The curse of prevention

Beware! I have detected a secret virus in your CPU. Due to an interaction effect between your hardware, solar flares, and quantum flux, this virus will crash your computer and erase your hard drive sometime soon. There is only one way to prevent disaster: you must click the subscribe button over on the right there. Go ahead, I’ll wait.

Did you do it? Good. Now you’re safe from that dastardly virus. How do you know my solution worked? Just wait. See, no crashing. You should really say thank you.

Now, I know some of you didn’t believe my urgent virus warning, and therefore didn’t take my proposed solution. But you’re not safe. That virus is still out there, lurking. It could strike at any minute. And when your computer eventually crashes, you should feel bad that you didn’t listen to me.

OK, I admit it. There is no virus. I did my best to exaggerate this claim without saying anything disprovable, in order to illustrate the curse of prevention. Imagine for a moment that you believed my claim about the dangerous virus. After investing in my proposed solution, you probably would be grateful that I “prevented” the problem from happening. In an example this ludicrous, that hopefully sounds funny. But companies make this mistake repeatedly.

Let’s take a common real-world example. It’s important to invest in good architecture so that your website will scale once customers arrive. If you make that investment, and then customers arrive, and the site stays up, most companies will reward the people who built the architecture and, thus, prevented the scaling problems. That’s every bit as crazy as the bogus claim I made earlier. How do you know the problem was actually prevented? Isn’t it just as possible that it never would have occurred in the first place? Or, if it really was prevented, what was the opportunity cost of choosing to prevent it ahead of time?

In other words, there is a formula for evaluating the success of any proposed prevention:

IF

cost of prevention < (probability of problem occurring) * (cost of problem)

THEN

do it

ELSE

ignore it

The killer thing about this formula is that every single term in it is unknown. And in most situations, there is significant cost involved in negotiating over the right estimates to plug in.

I have been present for these kinds of negotiations many times in my career. They are usually among the most heated arguments a company has. Like other situations that I’ve written about, they tend to devolve into competing all-or-nothing camps. One side insists that we should build things the right way, and that failure to anticipate problems is an abdication of responsibility. But the other side wants to get things done, and doing things right somehow, always, every time seems to involve postponing useful work. Both sides suspect that deep down, secretly, the other side is using their arguments over architecture (or planning, or roadmaps, or specifications) to advance a secret agenda. Ever notice how people’s pet projects seem to be exempt?

Why do they harbor that paranoia? It’s easy to see. Say you want to derail someone else’s project. Just start enumerating corner cases. Imagine everything that might go wrong, and insist that those things be prevented before the project is launched. It’s a win-win: you either dramatically increase the proposed cost of the project, making it easier to get cancelled, or you can rely on some “I-told-you-so’s” when the project does launch and encounters inevitable problems, which gives you credibility in future such arguments. On the other side, if you want a project to go forward, you can suddenly "discover" all kinds of extra efficiencies that make this particular project an especially good deal. In the past, we invested in brilliant architecture, code reuse, refactoring, modular design, etc. that now makes it a simple matter to add this feature without much risk of corner cases. Right.

Managing these situations is hard for any company, but potentially lethal for a startup. There are just so many ways for a startup to fail. I’ve lived through the over-architecture failure – where attempting to prevent all kinds of problems wound up delaying the company from putting out any product at all. And I’ve seen companies fail the other way – the so-called Friendster effect: having a high-profile technical failure just when customer adoption is going wild.

Most of the advice I’ve heard on this topic has been a kind of split-the-difference approach. The theory is that there is some truth in both camps, and the right way to manage the disagreement is to sprinkle a little bit of both into our plans. A little planning, but not too much. Prevent some corner cases, but not others. The problem with this advice, as I’ve experienced it, is that it’s pretty hard to give a rationale for why we should anticipate this problem but ignore another one. To the people being managed that way, it feels like the boss is being capricious or arbitrary. And that feeds the conspiracy feeling that decisions have an ulterior motive.

So I’d like to lay out a systematic way to avoid death-by-corner-case without sacrificing the company’s ability to grow. In other words, a principled way to combine agility with stability.

The first shift required is a change in orientation from prevention to fast response. Many problems are catastrophic only if allowed to fester. Imagine you hear from an engineer that they are worried that a certain payment subsystem is unreliable, and will therefore double-charge some customers. One way to evaluate this fear is to spend time on analysis: how many customers will be affected? What is the maximum amount of overcharging that will happen? How upset will those customers be? How much will it cost to solve this problem now? In this framework, we’ll tend to either invest in the proposed prevention or do nothing.

But there is another way. Imagine we asked the following question: if this problem does materialize in the future, how will we know? In a lot of systems, it might take days or weeks to uncover a problem-in-action. Maybe we already have a mechanism for customers to report this kind of problem, or maybe we could invest in a simple alert counter that increments whenever the problem happens, and sends a notification if it happens often. Then, we’d know immediately if the problem ever manifests, and get a simultaneous report on its severity.

We can also ask: how would we fix the problem if it does occur? If we’re practicing continuous deployment, we can be confident that we’ll be able to rush an emergency fix into production without risking introducing further problems. If not, maybe an investment in that direction would be more warranted. In other words, you can always invest in process, batch size reduction, and agility as an alternative to preventing a specific problem.

There are two principal reasons why this second approach is better. The first is that it allows us to make variable-sized investments in response to a feared corner case. Instead of “do the fix” or “hack it up” we can choose increments of investment anywhere in-between. That gives teams a lot more flexibility in the face of the numerous corner cases that come up. Second, investing in fast response is a more resilient strategy. If we’re wrong about the corner case, the investments we’ve made in fast response will allow us to respond faster to whatever problems do appear. By contrast, most investments in traditional prevention are designed to anticipate and fix a specific problem.

But investing in fast response doesn’t solve the whole problem. That’s because there’s still a lot of judgment involved in choosing the right level of investment to make in any given case. It can feel  incongruous to people who are used to the traditional model because it has a built in paradox: you will encounter a lot of cases where you know a problem exists, and you know how to solve that problem, and you are investing time related to that problem but are not investing in the solution. To a lot of smart engineers, that sounds crazy.

