My goal with this post is talk about Focus and what it really means. I will address some of the issues that cause different people to disagree on Focus and propose a way to think about Focus that I think may be helpful.

To set the stage, I want to use the company I know best, Backupify, as an example of why defining Focus can be elusive. Every CEO has to define what their company stands for, but this can often be done on many levels. When I define Backupify to investors, I talk about the long term future. I talk about building the defining data management and protection platform for cloud data. I talk about the data graph, all the things you can build on top of the platform once you understand how the disparate data sets for a company are all connected in a single data store. But I wouldn’t say that Backupify is “focused” on that. At the moment, we backup a handful of SaaS services but almost all of our revenue comes from Google Apps backup. If I want to define our Focus, I could do it at many different levels.

For example, maybe building a SaaS data management platform is too broad, so I will Focus and just build a SaaS data backup application. But that’s too broad as well, so maybe I will Focus more and just build a Google Apps backup application. But maybe that is too broad as well, so I will Focus even more and build just a Gmail backup application, ignoring the rest of the Google Apps suite. But then I could Focus even more and build a Gmail backup application that only targets companies with 100 or more employees. Then I could focus even more and add an upper limit, and build a Gmail backup tool that only targets companies 100 - 200 employees. Then I could Focus even more and build a tool that only backs up the last 10 days of email for companies with 100 - 200 employees. At first it starts sounding smart to Focus, but the mantra that more Focus is always better breaks down at some point and sounds ridiculous. You eventually Focus to the point where you just have partial product functionality or a very very small market.

And of course, outside of product dimensions and customer segment dimensions, there are other business dimensions where focus could come into play. Are you focused on revenue? On reaching cash flow breakeven? On market share? Or on sticking with your vision and your core product in your core market. These decisions matter. It seems like every B2B company will eventually face the dilemma where a large client representing significant revenue wants to buy their product, but wants some special feature or customization. Whether or not you do the deal depends on Focus. If you are focused on revenue first and foremost, you might. If you are focused on cash flow breakeven, you might, if the contract helps you get there. If you are focused on the long term, on owning your market segment, and this customer doesn’t fit your market segment, you will probably pass. So what’s the right answer? Are you focused? It seems like Focus can be interpreted to mean nearly anything. And the truth is, Focus is highly context dependent. So how do you know if you have Focus?

I think about 4 criteria when I think about Focus. What people really mean when they say you should Focus, is that you should Focus at the right level, in the right context. If your activities match up to these 4 criteria, I think you are probably focused. Here they are:

1. Goal Alignment - Your company should have some sort of goal or goals. Depending on your size and maturity, they may be short term goals or they may be longer term goals. If your activities are all moving you towards your stated goals, that is one step in staying focused.

2. Resources - Focus is highly dependent on level of resources. If you are Apple, you can be focused while attacking multiple markets with multiple new products simultaneously. If you have $1M in seed funding, you can’t. If you have Focus, you have a product scope and customer segment scope that is appropriate for the level of investment you can make.

3. Value Chain Consistency - Businesses are built around value chains, which are basically the way that you do things - the way you take inputs and turn them into outputs. Your value chain should be consistent. What I mean is, your overall strategy has to tie together and be reflected in the decisions you make at various points in your value chain. If an activity fragments your value chain, you probably don’t have Focus. For example, if your goal is to differentiate yourself in the market by having crazy good fanatical support, then activities/products/customer segments that you engage where support doesn’t matter or fanatical support is hard to deliver, etc, then you probably aren’t focused in those situations. On the flip side, if you serve one customer segment, and almost everything is the same to go after another customer segment because buying behaviors, price and packaging expectations, support expectations, etc are all the same, then you can probably still have Focus while going after more than one customer segment because your value chain remains the same.

4. First Things First - Peter Drucker says “Do first things first and second things not at all.” If you are engaged in activities that are moving your “first thing” forward, then you are probably focused even if, to an outsider, you don’t seem to be.

If your activities meet these 4 criteria, then in my opinion, you are probably focused.

The problems with understanding Focus are that it means different things to different people. It is also highly context dependent, and has a lot to do with available level of resources. If you are a first time entrepreneur, everyone will inevitably tell you that you need Focus. You will think you are. They will tell you that you aren’t. If you really think about it, you will start to get confused about how you know if you are focused. Some companies that seem to be all over the map are really quite focused. And some that seem to be very straightforward and focused are actually all over the map when you look behind the curtain. The key is to think about what the right level of Focus is for your company, in your context, with your level of resources, with your stated goals. It can be a little slippery, and Focus will inevitably change, particularly in the early days. But think it through, then stick to it, and reap the rewards of Focus.

