The story I’m about to share with you exposes some very hard lessons learned in my recent journey to build a dream and a company. As a business owner, this tale was a brutal, expensive misfortune. In fact, it cost over $300,000, at least 12 months in delays to get to get our concept to market, and countless heart palpitations and sleepless nights. But as some wise start-up warrior once said, “What does not kill you adds to your value.”
I could blame the IT firm we engaged, but that is not productive and gets us no closer to our goal. I could beat myself up, but that’s waste of needed energy too. So instead, I take responsibility for the bad turns, accept that what happened, happened and keep on the road toward success.
In 2006, my business partner and I had an idea for a company. We envisioned a niche social network for creative people, the right-brain thinkers of the world. We had read several books and studies about the importance of this market, knew it was big enough to attract outside funding and we believed it was underserved. We did our research, wrote our business plan, raised seed funding, and we were off to the races. From the get-go, we acknowledged our strengths and recognized our weaknesses in certain knowledge areas too, particularly in technology and Web development. This was a big investment and a vital piece to building our company’s success. We moved with caution, did our due diligence, and carefully assessed all our options.
So what happened? Two smart businesswomen who carefully selected an IT outsource-firm, royally screwed up on the vendor choice and couldn’t see the train running off the track, until it was a very bad wreck.
A snapshot of our situation.
Oddpodz’ vision was to build a niche social network that appealed to a defined segment of consumers called the creative class. This termed was coined by social scientist and economist Richard Florida in his best selling book, The Rise of the Creative Class. We wanted to create a distinct brand and user-experience that would stand strong against the mass, main stream networks that had emerged earlier like myspace®, facebook, and LinkedIn®. So we set out to build our platform.
Hindsight is better than 20/20 and here is what we see clearly now.
We are like most entrepreneurs are optimists. We get very excited about our ideas and proudly maintain a mindset of “yes, we can do anything”. While this is a good trait, sometimes it overshadows the reality of the world. In our case, our overly positive attitude did not invite the devil’s advocates to enter our thinking or vendor evaluation. We were so focused on the building our baby, we failed to consider the “what if this happened,” the subsequent domino effects, and their impact on our entire business.
We knew we had IT knowledge weaknesses and that the space we were entering was virgin territory, even for veteran IT companies. In 2006, social media was in its infancy. We did not establish an outside advisory team as a sounding board: instead, we put 100 percent of our trust into a paid vendor. This was a dangerous way to go.
What we did, what we got, and what we learned.
We sourced and interviewed many Web dev service providers, both in our backyard and out of town. We thought buying local, from a larger company would reduce risk. We thought having a vendor with a client list of known blue-chip firms demonstrated solid IT expertise. We thought Web dev was Web dev, if the firm had seasoned programming and project management teams, they could deliver any Web platform. We were wrong.
The company we engaged could not have been further from what we needed. They built nice corporate Web sites. They were a Microsoft shop. They were not a social media, open-source savvy company. And to make things worse, they had excessive staff turnover, which consistently interrupted our project team flow and effectiveness.
Turned out what we really needed was a hardcore specialist in social media; pioneers in a company making strides in Web 2.0; a team who worked with start-up firms, not blue-chip companies; and could relate to our Oddpodz creative-culture, and that of our market and their needs.
After almost six months of planning, meeting, architecting, and programming, we had a $300,000 sub-par site. The user interface was clumsy, the basic features of networking were missing, and it sure didn’t drive like a social network Porsche on the autobahn. It was user-unfriendly, expensive to maintain and about 10 percent of our vision. This Web debacle that not only sucked in its ability to perform but, impacted other investments like ad sales teams, ad server expenses, partnership deals, fundraising, and most of all our credibility with our community.
In a podshell, here are some lessons we learned.
Hire only specialists. (Unless you have a lot of time and money.)
When dealing in a new space or with a breakthrough product like we are with social networking, if the founders don’t come from that discipline area—as in our case—you’ve got to hire a master surgeon, not a general practitioner. Even if they’re outside of your home base.
Work from a Business Requirements Document (BRD) first.
Not one ounce of site planning or even budgeting should start without a detailed BRD that is aligned with your business goals and financial model. If you’re unable to think things through and create this document, you should stop immediately and reconsider what you are doing.
Avoid hourly budgets and terms.
They can easily become a runaway train. Instead, from your BRD have the firm build a fixed estimate with lots of detail – not only about features, but also function and performance metrics.
For sizeable investments, don’t sign any contracts unless you’re a lawyer. If you’re not a lawyer, get one!