That’s why it’s essential to pair the fast response aspect of this approach with a disciplined commitment to root cause analysis. Regular readers of this blog will know the specific methodology I recommend, called Five Whys. But regardless of the technique you use, it’s essential that you get regular feedback about how your prevention decisions are turning out in practice. When you’re heavily investing in prevention, you need to evaluate whether that’s causing your team to go faster. If it’s not, then you’re investing too much in one-off solutions and not enough in process. And if you’re having a lot of problems, you need to have a mechanism for ramping up your investment in prevention to avoid having your whole team dragged down into firefighting. Systems like Five Whys create a natural feedback loop: when you're going too fast, causing a lot of new problems, it slows you down to invest in prevention. As those preventative efforts pay off, the team naturally speeds up.

The most dangerous situation you can find yourself in is investing in prevention and also firefighting all the time. That’s why there is a third essential component to this approach. You need to have a long-term vision of where you’re headed. That’s because not all investments are created equal. In most real-world situations, any particular problem (or proposed problem) will have multiple kinds of solutions that you could invest in. Take your typical scalability bottleneck. It could be fixed by refactoring the code itself, or by partitioning the data horizontally or vertically, or by adding additional capacity at the point of the bottleneck, or by shaping end-user demand, or even by removing the feature itself. At any given point in time, which is the right solution? Here’s my belief: the right solution is always the one that moves you closest to your vision while simultaneously solving the problem. Thus it is unacceptable to choose a solution that solves the problem but makes not progress towards the end-state, just as it is unacceptable to invest in a solution that builds a beautiful vision but doesn’t solve today’s problem. Finding such a solution is sometimes challenging, but that’s the moment when it really pays to spend some time thinking through alternative approaches. In my experience, where there is a will to find a synthesis solution, there is always a way.

Entrepreneurial Thought Leaders (and a request for help)

There are only two opportunities left this year to see a Lean Startup presentation in the US - for free. In order to make those events the best they can be, I'd like to ask for your help.

This Wednesday, I've been invited to give a lecture as part of Stanford University's Entrepreneurial Thought Leaders Seminar. I'm really honored to be included in this program, as it's one I've admired and enjoyed for many years. They produce fantastic video podcasts, which you can explore here. And in mid-November, I'll be speaking at the Web 2.0 Expo in NYC. Once again, this will be a web2open hybrid session; I'll post details for how to register as soon as I get them.

I'd like to incorporate feedback into these presentations, and so here's my request for help. If you've seen me present in any format (online or in-person), would you take a few minutes to fill out the following short survey?

Click Here to take survey

If you haven't seen any of my presentations before, feel free to take a moment and peruse the video, audio, or slides available on this blog. As always, if you can come to one of these events, please come say hello and let me know that you're a reader. Hope to see you there!

Support the Startup Founders Visa with a tweet

It's been an exhilarating first day here in Washington DC for the Geeks on a Plane tour. We met a number of policy makers from the White House and State Department, and had a solid Startup2Startup all about government policy and entrepreneurship. After a full day of talking, debating, thinking, and strategizing, we feel about read to take some good old-fashioned action. Will you join us?

In a previous post, I asked readers for suggested topics that the US government needs to know about startups and entrepreneurs, and got some really interesting responses. I've done my best to represent those perspectives in the meetings I've had here over the past two weeks. In my presentation this morning, I emphasized three key areas: reducing the personal cost of failure for entrepreneurs, innovation-friendly legal reforms, and access to the digital means of production (slides from my White House presentation are available at the end of this post).

However, there's one additional issue that has come up throughout the day today. We have a serious structural barrier to entrepreneurship: a glitch in US immigration policy. We can remedy it by creating a special visa for startup founders. The idea is to enable up to 10,000 people per year to enter the United States if they are here to found a company that will employ US citizens. I think the benefits are a no-brainer. Let me quote from Paul Graham's original essay:

The biggest constraint on the number of new startups that get created in the US is not tax policy or employment law or even Sarbanes-Oxley. It's that we won't let the people who want to start them into the country.

Letting just 10,000 startup founders into the country each year could have a visible effect on the economy. If we assume 4 people per startup, which is probably an overestimate, that's 2500 new companies. Each year. They wouldn't all grow as big as Google, but out of 2500 some would come close.

By definition these 10,000 founders wouldn't be taking jobs from Americans: it could be part of the terms of the visa that they couldn't work for existing companies, only new ones they'd founded. In fact they'd cause there to be more jobs for Americans, because the companies they started would hire more employees as they grew.

Brad Feld is working on promoting this idea inside the halls of Congress. Today at Startup2Startup, some additional pieces fell into place. First of all, Dave McClure introduced the idea of modifying an existing immigration program. The EB-5 visa is designed for foreign investors to get a green card if they are willing to bring capital to the US and create at least ten full-time jobs. Unfortunately, this program applies to the investor who holds the capital, and not the entrepreneur who discovers how to put that capital to use. A small change in the law could have a big impact on entrepreneurship in this country, and that's what he proposed. When Dave presented this to the White House and State Department audience, he got a favorable reaction. That's when the second piece clicked, a few hours later. At Startup2Startup, we decided to generate some grassroots momentum to help out. It's actually part of a lean startup story.

David Binetti is an entrepreneur with some credibility in this area, having worked to create the original USA.gov. Recently, he's been engaged in a customer validation exercise around a new concept for a political action-oriented social network. When that concept didn't pan out, he decided to pivot. His latest effort, called 2gov.org, makes it easy to contact your local, state and federal governments with just a tweet. For more on his lean startup journey, you can take a look at this slide presentation. 2gov.org automatically routes your tweet (aggregating it with everyone else who's expressed a similar point of view) to the right legislator or agency. Because it checks your registration against voting rolls, members of congress know that the contacts being received are from actual voters, not just astro-turf. In other words, the service transforms tweets into professional reports that are sent by snail mail, fax, and email - the channels that actually have attention paid to them.

He was at today's event, and the Geeks on a Plane had a brainstorm. Let's use 2gov.org to raise awareness of the Startup Founders Visa movement in congress. To that end, we're tweeting about it, and would like to ask you to join us. If you are a US citizen, tweet your thoughts on the Startup Founders Visa, using the #StartupVisa hashtag and including @2gov. 2gov.org will take care of the rest. In order to have your tweet included in the printed packet that your representative will receive, you'll need to register at 2gov.org (it really only takes a minute).