To start you have to roll back the clock to March 2010. At that time Backupify was primarily a consumer social media backup tool, and we had recently realized that all our paying consumer customers were really businesses. We were considering a Google Apps backup product and were talking to I.T. managers we knew through our network who had moved to Google Apps, or were considering it. Sim Simeonov was teaching me customer development by walking me through these initial calls (note to entrepreneurs: surround yourself with great advisors) and we were talking about Microsoft Exchange.

Let’s stop for a minute. This is where most startups I talk to are failing in their “customer development.” Notice that we were not even talking about our product or the perceived need for our product, because when you do that people tend to just tell you “yes, they will buy it.” Customer development is really about much more than asking questions about your product. It’s about getting into the head of the person you believe to be the target user, and understanding the issues they really have. So, when I first saw Sim’s 3 page template of questions we were going to ask, I didn’t understand why half of them were there. But once we starting talking about Exchange, it began to make sense.

A couple of interesting things came out of these early conversations, and one of the most interesting points was that there was no clear employee deprovisioning process for Google Apps. In a Microsoft Exchange world, everyone knows what to do when an employee leaves, but in a Google Apps deployment, most I.T. managers were continuing to pay $50/year to Google for that seat. I made a note about this, but was more focused on the Google Apps backup idea, so it was a while before we took another step.

The second step came in March of 2011. We began analyzing a new metric that showed what percentage of the users on a domain were being backed up, to see if there was an opportunity to upsell existing customers who may not be backing up all their Google Apps users. But when the first graph went up, over half of our users had more than 100% of their domain backing up. It was puzzling. It took a few minutes for us to realize that these companies were storing data for old departed employees on Backupify. A company with 100 seats might be backing up 109 domains - the 100 active employees plus the 9 who had left. So we called these companies and found out that they were storing the data on Backupify and canceling the Google Apps accounts because Backupify was cheaper. We also learned that they would love to download this data locally and get rid of their Backupify costs too. They just wanted an archive somewhere of this old user data.

It became clear that, while not every company had a need for Backupify, every company did have a need for this Google Apps employee download tool. We started thinking about this tool as a separate product. The problem we encountered was, as a SaaS company we are pretty geared up around recurring revenue, and this didn’t fit our model. It was also much easier to build than the core Backupify system, so the barrier to entry was lower. And, we knew that the Google Data Liberation team would eventually build there own version of this, so there was a limited window for the tool anyway. So it didn’t make sense as a product, but it might make sense as a lead generation tool.

Now, most startups, when they talk about inbound marketing, seem to focus heavily on blogging. And yes, blogging is a piece of it. But remember the analogy that Hubspot used to kick off the term? It was that if you want to attract bees, set out a honeypot Inbound marketing is anything that can be a honeypot. Content works, but so do unique tools that have broad appeal, are cheap to build, and can generate qualified leads by exposing some small piece of functionality of your product. This fit Snapshot, so we built it. But, since this was a marketing product, we pulled it out of the normal product department and set up a separate set of goals for it.

The purpose of Snapshot, was to perform one simple task but do it extremely well. It had to create a positive experience with Backupify, so it had to be fast and easy to use. And the goal was promotion, not revenue.

Fast forward a couple of months and we were ready to launch. We decided to allow 5 free downloads for any Google Apps account. Users who signed up were then sent a message encouraging them to try Backupify. A significant percentage of them do, but those that don’t sometimes request more snapshots, which we then sell to them. So Snapshot is interesting because it serves as a lead generation tool and as a revenue source for Backupify.

Was it successful? So far, yes. Three months after launch, Snapshot generates about 10% of our revenue month to month (although it’s new revenue, non-recurring) and about 20% of our total leads. At current pace, it will be our highest source of leads by the end of Q1.

So in summary, the main lessons are:
1. Inbound marketing can be more than content. Don’t be afraid to use partial product functionality as an inbound marketing tool.
2. Customer development is about more than just asking people what they think about your product. It’s about understanding workflows and attitudes, needs and desires, and so much more. When we do customer development interviews, maybe 20% of the focus is on what we offer. The rest of the time is spent on understanding the target customer and their overall needs relative to this space.

