PIVOT: REINVENTION CENTRAL

Your Business Is Booming. Time to Change Course

Software maker 37signals has been on a roll lately. So why did founder Jason Fried decide to narrow the company's focus?
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Jason Fried, an Inc. columnist and founder of 37signals, a Chicago-based software company, announced today that his company would begin focusing exclusively on one of its products, Basecamp, the popular project-management application. Not only that, the company will be changing its name and entire identity to reflect the new focus--Basecamp the product, Basecamp the company.

But here’s the kicker: Business has never been better, so it’s not as if this were some kind of forced retrenchment. Fried says he simply had a realization that quality and culture would probably suffer if the company continued to expand. So he did the exact opposite. We spoke with Fried to hear more about his radical decision.

This seems like a huge change for the company. Why did you decide to change from 37Signals to Basecamp?
Jason Fried: It is a big change, but it's more a formalization of a change that's been taking place naturally over time. We're just speeding it up now and making it official. Over the past 10 years, we've released a bunch of products, some of which have become very popular and successful. But there's a cost to doing a bunch of things at the same time. That cost is dilution. Nobody does his or her best work when he or she is spread too thin. So we decided that if we want to spend our days doing our best work, then we should all focus on one thing. And that one thing should be our most popular product, Basecamp.

Was there a single "aha" moment that led you to make this decision?
JF: While the transition has been happening naturally over many years, it really all came together for me last August. I'd just gotten married and took my first extended vacation in many years. When I got back, I was doing some catching up on what I missed. And the more I looked at what everyone was doing, what everyone was excited about working on, and what our customers were using most, the way forward became very clear. Basecamp was what we should be doing. So I guess taking a vacation was the key to getting back to work. Kinda ironic, now that I think about it.

What's wrong with continuing to grow into a larger company, with more employees?  Most companies would be excited about the growth.
JF: There's nothing inherently wrong with it, but it's at odds with our culture. We take being a small company very seriously. We absolutely love it. We think small companies have advantages that large companies simply cannot have.

One of those is knowing everyone. We want to make sure we remain small enough where everyone knows everyone else's face and name. At 43 people, we're still there. We could still be there at 50 or maybe 60, but there's a point not too far off in the distance where you get too big, and you lose that special magic that comes from everyone knowing everyone else. That is too important for us to lose. It's one of the main reasons why so many people who work here end up staying here for a very long time. We have programmers who have been with us for nine years, eight years, seven years, etc. One of our designers has been here for 10 years. That's super rare in our industry. We're proud of that kind of longevity and loyalty, and we think being a small company has a lot to do with it.

In your experience, is there a certain size companies reach at which everything fundamentally changes? What is it?
JF: Hard to say, exactly. I think it depends on the work and the leadership. But I noticed some minor changes around 30 people. Once we hit 30, I just didn't know what was on everyone's minds as well as I used to. I still knew everyone well, but I just didn't get as much time with each person as I used to. I've heard this "turning 30" issue from a variety of other business owners. I imagine there's another number past 30 where it really changes again. Maybe 50? Maybe 60? Once you see someone in the hall you don't know, it's trouble.

Can you talk a little about the kind of growth and innovation you'll be able to achieve by focusing on just one product, versus the kind you'd be pursuing if you continued to diversify?
JF: Software development has changed so much since we launched Basecamp 10 years ago. Back then, it was just a Web app. But today, we have four distinct versions of Basecamp. We have the standard Web app, we have an iPhone app, we have an Android app, and we have a mobile Web app. If you count email compatibility, too, you could say we have five different versions. So even one product today is five products.

That means development tends to be slower and more complicated. Once you have a few products, you might have 15 or 20 different code bases you have to deal with. So focusing just on Basecamp allows us to minimize all that complexity and have fewer things to work on. Fewer things means higher quality on those things.

How did the decision go over with everyone else at the company? Did you encounter a lot of resistance or defensiveness? How do you deal with that?
JF: I announced it to everyone personally over the phone. We're a remote company--we have people in 30-plus cities--so we can't all get together for big announcements like this. It went over great. There'd been some tension brewing around how many things we had going on at once, so after this announcement, a lot of people were relieved. It just simplified everything for us. It also gives us a chance to take a deep breath and get back to work with a much clearer purpose. I'm sure there was some doubt that we could pull it off, since we tend to change our minds a lot, but that's why I was clear about the name change, too. The name "37signals" allowed us to continue to take on a bunch of other products under that brand umbrella, but "Basecamp" says we just make Basecamp.

Have you seen other companies make decisions like this? Was there somebody you looked to as a model?
JF: I have not. Nearly every major refocusing I've seen usually comes when a company is in trouble. It's in response to bad news. That's the opposite of what we're doing. Business has never been better! We didn't need to do this. We wanted to do this.

What do you anticipate will be the reaction from customers?
JF: Basecamp customers are going to love it. I can understand if some of our other customers from some of our other products are less thrilled, but we're not going to leave them hanging. We're going to be looking for new homes for those products. We're already in negotiations with a few parties for Highrise, our small-business CRM tool. But if we can't find the right fit elsewhere, we're committing to maintaining our other products as long as we're in business. We won't sell them to new customers anymore, but any existing customers will continue to be able to use whatever they were using before the big transition.

IMAGE: Basecamp
Last updated: Feb 5, 2014

TOM FOSTER

Tom Foster is an Inc. editor-at-large. His work has also appeared in Popular Science, Fast Company, Details, and Men's Journal, among others. A longtime New Yorker, he is a recent transplant to Austin.




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