The Geeks are doing their part. Will you lend us a hand (or at least a tweet)?

2009 09 18 The Lean Startup Geeks On A Plane Edition

View more presentations from Eric Ries.

Testing the new Disqus comment system

The recent and overwhelming influx of comments on The cardinal sin of community management. Has prompted me to investigate upgrading the comments system on this blog. I reached out to the twitter to gather suggestions, and the clear first choice seems to be Disqus. So I've attempted to install Disqus such that this post should be the very first one it's enabled for. Want to come give it a try? Just drop a comment on this post.

Your help testing is much appreciated! I especially would like your feedback. Should I keep Disqus? Go to another comment system? Or go back to the way it was?

Thanks!

Gov 2.0 Summit wrap-up

I had an incredible time at the Gov 2.0 Summit in Washington DC last week. I've never seen such a mixed crowd of entrepreneurs, vendors, and policy makers all in one place. There was quite an exchange of ideas. I was thrilled to be included.

I promised to post the slides for my highly abbreviated version of the lean startup presentation, so here they are. As usual, I'll include some of the real-time comments and some of my thoughts below.

2009 09 08 The Lean Startup Gov 2.0 Summit Edition

View more presentations from Eric Ries.

Given the time constraints, I organized my presentation around two simple ideas:

STARTUP = EXPERIMENT

FASTER STARTUPS = MORE EXPERIMENTS PER DOLLAR

I tried to make clear my usual definition of a startup, one that has nothing to do with size of company or sector of the economy. But judging from the twitter comments, it's not clear if I was able to make that case. It may be that it will prove a lot harder to make this point in DC than elsewhere:

aptuscollab: Too bad all you #g2s folks got up and left when Eric Ries took the stage. Dude is smart, his lessons apply to internal projects as well.

That's the nice thing about Twitter. You get the straight scoop, no sugar-coating. Any public speaker that doesn't take advantage of it is really missing out.

On to what seems to have stuck:

kwooleyy: #g2s Showed startup OODA loop developed by USAF pilot John Boyd

I included two Boyd-inspired books in the recommended reading list on the right-hand side of this blog: Certain to Win and Boyd: The Fighter Pilot Who Changed the Art of War. With a number of military men and women in the audience, I couldn't resist a plug. Boyd's ideas have inspired a lot of the principles underlying my work.

whorunsgov: Eric Ries: Startups fail not because the technology works, but because no one wants the tech. once it launches. #g2s

The very abbreviated version of Customer Development (channeling Steve Blank).

nickvitalari: Lean startups mean more experiments for dollars and human capital invested #ngenera #g2s

I'm trying to keep hitting on the theme of the human capital waste when we invest our smartest and most creative people into a venture that builds something that nobody wants. Every bit as true for government as for enterprise - and even the two guys in a garage.

dhinchcliffe: Lean startups go faster. Do course correction called a "pivot". - @ericries "Most exciting time in history be an entrepreneur." #g2s

For more on the pivot, see Pivot, don't jump to a new vision. I don't see how it could more a more exiting time to be an entrepreneur, and certainly can't imagine another time when entrepreneurship was more important to our country's future economic prosperity.

marciamarcia: The L word (learning) onstage at #g2s from @ericries. Finally. Startup=Experiment. http://startuplessonslearned.com

Amen! It's natural at a gathering like this to focus on new technology and applications. A lot of conversation was about what "the federal government" should do. But it's all too easy to lose sight of the fact that any government, even one as large as the US, is made up entirely of people. And so the right questions to ask, when we're talking about fostering innovation in any human institution, are: how can we foster a culture of learning and discovery? And it's my hope that the lean startup can provide some guidance in that direction.

Thanks to everyone who made the summit such a great event!

International tour about to begin

For my international readers: are you in Washington DC, Paris, Barcelona, London, Amsterdam, Malmo, or even Oulu, Finland? Then you'll have a chance to come discuss the lean startup live and in-person. (What's that you say? DC is actually not a separate country? Fascinating...)

The trip will happen in two separate trips. The first (DC, London for Seedcamp, Amsterdam for PICNIC) is first, with the Geeks on a Plane tour, September 18-25. Each event will feature a cool mix of Bay Area and local speakers (and me, too). Come join us if you can.

I then head back to the USA for a free and open-to-the-public lecture at Stanford University for their Entrepreneurial Thought Leaders Seminar on September 30.

Next up is a second swing through Europe. Exact dates for all events aren't yet pinned down, but here's what I'm working on so far: October 28 for a TBA event in Paris, November 2-7 for a series of events in Malmo, Sweden including Øredev, and ending with a workshop at the Martti Ahtisaari Institute of Global Business and Economics at the University of Oulu.

I'll keep you all posted as more details get added. As always, if you're a reader and can make it to one of these events, please come say hello. Continually love hearing your feedback!

The cardinal sin of community management

Once you have a product launched, you will the face the joys – and the despair – of a community that grows up around it. I won’t sugar-coat this: it is one of the most difficult and frustrating aspects of building a company online.

There are many articles by many experts (myself included) extolling the virtues of listening to customers. In fact, there are so many of these propaganda pieces that this question might naturally cross your mind: if listening to customers is so great, why do we need so much propaganda? I’ll tell you the honest truth: listening to customers is gruesome, uncomfortable, and painful work. Sure it has its moments, but then so does getting stranded on a desert island.

Yet few products these days can succeed without their online community, and the insight you can gain from interacting with that community is unparalleled, despite the pain. But to take advantage of that learning, you have to avoid the absolutely one and only cardinal sin of community management: not listening.

This probably sounds illogical. Communities care about lots of things, like how good your product is, how much information you give them, how you defend them from trolls, right? And when you’re being pilloried by community members over the latest mistake your company made, it can doubly confusing. After all, people rarely say they are mad because they are not being heard. But just because they don’t say it doesn’t mean that it’s not true.

Let me give an especially painful example. At a certain point in IMVU’s development, we faced a difficult choice. Some of our most passionate early adopters were using IMVU’s user-generated content capabilities to create illicit content. As you can imagine, this was a lucrative customer segment. But it became clear that if IMVU was ever going to become a mainstream business, we had to effectively fire these early customers. The reasons were many and complex, so I won’t rehash them all here. Suffice to say that our partners, vendors, and most importantly regular mainstream customers all found the idea disturbing. So we had to start enforcing new content policies that restricted what kinds of virtual goods could be bought and sold on IMVU.

