“I know you’re here because there’s free food, but I’m grateful to have your attention anyway.”

This is how Bob Metcalfe began his recent talk at Bazaarvoice, but it couldn’t have been further from the truth. The man who penned Metcalfe’s Law, invented Ethernet and founded 3Com also has a knack for self-deprecating humor and drawing crowds, as it turns out. In our packed All Hands area, he discussed innovation, entrepreneurship, startups and an array of other topics.

No matter how big you become, “when you stop feeling like a startup, you should start to worry,” Metcalfe remarked. In order to scale into a larger, more mature organization while retaining the best qualities of a startup, he advised the following:

  • Maintain open communication and frequent meetings  between teams, especially when much of your workforce operates out of satellite offices
  • Accept “adult supervision” as your organization matures
  • Cultivate “mutual respect between the nerds and the suits”
  • Don’t obsess over beating your competitors, as this comes at the expense of understanding  “who your customers are and what they want”

Metcalfe would never have invented Ethernet had Xerox not presented him with a daunting challenge:

My second great fortune in life was to be given a problem that no one had ever had before, which was ‘we’re going to put a computer on every desk’—if you could imagine such a thing—‘and we need to connect them together.’ You’re the networking guy; go do that.

Asked when he knew Ethernet was going to be “big,” Metcalfe reflected a bit. He recalled a moment at Xerox when someone accidentally disrupted the connections between 10 personal computers in an office. Immediately, 10 people stood up and asked what happened. “I realized that Ethernet was not an option…people had come to rely on it.” Metcalfe’s original sketch of the Ethernet concept appears below (image provided by PARC, a Xerox company).

Discussing innovation, Metcalfe described a chart that was created shortly after 3Com was formed, which projected the price drops in Ethernet several years into the future. 3Com leadership would meet every year, pull out the chart, and plan the steps they would need to take to get Ethernet down to the price they had originally projected for the year ahead.

Companies can harm innovation—and sales—by “burdening” their “products with too much responsibility,” which ends up making them “twice as expensive and half as fast.” As an example of this, he touched on the history of the token ring, which was Ethernet’s main competing technology throughout the 80’s and 90’s.

Metcalfe stressed the value of a well-supported, responsive marketing strategy to technology companies. Even when your products have clear, quantifiable advantages, companies can’t win over decision makers with numbers alone. “There’s a hell of a lot of emotion involved in what you decide is better,” he said. He then warned that an escalation of internal complaints about a competitor’s marketing, “when it feels like somehow they’re cheating,” actually “means they’re out-marketing you.”

The questions then returned to the subject of startups. Asked to name common mistake new startups often make, he urged the crowd not to “spend too much time naming the company and buying the stationary.” As a general partner of Polaris Venture Partners, Metcalfe shared a few of the considerations he uses to spot investment opportunities:

  • Do they have a “feature, a product, or a company”? Only the third interests him
  • Do they have a “backable” executive team and CEO?
  • Do they come recommended by someone known and trusted by Polaris?

The talk ended with a note about the difference between the traditional entrepreneur and the traditional executive. Entrepreneurs “have a new idea every day” and can get distracted, while “executives are execution-oriented.” Metcalfe pointed to Steve Jobs as an example of someone who has made the transition remarkably well, but he could have just as easily pointed to himself.


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