This “innovation is dead” meme seems to be gaining some traction. And why not? If you follow the startup world, you probably don’t see anything on Techcrunch and think “wow, what an amazing idea.” The flow of new startups consist of ideas that were all pretty predictable by anyone who regularly reads all the major tech blogs. Most companies are a new mix of the following words: mobile, social, app, sharing, cloud, food, travel, communicate, recommend, group, shopping, coupon. If you want to start a company that gets funded by VCs, pick 3 of those words and go.

I’ve been thinking about this a lot and I wonder, is innovation really dead? You probably wish I could give you a nice short answer that gets to the point and doesn’t require you to think, but I can’t. Issues like this are almost always more complex and nuanced than the analyses we give them, particularly when those analyses are written in a few hundred words on a blog. So I’m sorry to say that, the best I can do is lay out a series of causes, some affecting our perception of innovation, and some affection the reality of innovation, that interact in complex ways. Let’s start by addressing how innovation is measured.

How Do We Measure Innovation?
There are lots of ways to measure innovation. The most common ways seem to be patents granted and venture capital dollars invested. By either measure, we seem to be on part or better than the past.

We also think a lot about innovation as a productivity booster, the kind of 1+1 = 3 solution that drives the economy forward. I don’t know if we have less of those types of innovation or not, but if you listen to the pundits on the talk shows, they seem to believe that we don’t.

So why does it “feel” like we are less innovative?

Why We Feel Less Innovative
The main reason that I think the “innovation is dead” meme is spreading is that we see fewer things that surprise us. When I think about the times in my life I saw something and thought “wow, very innovative,” it was usually something that surprised me. It was an object that either did something I didn’t expect, or did it it a way I didn’t expect it to. Why does this happen less often now? I suspect it is due to the proliferation of online media. We know about so much, and we know so early, that few things take us by surprise. So perhaps we are as innovative as we have ever been, but it doesn’t seem like it because our learning about these new innovations is more incremental and less of a sudden discontinuity that we might have experienced in the past.

Is Innovation Really Dead?
I honestly don’t know if we are less or more innovative than we used to be. Rather than take a stand on that question, I want to make two cases. First, I want to assume we are less innovative and make the case for why that might be. Second, I want to assume we are just as innovative, if not more, and explain why we might think we are less innovative in spite of that.

Why Are We Less Innovative? - Argument 1
Power curves have made us less innovative. That, in summary, is my argument for why we innovate less than we use to.

The internet has made power curves, instead of bell curves, the norm. When we are awash in information, and the economics of so many industries break down, it causes the economics to move towards a power curve model where blockbusters make all the money and most everything else loses money. We continue to invest because we hope we have one of the blockbusters.

The power curve economy is a function of increased demand for attention, the scale of the internet’s reach, social networks, and our need for novelty. But why do power curves hurt innovation? My answer to that question assumes a bit of determinism, which I don’t want to argue in this post, but bear with me and see if this makes sense.

Our brains are giant input/output machines. Decades ago, two different people received very different inputs into their brains, based on where they lived, what they read, who they knew, etc. People in the same geographic regions had similar inputs and tended to think more alike. But human interests naturally vary, so they inevitably had different interests outside of core day to day life issues, and when they investigated those other interests, they did so through the structural thought lens of the rest of their world (this structural thought lens is the one determined by geography). So what you had was people with very different experiences, very different neural inputs, all looking at some intellectual issue from their varying perspectives. The result was different outputs for the same set of industry inputs. In other words, two people researching a cancer drug or designing a computer chip or whatever had all the same inputs with respect to that project, but they ran them through very different neural structures, the ones that were build up over years of living different lives. And thus, you got some randomness in the outputs - this randomness, when it was able to be turned into something useful, is what we called innovation.

But that doesn’t happen today. Why? Because the internet has made us more alike than we think we are. Because of power laws, we all read the same articles, admire the same companies and people, use the same products, etc. Our neural inputs for all aspects of life are more similar than they have ever been.

I know you are thinking “no Rob, on the contrary, the internet has been the friend of the little guy. Now we get access to ideas we never had access to before.” Bullshit. The internet propagates the ideas that are most easy to propagate, regardless of truth value or even usefulness. The power law nature of the internet has turned everything into novelty and entertainment. It has made us lose the serendipity of finding that diamond in the rough, and by making information easier to access, it has encouraged consolidation around the same pieces of information.