We did not take this step lightly. We did a lot of analysis to make sure that we were minimizing the number of customers affected. For example, we spent some time researching the usage of virtual goods that would be disallowed under the new policy and were relieved to discover that they accounted for less than 0.1% of all usage. So we felt confident that removing them wouldn’t have too big an impact. We couldn’t have been more wrong.

This single decision wound up costing the company significant revenue and over the course of several months sent its customer growth into decline. We were totally unprepared for the magnitude of what happened. In the end, we managed to repair the damage, but only after losing a lot of time and at significant opportunity cost. This was one of those catastrophes that shouldn’t have happened. We carefully rolled out the change in stages. We did our best to actively communicate why we were making the change, and we tried to put in place policies that treated affected customers fairly.

Yet none of that mattered, because we violated the cardinal rule. We didn’t listen. More accurately, we made our customers feel like we weren’t listening. And until we could make that right, we kept on hemorrhaging business.

The problem was that although very few customers were affected by the changes in policy, many more were anxious about those changes. We tried to be low-key about the roll-out of these changes, so as not to call attention to it, but our silence on the subject simply served to make room for conspiracy theories about what was really going on. And, because the people complaining were yelling and screaming, we thought the right response was to ignore them and wait for them to leave. After all, someone who is writing ten-page posts about how they are going to abandon your product is presumably going to go away, right? That’s why one of the most important maxims in online communities is “don’t feed the trolls.” People who thrive on creating controversy through volume, repetition and hyperbole don’t really want to be heard. They just want attention, and giving it to them just encourages more reckless behavior.

But silence was the worst possible strategy. For months, we made constant product and policy changes, trying to end the controversy without simply undoing our original decision and abandoning the mainstream market. Nothing worked, until we finally had one of our community managers start talking to real customers on the phone. Then the reality of our problem hit us.

Most normal customers – even among early adopters - do not pay attention to the trolls. They don’t participate heavily in the forums, and they don’t send email when they are dissatisfied. They are largely invisible in the normal channels where customer service and community management pays attention. But that doesn’t mean they are not aware of what’s going on, or that they don’t care deeply about it. It turned out that our customers had gotten a clear message, one that we had never intended to send: that IMVU was becoming a teen-only site. We were totally shocked. Adults, even those that aren’t at all interested in racy content, were our best customers. We had built numerous features specifically for them, and often had to contend with charges from teenagers that we were too adult-friendly (these two segments don’t really like hanging out with each other as a rule).

When we actually started listening, things changed fast. First of all, we discovered what was really upsetting our customers. They had come to rely on the fact that IMVU was one of the very few online communications platforms where verified adults could meet one another. This was an unintended side-effect of our earlier content policies, that required age verification before you could buy unrated content from our catalog. It turns out many of our best customers were becoming age verified and then not buying any “adult” content. They enjoyed being treated like adults and having a way to chat online with other adults. Again, this was not about prurient content. Avatars make it possible to meet other people as they would like to be perceived. Mostly, that’s a good thing – many people believe their avatar is a more authentic representation of their true self than their physical appearance. But it also has some drawbacks. In the middle of a serious conversation on the joys of motherhood or the stress of a career you might realize that the person you’re talking to is only 15. That can be a jarring juxtaposition of physical reality that breaks the suspension of disbelief.

It took me a long time to understand that benefit of our product. Most customers couldn’t articulate it; they just knew they were angry that we had ruined it. Except that, from a literal point of view, we hadn’t ruined it. All of the features that enabled that experience were still there. What we had done to ruin it was make our customers feel like they were not welcome anymore. We kept denying that we had done anything wrong, that the features still worked as advertised, and justifying our decisions instead of apologizing. When we finally understood the problem, fixing it was relatively easy. We made a series of very public declarations that IMVU would always support adults, that we appreciated their unique contribution, and that we would always protect the key features that meant the most to them. The fact that pornography was not one of these key features was besides the point. We had summarily turned off one of their features without consulting them and without remorse. Who knew what feature might be next?

So real listening can head off a crisis in progress. But it also has other powers. For example, consider a common case of a minimum viable product. Since this product is necessarily missing a lot of features, those of us who ship them often want to duck the feedback. After all, it’s likely to be something we already know. In fact, I used to have the urge to argue with customers who gave feedback like “hey, idiot, you’re missing feature X.” I used to respond with something like, “I know, but it’s on our road map and we’re already working on it and we don’t really want feedback about that right now and so please get off my back.” You can imagine the field day the trolls had with that.

Eventually, we learned a better way. Feedback that tells you something you already know is still quite valuable. It gives you a hint that you are on the right track, but it also tells you quite a lot about the person giving you the feedback – that they believe in the path that you are on. For an early adopter, having this insight acknowledged and validated is a powerful experience. So we learned to take the time to say “thank you for your suggestion. Thanks to you, we’re going to prioritize feature X.” Then, when feature X finally did come out, every early adopter who suggested it feels an earned sense of ownership over it. Here’s the best part. They will also defend you against future attackers and trolls.

Collectively, an online community has an unlimited amount of time to spend. Even if you and your community managers are a hundred times smarter and more productive than the members of your community, there is absolutely no way that you can keep up with its sheer volume of energy. So you can’t fight an online community and hope to win the argument. The only way to have your point of view prevail is to have members of the community invest their unlimited time and energy in evangelizing it. And that’s what really, truly, actively listening does. It sends a signal to passionate customers that you care, that you want them on your side, and that they are part owners of your vision. In fact, I am convinced that if you could find some of IMVU’s earliest adopters, they would say something like this: “sure, those guys at IMVU HQ were helpful in writing code and stuff, but in the end they were just the hired help. It was really the community who built that product.” Imagine what happens when a troll shows up and starts bad-mouthing you. Those earlyvangelists (to borrow Steve Blank’s phrase) will defend you.

I have seen this dynamic time and again. As a creator of products (and now an author, too), it’s one of the things that keeps me going. When your customers become your allies, there’s almost nothing you can’t accomplish together.

