Lessons Learned at 37 Signals

Sean Ammirati, ReadWriteWeb
April 23, 2008 | COMMENTS

I'm back at SXSW as one of the RWW contributors covering the interactive festival. This afternoon I attended Jason Fried's presentation on "Stuff We've Learned at 37 Signals.” 37 Signals is a software company headquartered in Chicago that started as a interactive design company and has since become one of the leading software companies for personal productivity software.

Currently over one million people and businesses use their productivity applications. They also are responsible for creating and then open sourcing the popular web developer language Ruby on Rails. Jason Fried is the company's founder. As a company I've long respected, it was interested to hear him discuss some of the things he's learned developing 37 Signals.

Lesson 1: Ignore the “great unknown.”

Jason started his presentation talking about "the great unknown," which he defined as the things that hang over every entrepreneur's head when they are starting a company. For example, "what about when we have 1million customers or 100 employees." Jason encouraged people to ignore these concerns and focus on the now. He pointed out that often as entrepreneurs, we worry about the impact of our decisions rather than just making the right decision. He asserted that this is crazy, because decisions made today don't have to last forever—we "must optimize for today."

Lesson 2: Watch out for red flags.

The next point was about interpersonal dynamics in the workplace and watching out for what he called “red flags.” Red flags are basically words or phrases that end up causing problems in communications. For example, at 37 Signals they learned to be careful with the words: need, can't, easy, only, and fast. For example saying, how easy someone else's job is or that they can't ship a product without one feature.

Lesson 3: Be successful and make money by helping other people be successful and make money.

He talked about the powerful reaction people had to Basecamp when they first released it (Basecamp is a very lightweight project management tool). They realized this was because the tool was helping other people do their job better. This has become part of their philosophy, looking for opportunities in the marketplace to "spot chain reactions and be the catalyst" around helping others.

Lesson 4: Target nonconsumers and nonconsumption.

This is actually a concept that Jason borrowed from Clayton Christensen (a famous professor at Harvard Business School) in the books Innovators Dilemma and Innovators Solution. The idea is that there exists an entire market of nonconsumers, or people who have a need but existing players aren't targeting these people. The advantage of targeting this segment is that you minimize the chance for competition from entrenched players.

Lesson 5: Question your work regularly.

At 37 Signals, Jason reported they are always asking questions to make sure they are doing the right things. Internally, this list of questions includes:

• Why are we doing this?
• What problem are we solving?
• Is this actually useful?
• Are we adding value?
• Will this change behavior?
• Is there an easier way?
• What's the opportunity cost?
• Is it really worth it?

Lesson 6: read your product.

Given the firm's background, this was a lesson I found particularly interesting. Jason claimed that the "biggest sin on the Internet right now is bad copywriting—paying too much attention to pixels and not enough attention to words." Beyond this he pointed out that words are actually less expensive to correct and improved copy will make doing the design second result in a stronger design.

Lesson 7: Err on the side of simple.

As surprising as I found the last lesson, this one was probably the most obvious given 37 Signal's business. Jason pointed out that you should always "start with the easy way." The interesting and non-obvious point was that he extended this beyond product issues. For example, he recommended people start a company by setting up an LLC, until they need a C Corp.

Lesson 8: Invest in what doesn't change.

Jason said that this is the "best business advice he's gotten in some time." It is interesting because this isn't something that is intuitive, when you think about tech companies which tend to be focused on what is new and upcoming. However, Jason pointed out that principles can last. For example at 37 Signals, he said they anticipate in 10 years "simple, affordable software" will still be worth investing in.

Lesson 9: Follow the chefs.

Jason called chefs the smartest business professionals. He explained this is because they are aware that you become famous and successful by giving knowledge away. For example, chefs have cooking shows and write cookbooks. Yet it doesn't stop their restaurants from being successful. In fact, he claimed they are probably more successful because of their sharing.

Lesson 10: Interruption is the enemy of productivity.

Originally David Heinemeier Hansson (Jason's partner) and Jason didn't live in the same city. They eagerly awaited David moving to Chicago and being able to get even more done. Interestingly, when David arrived they actually found productivity decreasing. At 37 Signals, they have come to believe that this was due to the increased interruptions; and so they ended up favoring passive communication like e-mail versus things that are more instantaneous but also interrupt your workflow.

Lesson 11: Road maps send you in the wrong direction.

When talking about business plans, financial projections, or features for products, 37 Signals believes road maps are bad, because "they lock you into the past." The only exception is APIs, because people are counting on it. Instead he said your expectation should be "do the right thing at the right time."

Lesson 12: Be clear in crisis.

At the beginning of this year, 37 Signals had some infrastructure problems that resulted in a few hours of unscheduled downtime. This was widely discussed on the Internet. They quickly posted about what had happened and during the technical problems kept they the homepage updated with status messages. Through this experience, it reinforced their belief that people love you even more if you are open, honest, public and responsive during a crisis.

Lesson 13: Make tiny decisions.

Rather than trying to make major decisions, when possible, Jason encouraged entrepreneurs to break problems down to the atomic level. In web properties, this is especially powerful because they've been able to break features down to the atomic level and then launch them one at a time. This is good because the team can gain momentum and celebrate little launches. However, it's also good because "when you make tiny decisions, you can't make big mistakes."

Lesson 14: Make it matter.

Jason ended his presentation by encouraging the audience to make sure their work was significant. He talked about how meaningful he felt the products they were creating were for individuals. Before opening it up for questions, he said that "everything you do should matter."

Conclusion

One of the things I love most about SXSW is the transparency with which so many leaders share about their business. At last year's festival, two of my favorite panels were: “ Web App Autopsy” and “ The Figures Behind the Top Web Apps.” We'd love to hear any good case studies or lessons you've learned running start-ups or in business. Please share them in the comments below.

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