Don’t believe me? Research backs up the fact that scholarship is narrowing. I think the exact same thing is happening to innovation.

A recent study, however, suggests that despite this cornucopia, the boom in online research may actually have a “narrowing” effect on scholarship. James Evans, a sociologist at the University of Chicago, analyzed a database of 34 million articles in the sciences, social sciences, and humanities, and determined that as more journal issues came online, new papers referenced a relatively smaller pool of articles, which tended to be more recent, at the expense of older and more obscure work. Overall, Evans says, published research has expanded, due to a proliferation of journals, authors, and conferences. But the paper, which appeared in July in the journal Science, concludes that the Internet’s influence is to tighten consensus, posing the risk that good ideas may be ignored and lost - the opposite of the Internet’s promise.

“Winners are inadvertently picked,” says Evans. “It drives out diversity.”

This is why so many new internet startups look the same - because everyone gets their business knowledge about how to run a company and what ideas to pursue from Hacker News. When you read sites like that, you get all the same neural inputs as everyone else who reads sites like that, which means your neural outputs are going to be similar as well.

And we are just reaching the point where a generation has grown up with the internet, which is why we are seeing this innovation decline now. This generation has more in common with each other, and is less diverse in their thought patterns than any generation before, because the internet picks winners. It picks idea winners, style winners, and winners in any other field it touches.

I bet if you pulled data about books and musical tastes from Facebook according to age, you would find that the younger the cohort, the more consolidated their tastes.

In short, what I am arguing is that more than ever before, we all read the same things, watch the same things, and learn the same things, and the result of a less diverse input stream is a less diverse output stream. Bye bye innovation.

We Are Still Innovative, But It Has Taken A New Form
That last argument was crap. By any measure of innovation are doing more than ever before. The problem is that the parts of the economy where we see the most innovation is changing.

Product innovation is the innovation we are used to. But building a product has become so easy that it seems every niche, every type of twist on every idea, is filled as soon as it is imagined. The problem now is that this proliferation of products has led to a proliferation of marketing messages that leaves us overwhelmed on a daily basis.

Mass marketing used to be the thing. You could push your ad out on one of the big three tv networks and reach a big chunk of America. Now that world is dying. And with it, we have the rise of long tail marketing. It’s because of that mix: easy products, avalanche of marketing messages, difficulty of mass marketing, that we see a structural change in where we innovate. These days, we innovate around marketing.

Innovation happens when it gets rewarded, and the rewards for product innovation are smaller than they used to be. It’s easy to get stuff built and it’s easy to copy new product innovations and be a fast follower, so your returns to product innovation are dropping.

But marketing… returns to marketing innovation are climbing. In a crowded world, getting your message out matters more, and is more difficult, than before. If you can figure it out, the gains can be huge. Look at Dropbox. I don’t buy this BS that the key was a great product. Why? Because there are LOTS of great products out there that don’t gain users as fast as Dropbox. A great product is necessary but not sufficient for good marketing in this day and age. Dropbox’s real innovation was in their marketing.

Hubspot is another example of marketing innovation. Their product started as a CMS, and I remember wondering why anyone would use Hubspot when there were hundreds of other paid and free CMSs on the market. Hubspot is crushing it, and it isn’t because of their product innovation - it is because of their marketing innovation.

That is the gist of my second argument. We are as innovative as ever, but that innovation has taken on a new form. The innovation is all around marketing. And because of that, because we are used to product innovation, it seems like we are innovating less.

Innovation Killed Us
Maybe my first argument is true. Maybe the second one is true. Maybe it’s a combination of the two that is true. Or maybe they are both crap. But there is one thing I know for sure - we are here because we were so innovative in the past. And most things in this world reach a level of diminishing marginal returns. Success makes future success less likely past a certain point, and maybe innovation has already passed that point.

So how can we revive innovation? Well, I think that since innovation put us in this position, it’s the best thing to get us out. I think we will see innovation that restores the serendipity to our intellectual lives, and breaks the stranglehold that power laws, social networks, and popularity have over our neural inputs. I don’t know when this will happen, so in the meantime, if you want to be more innovative, take some time to unplug from the world of power laws and plug in to something random, something old, something no one else is reading or watching or hearing. Vary your inputs, and maybe you will be the one to have that new output that restarts our innovations.