There’s only one catch. You can’t stop listening. If you do, as IMVU found out to our peril, you break the implicit bargain that made you allies in the first place. And when your defenders join forces with your trolls, there’s no way to have your message heard.

That’s why not listening is the cardinal sin of community management. Any other mistake can be overcome: shipping bad product, removing key features, erroneously banning community members, even kicking out a whole segment of customers. And when those allies feel unheard, you simply can’t do anything right. Every little thing becomes a crisis. Choose wisely.

Happy blogiversary (my present: a brand new URL)

It's official: Startup Lessons Learned has passed the one-year mark. 130 posts (and dozens more that mercifully never saw the light of day), tons of comments, and, of course - you, the awesomest subscribers on the internet. Thank you.

When I first started writing this blog, I made a promise to myself that I would spend more time on the content of the essays than on layout and fancy widgets. I've managed to go a whole year in keeping that promise, even though I get the the occasional teasing about my lame default Blogger theme. Still, it's probably time to start growing up. Today I'm taking the first step, and finally setting the blog up on its own real domain: StartupLessonsLearned.com. I know, it's not a new layout full of Web 2.0 goodness, but it's a start, right?

Back to the content, passing an anniversary is a great time to look back. Luckily, blogs come with an archive, which means you can take your own trip down memory lane. Want to see my very first post? It's a pretty weak homage to Paul Graham. Or how about the first of about a zillion times I used the term lean startup? Read the very first comment (thanks tfitz!) or relive my very first subscriber survey - when there were a grand total of five. Or, for something more substantive, how about the top five-most-read posts:

1. Why PHP won
2. Don't launch
3. Five Whys
4. Work in small batches
5. The engineering manager's lament

But wait, there's more! First OODA reference: Ideas. Code. Data. Implement. Measure. Learn. You can also witness the start of my speaking marathon in Built to learn, or leave a comment on my (still-draft) A new version of the Joel Test (draft).

If all that archive-browsing leaves you hungry for more, you will soon be able to get Startup Lessons Learned in book form. I've been experimenting with a simple compilation format. I've given copies to attendees at some recent workshops. The response has been positive, and I'm getting ready for a more general release. If you'd like more info, or want to order one of the beta-test copies, I'd love your feedback. Feel free to drop me a line or leave a comment.

Most of all, thank you so much for your continuing support. It's been a real blast getting to know so many of you - in person, comments, and at events. Please keep the feedback coming. And, if you're feeling really generous, tell a friend to subscribe. Thank you, thank you, thank you.

Oh, and one last thought. It's true, not every comment has been so supportive or constructive. That's the internet for you. So, for the trolls: I've heard you loud and clear. Let me summarize. Actually, I'll let MC Frontalot take it...



Thanks for stopping by!

What would you want to tell Washington DC about startups?

I'm writing this post from an airplane headed to Washington DC, where I'll be presenting at the Government 2.0 Summit. It's an honor to be invited, and I'm looking forward to meeting a lot of people with a background very different from my usual crowd. I'm especially curious to gauge the reaction of the civilian and military representatives of our government. Beyond just those who will be hearing about the lean startup for the first time, I'm expecting to shake a lot of hands and have a lot of interesting side conversations.

As a result, sitting here on this plane, I've been pondering what message I want to deliver on behalf of startups and entrepreneurs. Thanks to on-board wifi, you can join me in that thought process, if you'd like. So here's my simple question:

What do folks in Washington need to know about the global community of entrepreneurs?

I've been in a few government-themed meetings recently, so I know some of the standard answers. One school of thought is something like: leave startups alone! They are so fragile, the heavy hand of government policy could easily snuff them out while trying to help them. And there's some truth to that, although I think the metaphor is a little misleading. Much of what makes the USA, and Silicon Valley in particular, such a great place to start a company is the result of good government policy. I think a more nuanced view is that we should be encouraging the government to think about the impact on entrepreneurs, and try to foster policies that reduce burdens on companies in their earliest stages. Some of those policies actually require more, not less, government action, because startups risk being crushed by entrenched corporate interests as well.

A second standard theme focuses on each of our financial interest. If the government raises taxes or adds regulation to my sector of the economy, watch out: innovation is doomed. I understand that there is a reason to employ lobbyists to protect established interests, but I'm not really interested in that job. I'd like to see if we can come up with policy suggestions, concerns, or questions that might promote entrepreneurship generally - and globally. It's my fervent belief that will lead to overall economic growth.

So what are good entrepreneur-friendly policies? What is good in the current system that should be preserved? And what hurdles could be eliminated? My short list, off the top of my head (hey, I am in an airplane, after all):

• Patent reform (so startups don't have to waste time amassing a deterrent warchest of dubious patents)
  
• Health insurance reform (so more people can take the risk of becoming an entrepreneur)
• Stage-appropriate regulation (many regulations kick in only after companies achieve a certain size, which promotes more risk-taking)
• Open data and platforms (the major theme of the Gov 2.0 movement - give startups open access to the raw materials so they can create economic growth)
• Open spectrum and wireless competition (with obvious benefits, I hope)

What would you add? And beyond just policy suggestions, what facts on the ground do policy-makers need to know about startups? Please leave a comment and let's discuss!

(It's impossible to resist the urge to plug Virgin America as much as possible. Here I am, tens of thousands of feet above the ground, and I have power and broadband. Of course, the real thanks should go to a startup - Gogo Inflight Internet - that I was lucky enough to meet at a recent workshop. Thanks guys!)

Don't be the Ice Cream Glove

I have a new post up today on O'Reilly Radar, called "Is your product an Ice Cream Glove or a Snuggie?" It is based on two videos I normally use in workshops - each of which contains an important entrepreneurship lesson for all of us. Here's an excerpt:

For those that haven’t watched it, I’ll give a brief recap. Ali G meets with business leaders and investors on Wall Street to learn how to create a new company around a new product idea. After some general lessons, he then proposes his first product idea, complete with flip charts, business plan, and marketing plan. His idea? The Ice Cream Glove, a special glove you can carry around with you so that, if you happen to eat ice cream, you can prevent your hands from getting sticky. After failing to persuade most of the investors to back him in that venture, he then tries to sell a second idea: a Hoverboard, “like from Back to the Future.” After all, they must have made at least one of them for the movie, right?

