Lean Startup Pitfalls Uncovered
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Lean Startup Pitfalls Uncovered

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Presentation to the Lean Startup Circle Meetup, San Francisco, July 21, 2010 at Kick Labs. ...

Presentation to the Lean Startup Circle Meetup, San Francisco, July 21, 2010 at Kick Labs.

Overview of how IMVU has grown using Lean Startup principles and the challenges faced as the company scaled.

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  • Thanks for sharing. Interesting to see a Lean Startup case from the transition phase. And, nice hockey stick there :-)
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  • I would LOVE to see the video for this. Could you upload it to slideshare? Happy to feature it. Was bummed that I missed most of the talk (I arrived when you were on the last slide).
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Lean Startup Pitfalls Uncovered Presentation Transcript

  • 1. An online community where members use 3D avatars to meet new people, chat, create and have fun with their friends
  • 2. Lean Startup Pitfalls Uncovered Brett G. Durrett (@bdurrett) VP, Engineering & Operations, IMVU, Inc. Lean Startup Meetup, San Francisco, July 21, 2010 1
  • 3. Presentation PIVOT! a word so popular right now that I had to drop it on the second slide 2
  • 4. The Transition of a Lean Startup IMVU’s journey to becoming a Large Company Brett G. Durrett (@bdurrett) VP, Engineering & Operations IMVU, Inc. Lean Startup Meetup, San Francisco, July 21, 2010 3
  • 5. WTF? Hey Brett… don’t Large Companies suck? 4
  • 6. I heard this talk… From Steve Blank’s “Why Accountants Don’t Run Startups” presentation, used with permission. 5
  • 7. Startups Don’t Last Forever Scalable Large Transition Startup Company - Business Model found - Cash-flow breakeven - Product/Market fit - Profitable - Repeatable sales model - Rapid scale - Managers hired - New Senior Mgmt ~ 150 people You fail if you remain a startup! From Steve Blank’s “Why Accountants Don’t Run Startups” presentation, used with permission.
  • 8. Startups Don’t Last Forever Scalable Large Transition Startup Company - Business Model found - Cash-flow breakeven - Product/Market fit - Profitable - Repeatable sales model - Rapid scale - Managers hired - New Senior Mgmt ~ 150 people You fail if you remain a startup! From Steve Blank’s “Why Accountants Don’t Run Startups” presentation, used with permission.
  • 9. Startups Don’t Last Forever Scalable Large Large Transition Startup Company Company - Business Model found - Cash-flow breakeven FTW! - Product/Market fit - Repeatable sales model - Managers hired - Profitable - Rapid scale - New Senior Mgmt ~ 150 people You fail if you remain a startup! From Steve Blank’s “Why Accountants Don’t Run Startups” presentation, used with permission.
  • 10. The Large Company is the result of a successful Scalable Startup 9
  • 11. The Large Company is the result of a successful Scalable Startup If you can survive the transition 10
  • 12. The Large Company is the result of a successful Scalable Startup If you can survive the transition (which has pitfalls) 11
  • 13. Not Really Startup Metrics • ~100 full-time employees – Technical staff ~50 people • > $40 million run-rate • > 10 million monthly unique visitors 12
  • 14. Introduction • Assumption audience is quite familiar with Eric Ries’ Lessons Learned blog • IMVU sometimes referred to as the original Lean Startup • Talking about IMVU transitioning from Scalable Startup to Large Company 13
  • 15. Quick Background • Customer Development & Lean principles lead company to tremendous growth • Fast development – everybody focused on getting new things into customers hands • No “golden gut” - customer metrics beat grand product vision • Inspirational environment – everybody empowered to make product decisions 14
  • 16. Hey – We’re a Scalable Startup! IMVU Revenue by Quarter (in millions) $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 15
  • 17. Initial Transition • Product Owners for R&D, productizing, monetizing and keeping things running – Smaller, independent versions of company • Same successful philosophy and practices – Ship fast (but 2 month cycles feel slow) – Anybody can make product decisions – Customer-facing over infrastructure 16
  • 18. Not So Much IMVU Revenue by Quarter (in millions) $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 17
  • 19. Not So Much • Revenue dropped even though we were the using exact same philosophy and practices that delivered success • Product becoming “bucket of bolts” – Features abandoned because development teams disbanded / moved to new projects • Emphasis on customer-facing changes leads to increased technical debt 18
