Less Is More – HOW Magazine, February 2005


See how 37SIGNALS scrapped web-design work to develop software that retools how designers create — and redefines the way business is done.

37SIGNALS HAS A SIMPLE CREDO: “UNDERDO” THE COMPETITION. This means hiring fewer people and spending less money. Working shorter hours.
Holding as few meetings as possible. Deliberately offering fewer features than competitors. But making sure what they do deliver is brilliant.

This Chicago firm creates web-based software that helps businesses and people get organized—software designed to simply do its job and get out of the way. No superfluous features, no detailed preferences, no complicated setup and no learning curve. They’re an antidote to bloated software that’s more frustrating than useful, and these streamlined products resonate with a user base that’s 500,000 strong and growing as more people and businesses catch on to what 37signals is all about.

In an industry once defined by extravagance, 37signals is pioneering more than just fuss-free software, but also a philosophy of working smart, lean and simple. This mighty team of seven is showing those in and outside the web and design worlds a whole new way of doing business.

Founded in 1999, 37signals began as a web-design firm, boasting clients including Qwest, HP, Clear Channel and Microsoft. But the staff found working with clients draining. “I never really liked client work,” says founder Jason Fried. “I wanted to find a way to work where I no longer had to deal directly with clients.”

Since 2004, 37signals has launched five applications to the public. Since all applications are web-based (there’s nothing to download or install), setup is instantaneous. And its more than 500,000 users appreciate those sorts of things that put 37signals a notch above other software developers.

What began as a side project became a whole new path. The firm had developed a web-based project-management application that aided client communication. After working with 37signals, some clients would ask for copies for their own use. Seeing potential, Fried charged programmer David Heinemeier Hansson with developing a commercially viable application. In February 2004, it was released to the public as Basecamp, a web-based, project-collaboration tool that allows coworkers and clients to communicate with one another by assigning to-dos and tasks, posting messages, gathering feedback, scheduling milestones, sharing files and tracking time.

Following the release of Basecamp, 37signals continued web-design work. But they also kept developing software. Ta-Da List, sharable to-do list software, was released in January 2005. Backpack, an organizer for personal and business use, was released in May 2005. Writeboard, a collaborative writing tool, was released in October 2005. And Campfire, a group chat application for business, was released in March 2006. All products are web-based and available for a scalable monthly subscription fee, except Ta-Da and Writeboard, which are free. All tools have free versions available, with limited features.

To build these applications, Hansson developed Ruby on Rails, a web framework that he later released as open source. Hailed as a godsend for increasing backend productivity, Ruby on Rails made Hansson a rock star of sorts in the programming community and furthered the cred of 37signals. The 26-year-old has been dubbed “The Hottest Hacker on Earth” by Wired, and he landed the cover of LinuxJournal.

It took about a year, but by early 2005, 37signals was making enough money from application development to abandon web design (and along with it, client work) and focus exclusively on development. “I never intended for 37signals to be a web-application developer,” Fried says. “But we’re happier working for ourselves than for clients.”

Anyone who’s ever resorted to help from a software application’s animated paper clip will appreciate the efficiency and simplicity of 37signals’ software. “I’m always pushing back against complexity,” Fried says. “Most software is overdone, frequently out of the designer or programmer’s ego. I say, scale back. You can always add stuff later.”

The firm’s design strategy was one defined by constraints. “Think of the stories you hear of a prisoner creating a weapon with a comb, tape and a pinecone,” Fried says. “Constraints help people come up with creative solutions.”

For instance, when the 37signals team was building Basecamp, they were still doing client work, had no outside funding, and their programmer (Hansson) was living in Denmark, a seven-hour time difference. They scaled back the scope of the software, collaborated online instead of meeting in person and lowered the cost of the project by literally building less software.

And less was exactly what the firm’s users wanted. “When we ask customers what they like best about our applications, they say, ‘They’re simple and they work,’” Fried says. “That can’t be overstated. The fact that someone can get right in and use the product without a big learning curve or setting a lot of preferences.”

The bold declarations 37signals makes about its products, its entrepreneurial philosophy and its competition’s shortcomings has earned the firm some vocal critics. But Fried doesn’t shy from provoking controversy. “It’s important to have people on both sides who care,” Fried says. “Poking people here and there inspires debate. If you try to build something for everyone, you end up with mediocrity. We’re in the business of making simple products that work. People looking for a ‘kitchen sink’ solution won’t like our products, but we’re not worried about them.”