Both of these ideas for companies are terrible, and the show is funny because he manages to keep on selling them with a straight face. But there are also important lessons baked into the humor. Take the example of the Hoverboard. If you look at the typical startup, you will see the vast majority of their energy and time invested in building new technology. We act as if the biggest risk to startup success is that the technology won’t work. But in reality, most products fail because they are the Ice Cream Glove, that is, because there are no customers who will buy them.

Read the rest (and be sure to watch the videos)...

These videos make an important point: that almost all product ideas sound bad. At the whiteboard, you can make any idea seem brilliant or ridiculous. It's only by actually moving through the fundamental startup feedback loop, which involves facts, that we can find out which have a kernel of truth baked within them.

Let me also say a brief thank you to those who replied to my previous ask for feedback about cross-posting. So far, all the feedback has been in favor of doing it whenever I have a guest post elsewhere. If you have further thoughts, please leave them as a comment. Thanks!

Building a new startup hub

Last week, I had a unique opportunity to spend some time in Boulder at the behest of TechStars. It was a great experience to see a relatively new startup hub in action - and thriving. It's easy to take Silicon Valley for granted. The startup scene here can be ostentatious and serve as an echo chamber, amplifying the cool trend of the week into a deafening roar. But there's no denying the level of support for entrepreneurs that we enjoy. I've written a little bit about the origins of Silicon Valley because I think it's important for us to understand how we got here in order to make sure we preserve what is best about our community.

Traveling to Boulder I had the feeling of stepping back in time. It felt like I was watching a new startup hub in the process of being created. The companies I spoke to all agreed that the community there was extremely supportive, especially in the critical ulta-early-stage. That community is, by all accounts, relatively new - less than five years old according to several folks I asked. Even more impressive is that the culture there seems to have been the conscious creation of just a few people.

On my brief visit, the results were impressively on display. If you watch the video/audio below, you'll get to see some of the questions I was asked after my presentation. On the whole, I found them unusually sophisticated - and mostly rooted in the actual practice of entrepreneurship. I also did quite a bit of asking questions myself. I spent most of my time with TechStars, who were my hosts for the trip. Their model looks like a key ingredient in the startup brew there. Every summer, they bring approximately 10 companies to Boulder for an intense "accelerator" experience (don't call it an incubator, or you'll get dirty looks). They don't invest a lot of money; just enough to keep them going through the summer. They take common stock, not preferred, a fact that the entrepreneurs mentioned to me many times. And they expose the startups to a vast network of mentors, none of whom get paid for their involvement.

Some of the mentors are based in Boulder, but many are not. As a result, the companies get a lot of exposure to VC's, investors, and partners in larger, more traditional startup hubs. And, as one entrepreneur put it to me, "we understood that a big part of our responsibility in the program was to make sure the mentors have a good experience, by taking their advice to heart and giving them a feeling of being part of our evolution as a company." As a result, for a lot of these companies, Boulder is just a gateway to San Francisco. TechStars encourages them to go wherever opportunities take them. But even the companies that move on have had a taste of life in Boulder (it looks awfully nice). And every year, it looks as if one or two entrepreneurs from the program decide to stay.

That strikes me as a really smart formula for building a startup hub. First, pick a place that entrepreneurs (and other creative class-types) would love to live. Great weather, a strong university, outdoor sports, cafe culture, good restaurants - you get the idea. Then, create an encouraging environment for early-stage companies. You don't need massive amounts of capital available for VC investment - modest amounts will do. Accept that many successful companies are going to want to be backed by big-name firms in other cities. Instead, focus on getting them ready for that stage. Provide early seed capital, and be the ones to make those introductions. Make your city a gateway to other opportunities, so that entrepreneurs can increase their access by starting there. And do your customer development. If you talk to early-stage entrepreneurs who randomly landed in Silicon Valley, you'll hear just how hard it is to break into the scene here. Because you're not asking entrepreneurs to forsake those bigger cities, it's a no-brainer to give your city a shot.

Anyway, those are my thoughts after having spent only a few days in Boulder. You can see that it stimulated a lot of ideas; you'll have to evaluate the veracity of those ideas on your own. In the meantime, let me keep my promise of some multimedia. I did my best to capture video and audio; a YouTube playlist and Slideshare slidecast are below:



Slides (with audio):

2009 08 19 The Lean Startup TechStars Edition

View more presentations from Eric Ries.

And, as usual, I wanted to share some of the audience reaction with my commentary. These quotes are, as is my custom, straight from twitter.

My biggest thanks goes to the people who generously sponsored scholarships for others to attend the dinner and workshop, Thank you so much!

ericries: special thanks once again to @fancy_free and @KISSmetrics for sponsoring scholarships for the #leanstartup workshop in Boulder.

I'm also excited to share two long-form reviews from actual attendees. I'm always excited to see how these ideas are expressed by entrepreneurs in their own words:

petewarden: Another blog post, this one on the @ericries Lean Startup Workshop I attended: http://bit.ly/4UWuf #leanstartup

tmarkiewicz: Notes from the Lean Startup Dinner with @ericries http://bit.ly/80kKW #leanstartup

And I can never resist sharing some positive feedback. I hope you'll indulge me - I need to have a copy of these testimonials for the record:

neilsimon: Thanks @ericries for the #leanstartup tips last night. Articulate, inspirational.

jdegoes: Great talk from @ericries last night. Inspiring ideas: real-time biz metrics; safe continuous deployment; A/B split testing. #leanstartup

feverishaaron: @ericries thanks for droppin' facts at the #leanstartup dinner. Learned a lot and enjoyed the discourse.

KevinMSmith: Excellent discussion on #leanstartup w/@ericries. If you get a chance go see him. If you don't get a chance , MAKE ONE. He's that good.

lmckeogh: Best $50 I've spent in last yr as unempl. prod mgr. #leanstartup dinner Boulder full of useful info that I want to apply [echo @roger_tee]

ultimateboy: #leanstartup was the most invigorating event I've ever attended. Thank you @ericries for drastically altering my perception of agile startup

Thank you all so much for your kind words. I was really overwhelmed this time. Now for some actual content:

jeantabaka: Really liked @ericries answer to adding in quality while still a startup #leanstartup

If you want to hear the exact question and answer, check the video. This was a question about how we convinced our investors to "allow" us to invest in quality after we'd shipped the initial buggy version of IMVU. That's always a tricky relationship to navigate, but we found a way to get our investors on board with that program by practicing a form of radical transparency. When they could hear the customers' complaints in their own voice, it became clear when it was time to up the quality level. We also had the benefit of many lean practices that break out of the "time, quality, money - pick two" paradox. (You can learn more about that by reading The engineering manager's lament.)

