, engineers slipping schedules. At first it looks like the plans were too ambitious; then it’s everybody else’s fault. At some point, unless things start improving, sometimes even before the proof is conclusive, changes must be made. You have to be able to say, “If you can’t do it, we’ll just have to find someone who can.” If you wait too long for the person to learn what they need to know or for conclusive proof of whose fault it is, you may bring the whole enterprise down. Better to risk the lawsuit for wrongful discharge and save the venture.

5. Don’t Listen to Your Customers

In 1982, 3Com Corporation was the sole supplier of Ethernet cards to a startup called Sun Microsystems. These cards were for Multibus-compatible computers, and so internally we called them MEs (really). Sun and its competitors were buying MEs at ever-increasing rates, and they wanted us to make a cheaper, faster next-generation card. Our salespeople were right there with our big customers: They demanded we work on what internally we called the ME II (naturally referred to internally as the “me too”).

We knew, however, that Sun was planning to design Ethernet connections into their computers, and that Intel, designer of the Multibus, was planning a competitive ME. Despite overwhelming customer demand, we decided not to develop the ME II. Some of our salespeople quit in disgust, because we were “not listening to our customers.”

They were right; we weren’t. Instead, we invested the time of our excellent engineers in designing an Ethernet card, called internally the IE, externally the EtherLink, for the new IBM Personal Computer. Today, there are no Multibus computers left, but 3Com ships more than 20 million EtherLinks per year.

The lesson? Well, of course I’m taking some license by saying that the lesson is you shouldn’t listen to your customers. The real lesson is that you have to choose which customers to listen to very carefully. And, even then, you cannot necessarily give them what they say they want. You have to develop products that your customers will need by the time you are able to deliver them. If you don’t, when the development cycle is finished, and you’re ready to ship, you will be offering what the customer said he wanted last year. And any salesman will tell you it’s easier to give a customer what he needs now than to sell him something you insist he said he wanted last year.

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