The same philosophy that informs the software’s development applies to the firm’s culture as well. As you might imagine, 37signals isn’t dependent upon a conventional office structure. There are as few meetings as possible, flexible hours and three time zones separating the team. Five staff members live in Chicago (Fried, three programmers and a designer), one programmer in Idaho and a designer in New York City. But even the Chicago folks rarely share office space. The team spends most of its time collaborating online via the Campfire group chat application.

“We thrive on alone time,” Fried says. “The same way it takes a good half hour to get into REM sleep, you need time to get into your zone in order to be productive. If someone’s there to tap you on the shoulder, it just invites opportunities to be distracted.”

No one is held to set office hours, a structure that honors each individual’s working style. “The fallacy is that anyone really works eight hours a day,” Fried says. “People are productive in spurts. Maybe you’re only really productive two hours a day. It doesn’t matter if you’re sitting in an office or not.”

This structure (or lack thereof) works to support a simple firm tenet: Optimize for happiness. “Happy people are motivated people,” Fried says. “Motivated people are productive. As long as the work gets done, we let people work the way they want to work.”

The firm is built on a foundation appealing to its employees’ passions, creativities and independence. For instance, the staff is the first customer, building applications they find exciting and useful. “When you’re building things you like, you stay true to what you want to do,” Fried says.

When you look at the scope of the work and the reach of the audience, it’s hard to believe that 37signals is comprised of just seven people. “Our philosophy is to =hire less and hire later,” Fried says. “With a lean staff, there’s less of an impulse to increase the scope of the project, and you’re likely to see profits more quickly.”

Working on a small staff means that everyone must be prepared to don a variety of hats. A non-negotiable skill for the firm members is the ability to write well. “To be successful, you have to be able to explain things clearly,” Fried says. “Today, most communication is written, through e-mail or online chats. If you can’t communicate clearly, it doesn’t matter how great of a
programmer or designer you are.”

The impetus to work smaller also extends to the scope of their projects. Most of their web applications launched in less than four months. “If we spend more than four months on something, we know we have to scale back the project’s scope,” Fried says. “It’s better just to get the product to market. There’s always time to add stuff later.”

The shorter time line also serves as incentive for staff. “Our team can see their products built quickly,” Fried says. “No one likes work that launches late or is thrown away later.”

Even customer support is handled in-house—by Fried himself. And although he admits that answering 50 to 60 e-mails a day can be cumbersome, the direct line to the users allows him to be the first to
know about potential problems, and he gets to hear directly from the users about their experiences with the products.

Interest in the bold ideas behind 37signals’ success has inspired many to pay attention to the philosophy behind their work, whether or not they work in software development. In 1999, 37signals launched a blog, Signal vs. Noise, which addresses topics surrounding entrepreneurship, design, simplicity, constraints, pop culture, products and more. The site is a vibrant web presence, boasting more than 30,000 visitors per day.

The blog’s popularity inspired Fried and Hansson to write “Getting Real,” a collection of essays on the business, design, programming and marketing principles of 37signals. They self-published the book as a PDF and sold it through their site for $19. In case they needed any more validation of their inspirational philosophy, the book sold briskly: more than 15,000 copies in its first 90 days, netting a profit of $190,000.

The firm also hosts seminars three to four times a year in Chicago, which delve more deeply into the topics in “Getting Real.” The last seminar sold out in just 24 hours and hosted attendees from Australia, Japan and Europe. This is another profitable venture for the firm—the most recent one made a $50,000 profit.

And they just launched a job board on their site. Listing primarily programming and creative jobs, the listing service capitalizes on the blog’s impressive daily visitation, and it provides yet another revenue stream for the 37signals crew.

You don’t hear about many boutique firms that are influencing the culture and philosophy behind online media like 37signals. Or, as soon as you do, they end up being acquired by some mammoth corporation. (After all, Blogger went to Google and Flickr to Yahoo.) Although the firm now boasts a high-profile investor (Bezos Expeditions, a personal investment company of Jeff Bezos, who founded Amazon.com, has made a minority private equity investment in 37signals), Fried is devoted to keeping 37signals autonomous.

For instance, the firm did client work until they could survive comfortably selling the applications exclusively. They didn’t have to wait long. Basecamp had a positive cash flow in about six weeks and was profitable after a year. “If you’re starting with venture capital, you’re not making decisions in the best interest of your customers; you’re making decisions for your investors,” Fried says.

After all, he didn’t build this firm just to flip it. “We’ve talked to the big guys,” Fried says. “Everyone has a price. But ours is too high for anyone. We want to do this for a long time. We’re not building this firm to sell it. That’s not interesting to us. We want to still be doing this in 20 years.”

Lisa Baggerman Hazen is a Chicago-based writer
and web designer who now manages the various
details of her business and personal life through
37signals applications. lisa@baggermania.com