Here are two more questions that I really enjoyed answering:

roger_tee: At #leanstartup dinner w/ Eric Reis. Asked where I find visionary early adopters who pay 4 buggy beta SW. Killer answer.Ask me. #bdnt

nbauman: When to split test? Anytime anyone on the team thinks it could make a macroscopic change. Define macroscopic change! #leanstartup

I could recap these - but just go watch the video already!

And one last specific practice that came up at this session:

feverishaaron: UI, design and programmers are all in the same department, all have the same title, and all are evaluated the same. #leanstartup

We organized our engineering team at IMVU to try and maximize cross-functional collaboration. That meant getting designers, programmers, and QA folks to cross-train and work together as peers. By expressing these values as part of the formal structure of our department as well as the formal evaluation system, I think we went a long way towards reducing the usual internecine conflict between these groups.

Let me close with one last thought. I think it speaks for itself:

peterhoskins: At least have the courage to make new mistakes. #leanstartup

Thanks to everyone who participated and helped make these great events!

Marching through quicksand

I have been spending a lot of time lately talking to people in various media companies: editors and agents, executives, journalists, producers and directors. It’s a fascinating time to see content industries in action, because they are facing a constantly changing landscape and are really trying to keep up. In other words, they are facing conditions of extreme uncertainty, just like startups. So I generally feel right at home in these conversations.

Most pundits and the people I ask for advice fall into one of two camps. One is explaining the world as it used to work: the importance of gatekeepers, the scarcity implied by limited distribution, and the resulting quality bar that the industry is so proud of. The other revels in the world as we all know it will be someday: limitless distribution enabled by new technologies, the importance of collaborative filters, and on-demand availability of all content for end-users. The problem with engaging with either camp as an author (or “content creator”) is that neither camp is really addressing the world as it exists today. The old models are broken, and we do not yet have new models to replace them. For established media empires, this is a scary fact. But, as any startup can tell you, this opens up a tremendous set of opportunities for the rest of us.

As I talk to established media companies, their responses are surprisingly uniform. I have in mind an image of each industry marching along in lock step, one after the other. I place them roughly in this order:

Movies > Television > Books > Music > Magazines > Radio > Newspapers

Each industry is watching the one in front of it sink into the quicksand. Their reaction seems to be relief that at least they are not as bad off as the industry in front of them. Thus does everyone enjoy a nervous chuckle at the plight of newspapers. But this relativism obscures one essential fact: everyone is sinking! It’s just taking some longer than others. What accounts for the difference? Mostly it is the time and expense required to create the means of distribution for that industry. Because it is much more expensive to launch a Hollywood movie than a printed book, for example, it’s taking digital technology longer to work its way through the complete supply chain for that industry. But make no mistake, disruptive innovation has happened, and the established supply chains are going to change accordingly.

So let’s turn our attention from what may happen in the future to what is definitely happening in the present. Here are a few of my observations from the trenches:

Personal brands are displacing organizations brands. I used to be skeptical of all this talk of “personal brand.” But I now believe it is at the center of the disruption changing the face of media. Because of the incredible array of information available, we have a desperate need for filtering mechanisms. But the traditional media brands simply aren’t good enough. Does anyone really watch the full NBC lineup anymore? Or follow all of the New York Times columnists equally? It’s an artifact of the old large-batch distribution mechanisms that we bundle all this somewhat-related content together.

This is good news for everyone except those who have huge legacy investments in large-batch distribution. Customers will get to consume the content they want, and support the producers of that content directly, rather than having to rely exclusively on intermediaries. And once you have a relationship with an author, musician, or journalist, it will be quite easy for them to offer new products and services – and for you to give them feedback that helps them shape ever more interesting (and ever more profitable) offerings. But there is a serious drawback: finding new creators is getting difficult. There are just too many of them out there.

Now, helping potential customers discover new things they might like is the job of the discipline of marketing. But that job is changing dramatically, and this brings us to the next major problem facing traditional media organizations:

Media companies are failing at marketing. Most of the people I meet in marketing at traditional media companies are struggling with the realization that their new job is to cultivate new personal brands and to constantly explore new ways to help people discover and deepen their engagement with those brands. The key tools of this new marketing are: targeting, filtering, and customer insight. Mass blasts of information are ineffective, because the broadcast channels are suffering from information overload (even in social media). There are too many products clamoring for attention.

But the same technologies that make life difficult for traditional marketers also offer them unprecedented new opportunities. Test-marketing is now easier than ever before, thanks to leveraged distribution channels like AdWords and Facebook. Scaling up successful tests is easy for the same reason. Most importantly, it’s now possible to have detailed analytics on exactly what’s happening to messages and ideas as they flow through word-of-mouth channels. In the old days, the brand manager of a consumer packaged goods product had to spend energy inferring the effectiveness of their television ads through a combination of trailing indicators (like market share) or time-consuming market research. No longer. Anyone who puts out a marketing message today and doesn’t know exactly what happens to it is suffering from willful ignorance (what I term Datablindness).

Gatekeepers are overloaded. Gatekeepers, who decided what material was published, where dollars were invested, and had a tremendous responsibility for predicting future consumer demand, dominated the world of traditional media. All successful media companies had at their heart a series of editors, producers, and agents tasked with discovering and developing new talent. Look at the stories of the current generation of aging superstars in any industry. They all have a story of how they were discovered, how their first breakthrough work was cultivated by a skillful (or lucky) individual gatekeeper. You can’t turn on a television these days without hearing about how this happened to Michael Jackson. But the idea of artists being discovered is heading towards obsolescence in a world when anyone can start a personal brand anytime, anywhere. The new “discovery” will be a continuous series of events, starting with a niche following and, for the successful artists, gradually transitioning into mainstream success. It will look much more like the technology life-cycle adoption curve than like a tournament system – and that is a good thing for creators of all sizes.

