Eric Ries and the Origins of the Lean Startup Theory—The Full Xconomy Interview

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200 employees by the time it launched, so it was really maladapted to the results that followed, which was a vigorous early adopter response but zero mainstream adoption.

It should have been a great thing. If you look at Second Life, which launched around the same time, they pursued a much different financial relationship with their customers and different expectations, and they had success just with early adopters. But There was geared as a mainstream thing. So early adopter success was judged to be a failure and the company was in real trouble. It had to immediately take off; it had to just grow huge.

X: Whereas Second Life’s strategy was much more geared toward early adopters, and getting other people to help them build the world.

ER: Right, it was geared toward a much more geeky audience. I remember at the time, we used to make fun of them, because we had a beautiful mainstream product, that also had a developer program, and had ways to have the users build things, but that was a much more limited part, because we didn’t want the geeks and the early adopters to overrun the place and get hostile with the mainstream customers, which is an issue that Second Life has had to grapple with. Every company has to cross the chasm. We didn’t believe in the chasm. We thought we could just start with mainstream customers. I was 22 or something; I didn’t know any better. People told me we were going to get these mainstream customers, and I said hell yeah, that makes sense.

X: You thought it would be like opening the doors of a theme park, and everyone would just stream in?

ER: Ironically, even when you open the doors of a theme park, you have to struggle. There were actually no products in history that had the kind of response we were looking for. We used to say stuff like, “We want to be the next Microsoft, the next AOL. We want to build products of their stature and caliber.” And we were building the kinds of products a mature company might build. But if you go back and look at version 1 of AOL or a Disney theme park, every product goes through its adoption phases. There is no skipping a grade. It’s just not possible. It’s not like we debated this internally, we just had these beliefs—I call them “shadow beliefs” now—that we never spoke out loud, they were just things we believed.

X: I want to come back to it later, so let’s just bookmark it, this notion of shadow beliefs and the purity of the vision. But when and why did you leave? The decline of There was very slow and drawn out.

ER: Once the launch failed, there was a series of crises and leadership transitions. It’s kind of a complicated episode that I’d rather not talk about on the record. It was a period where a bunch of us who were involved, who had kind of become disillusioned about where the product was going, left to do a spinoff to try to prove a new technical direction. So we did this. And then the company bought that thing back, and agreed to commercialize it. It was one of these things where we thought that if we did the impossible, they would be like, “Great.” Of course, real human beings don’t react that way when you prove that they’re wrong. We were just so stupid in retrospect. So they wound up buying the thing back, and never commercializing it, and that was the precipitating event for us to say this was doomed.

X: But you stayed in this general area of 3D avatars, with IMVU.

ER: The founders of IMVU had this common experience because we had all worked on this spinoff. It was basically a little mini-startup. Today I would know how to run and incubate that product. I have the theory now about how to incubate an internal startup, but we did everything wrong. It was a disaster. We really structured it the wrong way. But the five of us had had this work experience together. We knew we could do amazing things. We had done the impossible. We were really proud of what we had accomplished. So when we realized this was not going to work, we were like, “Well, we can disband, or start something from scratch.” We literally had a clean room day, we threw all the servers out, we had a complete clean start. We gave it a deadline; we had an ultimatum that we will either do this or … Next Page »

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Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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2 responses to “Eric Ries and the Origins of the Lean Startup Theory—The Full Xconomy Interview”

  1. Wait…now that we built it leveraging Lean Start-up principles…”THEY WILL COME?” I understand the “Customer Development” component of Lean Start-up…but am still missing ideal strategies to generate new customers and users, especially for B2B startups providing a “disruptive technology/solution”

    It sounds like all you now need to do next is implement a sales/marketing 2.0 tool, add a “PRICING AND PLANS” section on your website and hire some internal telemarketers?

    Sounds like a single point of potential failure to me…Should these start-up’s also target big company “C-Suites” and communicate their value prop towards “C-Suite” sponsored initiatives? Should a “top down” sales approach be ignored? “Bottoms up” / viral approach only?