  • 20. Transition: Plan B • 7 “customer experience” product groups – acquisition, discovery, connection, etc. • Persistent feature ownership • Each group has key business metric – Conversion, retention, # chats, etc. – Combined metrics ultimately drive revenue 19
  • 21. Again, Not So Much IMVU Revenue by Quarter (in millions) $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 20
  • 22. Again, Not So Much • Revenue flat • Product still a “bucket of bolts” • Technical debt continues to pile up – Build infrastructure hindering development – Can’t iterate on IM client • Lack of progress leading to morale issues 21
  • 23. Key Failures • Didn’t align everybody for success – Competing metrics = adversarial owners – Authority disconnected from responsibility • 7 product teams = too small to be effective – No desire to apply limited team to tech debt • Focus on immediate customer feedback prevented “big bet” improvements – Bias favors features over infrastructure 22
  • 24. Transition: Plan C • Align organization for success • Strengthen product ownership – Support it with effective project management • Allow “big bets”, not just optimizations • Don’t lose the things that make us great! 23
  • 25. Getting Aligned • Officers determine business strategy – Shared (repeatedly) with all employees • All employees have same incentive plan – 2009 targets for profitability and revenue • Authority consistent with responsibility – Drive accountability – Required difficult changes to culture 24
  • 26. Stronger Product Ownership • VP Product clear mandate – Determines long-term product strategy – Aligns product owners to company strategy • Product teams: product, monetization, keeping things running, but this changes • Product Owners determine all product changes 25
  • 27. Project Management • Needed visibility into: – Where we spend development resources – Better ROI assessment when planning (the “I”) – What others are doing (transparency) • Resource Allocation – Product decides % of resources to each area – Engineering determines actual people • Variation of scrum, 2-3 week sprints 26
  • 28. Seeing the Big Picture • Passion for customer validation great • Obsession for immediate validation can distract you • Easy to lose sight of: – Product opportunities requiring a big bet – Increasing technical debt – Infrastructure needs 27
  • 29. Customer vs. Infrastructure • Customer facing features prioritized over infrastructure critical to early success • When it compromises ability to rapidly iterate a key strength is lost 28
  • 30. How Do You Know? “We are hiring smart people that can’t make changes to our code” 29
  • 31. Payback of Technical Debt • Dedicated technical investment projects • Some systems get a technical debt “tax” applied only when product changes • Tech Leads can add project requirement 30
  • 32. Continuous Deployment Overhead • Effective development systems require ongoing investment to scale – Impacts speed and morale • IMVU spends >20% of engineering on maintenance of the tests and process – Even with premium we find it has high ROI • Pain follows a square wave pattern as we scale the organization 31
  • 33. CD: Expect Some Hurdles • Production outages • New overhead – Tests – Build systems • Production outages • Frustration • Production outages (but well worth it)
  • 34. Cultural • No longer possible for everybody to participate in every aspect of the company • Leadership changes at all levels • Process: too much, too little. • Not everyone makes the transition… some people just love startups 33
  • 35. Key Cultural Values We Kept • Entrepreneurial spirit • Customer metrics validate our decisions • Value everybody’s ability to contribute to product direction • Accepting failures in order to learn and improve 34
  • 36. Example: New IM Client • Not previously possible – 1-year design and development – Substantial non-customer-facing infrastructure • Big win for customers and technical debt – Solved key issue confusing customers – Rate of development greatly accelerated • Iterated with customer validation! 35
  • 37. Example: Hack Week • Originally few requirements – Anybody can develop anything – Have to demo it at end of week (live) • New requirements – anything, but ship it or kill it – Each person allowed 1 project at a time – Product adopts it, keep building it or kill it – Limit customer exposure until adoption – Engineers need business data to make decisions! • Results – Much higher rate of projects getting to customers – Many engineers choose to work on existing product plan! 36
  • 38. How’s the Transition Going? IMVU Revenue by Quarter (in millions) $8 $7 $6 $5 $4 $3 $2 $1 $0 Qtr Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 37
  • 39. Thank You Brett G. Durrett Twitter: @bdurrett bdurrett@imvu.com and… many thanks to Steve Blank for use of his slides 38
  • 40. Oh Yeah… Interested in getting more experience? We’re hiring! http://www.imvu.com/jobs/ 39