I’ve met a lot of gatekeepers in the past few months. They all have one thing in common: the world’s most painful case of information overload. Ever-more artists and authors are petitioning them. As the costs of production fall, it’s getting easier and easier to send in a proposal or even a complete work. And thanks to the radical transparency enabled by the internet, the quality of these proposals is actually constantly rising, to the point that it’s almost impossible to judge the quality of the final product – because all the proposals look polished and professional, even the terrible ones.

Thus, the selection criteria for gatekeepers has moved almost entirely away from the content itself and to an elusive quality called the “author’s platform” (in publishing; each industry seems to have its own version of this same concept). This is the total number of activities that the author has engaged in – other than writing – that causes people to give them attention. Think of it this way: every person on earth is ranked on a scale from zero to Oprah. When she says to buy something, millions of people do it. How many people follow your recommendations? This is an important question, but it’s not directly related to the kind of content an author actually produces. Unfortunately, this content-less decision-making process is inhibiting the ability of media companies to develop interesting new content at the very time when this supposed expertise should serve as their one true competitive advantage.

Despite all the energy invested in talking to authors about the size of their platform, very few gatekeepers have a rigorous set of metrics for measuring it. My blog has over 14000 subscribers, for example. Is that a lot? I have given more than two-dozen paid speeches this year – is that a lot? When I reviewed a recent product development book, it immediately shot up to Amazon sales rank 300. Is that good? These are pretty interesting anecdotes, but they are hardly the kind of serious approach that these questions deserve. In the absence of real data, gatekeepers are having to rely on much more tenuous indicators. And as everyone’s attention starts to focus on those same indicators, their value is being diluted. Which leads to the next problem:

We need new status indicators. One of the legacy functions of the established order that has not been adequately addressed is the creation of status indicators. For example, the best book reviewers only review books published by the best publishers, which only accept manuscripts from the best agents. These reviews can launch good books onto the big mainstream bestseller lists, which then provide self-sustaining growth (similar to the dynamics of App Stores). Even if a self-published book was every bit as good as one published by a top-tier press, how would the reviewers know? They can’t even consider 99% of published books already. And how could they possibly review a blog? The problem is that there are no other metrics they can look at to judge the content of a book to know if it’s worth reviewing.

We faced this same problem in entrepreneurship and venture capital, but we are getting past it. Seed-stage investors are learning the metrics of traction, and are getting better at identifying those companies that are really achieving validated learning about customers. They can make smart investments even if the entrepreneurs are not well credentialed or have a product/idea that is outside the mainstream of what investors are expecting As this change has rippled up the venture industry, it has meant a lot more worthy companies are getting funded than just a few years ago.

The biggest lost opportunity of all, though, is this one: we no longer need to rely on scarcity or status-oriented measures to filter which projects should get the green light. Just like in the world of startups, we can start to use micro-scale pilot programs, executed in lean fashion, to gather real facts for making ROI decisions about new project investment. Most publishers are still caught up in an outdated “vision vs. metrics” argument, which is already obsolete here in Silicon Valley. We’ve learned that data can be used as a reality-check against vision without diluting the mission or reverting to “sum of all features” focus groups.

Consider this question: what percentage of all books that are purchased does the buyer actually finish reading cover-to-cover? I'm not sure we really know the answer - yet. But thanks to new distribution technologies like the Kindle, we will soon. And that will open up an interesting new way to value books. If a previously unknown title has a higher-than-average customer engagement across a wide demographic, it might merit additional investment – even if the total number of units sold is quite small.

And as we consider specialized niche topics, like business, technical or educational content we can get even more precise. If our goal is to teach, persuade or inform with our content, we can measure our success at those goals. There is no reason why all written content that is produced today for those purposes couldn’t be split-tested – at least to a segment of its audience. Digital versions of these books could have built-in comprehension tests and mini-feedback forms, all of which could evaluate the level of understanding of the reader. Even if only a small percentage of readers or viewers participate, we will be able to get an accurate read on the effectiveness of each piece of digital content.

It’s time for us to start thinking of every piece of content – books, blogs, albums, TV shows, movies, everything – as a new little startup. We have to look at fundamental business questions right from the start: what is the right audience? What is the right revenue model? And, most importantly, what could we do right now to answer the riskiest of these questions. In other words, what is the minimum viable product?

Just like with startups, this is a hybrid question. If our goal is just to create a blog or a YouTube video as a hobby, there’s no need for this kind of rigorous process. And if you want to write the great American novel – and don’t care if anyone reads it – you don’t need this either. But for the rest of us, who create content because we care passionately about having an impact on the world, we need to rethink the process by which we do it. We can’t just delegate the business questions to some media executive.

For people raised in a traditional media environment, this probably sounds scary. In fact, traditional media specialized in keeping authors and creators in a kind of bubble world, so they could “focus on their creativity” but that in reality served to keep them in a constant state of dependency. That made sense in an era where ownership of the means of distribution was more important than ownership of the means of production. But we don’t live in that world anymore. Fellow creators, trust me – this new world is incredibly liberating. Sure, you have to pay attention to your own business, you need to own your own brand, and you need to engage in dialog with your customers. But guess what? Every minute you spend on those activities is spent actually honing your ability to shape the world through your art.

I have no illusions that this new order is going to quickly displace the old. In fact, it’s not even clear that would be a good thing. What matter is that somebody steps into the void being created by this disruption. If traditional media companies adapt, so much the better. If not, there are plenty of alternatives.

So, to all those struggling with how to build an information-distribution channel in this brave new world, let me make a few concrete suggestions. First off, every customer who interacts with any of your creators should have the option to subscribe to all of their future work, every time they interact. For bonus points, make this a paid subscription. Your creators should always have a simple way to talk to current and potential customers in any segment. Make it easy to “pilot” new work with a test community of actively engaged readers, and provide a mechanism for measuring the impact of these pilots. And anytime you strike a deal for digital distribution of any content, insist that your creators be given real-time access to the big-picture metrics: not just downloads, but engagement, retention and replay.

The media companies that will make the transition in the coming years will be the ones that embrace this principle and devote themselves to helping creators, authors and artists develop as entrepreneurs as well as craftspeople. If they don’t, there are a new breed of lean startups who understand this deep in the bones ready to take their place.