Most sophisticated vendor contracts are one-sided. Unless you have modifying language to level the field, should you decide to pursue a legal remedy over a dispute you’ll, at minimum, double your work, expense, and risk. If the vendor won’t budge on the contract language, look for a different vendor. If deadlines are important, include penalties in the contract should the deadlines not be met. Pay close attention to warranty terms and what is and is not included in a fixed-price estimate.
Beware of over-promising vendors.
Along with all the good that comes from the entrepreneurial world and its spirit can come a tendency to over-promise. Even if you’re generally optimistic, always keep your skeptic’s hat on when you examine schedules and low-ball budgets — especially when it comes to high-dollar investments.
Stay connected and communicate honestly with your brand evangelists.
In light of this bump in the road, and our delayed time to market, we’ve always kept open, honest communication with our members and supporters. If you maintain this, you will earn the company miles of understanding and patience as you correct and improve your offering.
Was there a silver lining in this misstep IT vendor experience? Well I don’t know that I’d go that far, maybe a tin lining. But, there are definitely some positive pieces and meaningful lessons we gained.
* No matter what we would have built the first time out of the chute, the social media space has matured; there is a lot more data, best practice history, and viable resources in this specialized social media and marketing area from which can make future decisions.
* The challenges we faced with this IT outsourcing actually helped mold the new and improved business model for Oddpodz 2.0. Without this adventure, I don’t know that we would have seen the real opportunity in front of us. Companies need a place to access trusted resources; where they can read reviews from others who have worked with them and make sound business decisions. Recently, Oddpodz rebuilt our site. We have evolved from a social network for creatives into a B2B idea engine where buyers and sellers of creative services collaborate, network, and do business. Our painful experience is one of the main drivers behind our company’s value proposition. We provide a vertical destination for creative service resources, ideas, and connections, so that other companies won’t make the same mistakes we did.
* When your cash gets zapped it brings out your brightest, most creativity solutions. For Oddpodz, we have become sharper and more resourceful in every area of business.
* It has been a character builder. Dealing with all this has made both my business partner and I even better, stronger, and smarter entrepreneurs.
* Manage cash like there will be no more coming in for a while.
* Should this happen to you, don’t feel like the Lone Ranger. Turns out many a smart business person I’ve met has had similar experiences. Some even more costly. Ouch.
In summary, when entering into a costly, important relationship with an IT firm or any professional group for that matter, ask these five crucial questions before proceeding.
1) Does the contract equally protect both parties; the buyer and seller?
2) Is their performance and compensation tied to results and outcome?
3) What happens if things are not working as planned, how will you get out of the deal without losing your shirt?
4) What bi-weekly measures will you assess to make sure your investment and ultimate deliverable expectations are being met?
5) Can you verify and learn about the provider’s expertise, work style, and budget and scheduling success with other companies that are your size?
Even though Oddpodz had this major setback, we continue to progress with fuel in our tanks. When something like this happens to your start-up you have two choices, 1) you can throw in the towel, or 2) value what you do have, appreciate what is working, learn from the lessons, regroup, and keep moving forward. In November of this year, after our financial and time loss grieving process was complete, we stopped looking back. We accepted what was and recommitted to staying the course. We invested a lot of time and thinking in retooling our business plan. This round we reached out to a team of volunteer, mentoring-minded technology advisors. Additionally, we retained a professional to help us construct a Request for Proposal (RFP) for our site rebuild. This document enabled us to get fixed pricing from vendors, evaluate capabilities, and include penalties and bonuses for meeting or missing milestones. This process was time consuming and cost about $6,000 in professional fees. It was well worth all the expense. Today we are working with a Web development and online marketing firm in DC. Our new site was built with open-source application called Jumla. Our serving costs have gone down, the ability to add onto the site is flexible and affordable. Our new provider has been a pleasure to work with. Their experts understand the social media space and our place as a start-up with healing wounds.
Do you have any lessons learned that you can share with our Oddpodz community?
Questions and or you have comments on IT outsourcing, please post them too.
The resources I mentioned can be found on in the Oddpodz Creative Services Marketplace in the directory.
Search for Shannon James, RFP consultant
and Wyndstorm, our Web developer and online marketing service provider.
About the Author:
Karen Post, a.k.a. The Branding Diva® is an international authority on branding, marketing, and entrepreneurial matters. She is has been featured as a business expert in print publications; on TV, radio, and on Web channels. Karen authored the best-selling book Brain Tattoos, Creating Unique Brands That Stick in your Customers’ Minds and she is co-founder and CEO of Oddpodz.com, an idea engine for creative professionals and business. Her work has benefited large and small organizations in the United States and around the world.