How To Save Microsoft, and Other Valuable Insights from Blist

OK, it’s taken me a few weeks, but I finally have a chance to highlight a couple of entries in a local blog I’ve been following. It’s from the guys at Blist, a Seattle startup that makes Web-based software that lets people manage large lists and databases as easily as a spreadsheet. That may not sound that exciting at first, but the software also lets you share, publish, and collaborate on lists online, and that leads to interesting business applications as well as online communities united around common interests.

In February, Blist raised $6.5 million in first-round financing from Frazier Technology Ventures and Morgenthaler Ventures. The company was founded in early 2007 by Kevin Merritt, formerly CTO of FrontBridge, which was bought by Microsoft in 2005. Recently I’ve found the Blist blog to be chock-full of insights into entrepreneurship, product management, and the local innovation community—all through the lens of a startup on the rise. Two recent highlights:

Jon Byrum, senior product manager at Blist, wrote yesterday about the importance of truly understanding your customer base. He points out that there is a trap involved in talking to customers one-on-one. You may think you have a good sample of opinions and requests, but the truth is “you don’t have an understanding to the extent to which the requests are important, or how strongly they are affecting your total customer base,” he writes. What’s more, product managers (like everyone else) are susceptible to confirmation bias, whereby you have a gut feeling that users want a certain feature, and when you hear a few of them confirm this, you inflate the importance of that small sample.

The solution? Work to overcome such biases, and complement talks with customers with much larger and more comprehensive samples of user data. Only then, Byrum writes, will you truly understand how to focus your limited resources of engineering time and brainpower. I suspect the lesson applies in principle to a lot of other scenarios as well: managing a large team, planning marketing strategies, and understanding your audience as a blogger, to name a few.

Kevin Merritt, CEO of Blist, wrote last Thursday about his proposal for how Microsoft can stay on top. You’ve got to read the whole post—it’s got some great specifics—but let me just summarize a few nuggets here. “It will require the Redmond giant to return to their risk taking, entrepreneurial roots. Insiders at Microsoft call it making big bets. It’s time to make some big bets,” Merritt writes. The gist is that Microsoft should start a venture fund. (Merritt points out that he had the idea before Google announced its own fund last week.) In short, he thinks Microsoft needs to start investing in small startups, similar to the Y Combinator program in Boston and the Bay Area, in exchange for stock and the startups’ commitment to using only Microsoft development software, operating systems, and product platforms.

Merritt suggests the Microsoft investment committee should consist of Ray Ozzie, Don Dodge (who recently posted for Xconomy here), and Dare Obasanjo. Proposals should be reviewed once a quarter, in 90-minute demo-and-pitch sessions. At the end, you are either in or out, “American Idol style.” If you pass, your company gets up to $175,000, plus Microsoft IT support and software, and office space.

From a distance at least, it makes good sense. Microsoft has tons of cash—annual revenues of $60 billion, net profits of $17 billion; each is triple that of Google. Merritt argues that if they take on 100 companies each year—which seems like a huge number to me—it should cost only about $25 million, a drop in the bucket of Microsoft’s R&D budget. Realistically, I could see them starting with a handful of companies, maybe 10 or 12; 100 is too many for a venture organization to do a meaningful evaluation. But what’s interesting to me is that it’s all about Microsoft seriously tapping into the innovation community—something I agree the software giant needs to do to not only stay relevant but dominate in the decades to come.

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