How to Scale an Open Source Business

On Wednesday this week we have Matt Mullenweg in Auckland for a flying visit. Matt is CEO of Automattic which is the company behind WordPress. As the co founder of WordPress Matt has also learned a huge amount about how to grow a distributed business which is global and where almost all staff work remotely as the norm.

Currently there are 240 employees around the world in something like 26 countries. In the Bay Area and SF which is the closest thing to head office there are 15 but even they don’t all work in the same location.

BTW – the event the Auckland event still has seats available. Tickets are free but you do need to book.

Having heard Matt speak at various events in NZ, SF and in Australia over the years plus a few other interviews and online talks I have some idea of what the topics may cover but really for me the back story of how to build, and scale a business based on open source is very much a key part of the story.

As one of the local organisers of WordPress related events and projects I get to speak with an incredible range of businesses and media about WordPress and related topics.

It is fair to say that businesses generally don’t understand how an open source business can grow to the astonishing size that it has done in the last 11 years.

So here is my summary of some of the key elements of the WordPress/ Automattic story. (I’m using WordPress to describe the wider community and not just the WordPress.com part because that is also part of the wider success trajectory.)

1. Stay true to the community that you came out of and nourish that by providing an ecosystem that captures the core values of that community. An example of this is the WordPress.com mostly free (freemium) hosting model with the arms length – self hosted WordPress.org sites providing websites to millions of users of all kinds.

2. Develop grass roots products that are inexpensive and infinitely scalable. Examples of this might be the JetPack plugin set and VideoPress (although video hosting is much more demanding to build at scale.) I have no idea of the relative values of the “free” compared to the “paid” products but my impression is that 80% of the business is free stuff and the revenue comes from the 20% that is paid for – a kind of reverse Pareto principle.

3. Treat recruitment and hiring as an extended audition. If your application to work at Automattic is accepted you then work on a project together with one of the teams for a period of weeks for which you get paid $25/hr. Depending on how well that goes you will then get interviewed by Matt himself. He has said in interviews that he spend up to 1/3rd of his time on hiring. This has the very real value of confirming (or not) the cultural values of the organisation at a very personal level.

4. Keep all communications structured and searchable. Internally the company uses P2 which is a project based WordPress theme plus Skype and other chat based clients. Every project can be searched. This is a little bit like having a CRM tool which is purpose built for projects.Yes there are emails and phone calls but the core communications are all structured and accessible to all of the staff. Building software is very much based on process and by running the company the same way as the software is created that makes a great deal of sense.

5. Be inspiring. This quality is harder to analyse but the best leaders are those who inspire and are visionary. They also hire people with skills that they don’t have and recognise diversity and the strength different perspectives to solve programming and every other business problem.

This last one is not on the list but is very clear if one is lucky enough to meet Matt in person. Have great parents or other role models in your life that have nurtured the vision and the positives inside you. Isaac newton is reported to have said

If I have seen further it is only by standing on the shoulders of giants.” 

It is fashionable in business to revere the “self-made man” but really I’m picking someone in Matt’s family had a real and very deep understanding of servant hood or stewardship and though it may have been an unconscious family value it is clearly there in the mix.

It also seems like a core value of Automattic is very much to do business things that make sense in the context of the company and not just because business conventions demand that.

I am reminded of a story from the Jim Collins book “Good to Great” where Jim treated himself as an experiment and started taking observations on what worked and what didn’t for him personally. From where I sit it seems very much like the culture of Automattic is very much like that.

For a more direct perspective here is a snip from a recent Forbes interview with Matt

“Automattic is basically a big experiment. Can we create something that’s fully open source to the core, that becomes a big Internet-scale business?

They say it can’t be done but we’ve been proving them wrong since 2005. I look forward to continuing to do that.

FORBES: What are the main revenue drivers now?

Mullenweg: People think that WordAds and VIP are big parts of our business—they’re about 10% each. They’re important and for many reasons we invest in them, but the vast majority of revenue comes from subscriptions, the other 80%. So people signing up for WordPress.com to get extra features or a domain name.

Then for people who are hosted on Amazon or GoDaddy or those places we also have a set of products for them under Jetpack. Between WordPress.com and Jetpack, that’s the whole company basically.”

The other way to hear about this is to come along this Wednesday night

Update: In breaking news – Rachel Martin is New Zealands 1st Automattic staff person. Rachel just joined the company in the last few weeks – read her post over here… I am one very happy Happiness Engineer

Here is a snap I prepared earlier ( 2012) of Matt and myself. There had been a very big party the night before and it looks like I may have got home much earlier than he did 🙂

Matt-JK-Aug2012

Matt & Jason the day after WCSF 2012 at code day