Failed Lessons

• As an engineer and later as a manager, I was accustomed to measuring progress by making sure our work proceeded according to plan, was high quality, and cost about what we had projected.
• Unfortunately, “learning” is the oldest excuse in the book for a failure of execution. It’s what managers fall back on when they fail to achieve the results we promised.
• We must learn what customers really want, not what they say they want or what we think they should want. In the Lean Startup model, we are rehabilitating learning with a concept I call validated learning.
• Validated learning is the process of demonstrating empirically that a team has discovered valuable truths about a startup’s present and future business prospects. It is more concrete , more accurate, and faster than market forecasting or classical business planning.

Validated Learning at IMVU

I’ll now elaborate on one of those mistakes to illustrate validated learning clearly.

• Brilliant Strategy
• We decided to enter the instant messaging (IM) market. In 2004, the IM market was locked up by a handful of incumbents.Because of the power of network effects, IM products have high switching costs. To switch from one network to another, customers would have to convince their friends and colleagues to switch with them.Because of the near impossibility of bringing a new IM network to market, we decided to build an IM add-on product that would interoperate with the existing networks.To achieve that viral growth, it was important that our add-on product support as many of the existing IM networks as possible and work on all kinds of computers.
• Six Months to Launch
• I won’t mince words: the first version was terrible and Personally, I was worried that the low quality of the product would tarnish my reputation as an engineer.In our situation, many entrepreneurial teams give in to fear and postpone the launch date. Although I understand this impulse, I am glad we persevered, since delay prevents many startups from getting the feedback they need.
• Launch
• And then nothing happened! It turned out that our fears were unfounded, because nobody even tried our product. As a matter of fact, customers wouldn’t even download our product.We eventually learned how to change the product’s positioning so that customers at least would download it.However, despite our best efforts , we were able to persuade only a pathetically small number of people to buy the product.The quantitative targets created the motivation to engage in qualitative inquiry and guided us in the questions we asked; this is a pattern we’ll see throughout this book.In short, our entire strategic analysis of the market was utterly wrong . We figured this out empirically, through experimentation, rather than through focus groups or market research.
• Talking to Customers
• Out of desperation, we decided to talk to some potential customers.We brought them into our office, and said, “Try this new product; it’s IMVU.” If the person was a teenager, a heavy user of IM, or a tech early adopter, he or she would engage with us.In contrast, if it was a mainstream person , the response was, “Right. So exactly what would you like me to do?” We’d get nowhere with the mainstream group; they thought IMVU was too weird.Imagine a seventeen-year-old girl sitting down with us to look at this product. She chooses her avatar and says, “Oh, this is really fun.” She’s customizing the avatar, deciding how she’s going to look. Then we say, “All right, it’s time to download the instant messaging add-on,” and she responds, “What’s that?”“Well, it’s this thing that interoperates with the instant messaging client.” She’s looking at us and thinking, “I’ve never heard of that, my friends have never heard of that, why do you want me to do that?” It required a lot of explanation.She downloads the product, and then we say, “Okay, invite one of your friends to chat.” And she says, “No way!” We say, “Why not?” And she says , “Well, I don’t know if this thing is cool yet You want me to risk inviting one of my friends? What are they going to think of me? If it sucks, they’re going to think I suck, right?”Then the second customer comes in and says the same thing. Then the third customer comes in, and it’s the same thing. You start to see patterns, and no matter how stubborn you are, there’s obviously something wrong.We had the incorrect preconception that it’s a challenge to learn new software and it’s tricky to move your friends over to a new buddy list.Our customers did not want an IM add-on; they wanted a stand-alone IM network. They did not consider having to learn how to use a new IM program a barrier; on the contrary, our early adopters used many different IM programs simultaneously.Bit by bit, customers tore apart our seemingly brilliant initial strategy.
• Throwing My Work Away
• When it came time to pivot and abandon that original strategy, almost all of my work— thousands of lines of code— was thrown out. I felt betrayed.Could we have learned those lessons earlier if I hadn’t been so focused on making the product “better” by adding features and fixing bugs?

Value Vs. Waste

• In other words, which of our efforts are value-creating and which are wasteful? This question is at the heart of the lean manufacturing revolution ; it is the first question any lean manufacturing adherent is trained to ask.
• Lean thinking defines value as providing benefit to the customer; anything else is waste. In a manufacturing business, customers don’t care how the product is assembled, only that it works correctly.