Lean Startup Pitfalls Uncovered

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Lean Startup Pitfalls Uncovered

Brett G. Durrett (@bdurrett)

VP, Engineering & Operations, IMVU, Inc.

Lean Startup Meetup, San Francisco, July 21, 2010

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Presentation PIVOT!

a word so popular right now that I had to drop it on the second slide

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The Transition of a Lean StartupIMVU’s journey to becoming a Large Company

Brett G. Durrett (@bdurrett)

VP, Engineering & Operations

IMVU, Inc.

Lean Startup Meetup, San Francisco, July 21, 2010

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WTF?

Hey Brett… don’t Large Companies suck?

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I heard this talk…

From Steve Blank’s “Why Accountants Don’t Run Startups” presentation, used with permission.

Scalable

Startup

Large

CompanyTransition

- Business Model found

- Product/Market fit

- Repeatable sales model

- Managers hired

- Cash-flow breakeven

- Profitable

- Rapid scale

- New Senior Mgmt

~ 150 people

Startups Don’t Last Forever

You fail if you remain a startup!From Steve Blank’s “Why Accountants Don’t Run Startups” presentation, used with permission.

Scalable

Startup

Large

CompanyTransition




- Managers hired


- Profitable

- Rapid scale

- New Senior Mgmt

~ 150 people



Scalable

Startup

Large

CompanyTransition




- Managers hired


- Profitable

- Rapid scale

- New Senior Mgmt

~ 150 people



Large

Company

FTW!

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The Large Company is the result of a

successful Scalable Startup

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If you can survive the transition

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If you can survive the transition

(which has pitfalls)

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Not Really Startup Metrics

• ~100 full-time employees

– Technical staff ~50 people

• > $40 million run-rate

• > 10 million monthly unique visitors

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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

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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

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Hey – We’re a Scalable Startup!

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07

IMVU Revenue by Quarter (in millions)

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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

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Not So Much

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07


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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

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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

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Again, Not So Much

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08


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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

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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

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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!

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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

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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

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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

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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

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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

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How Do You Know?

“We are hiring smart people that can’t make

changes to our code”

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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

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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

CD: Expect Some Hurdles

• Production outages

• New overhead

– Tests

– Build systems


• Frustration


(but well worth it)

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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

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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

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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!

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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!

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How’s the Transition Going?

$0

$1

$2

$3

$4

$5

$6

$7

$8

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


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Thank You

Brett G. Durrett

Twitter: @bdurrett

[email protected]

and… many thanks to Steve Blank for use of his slides

mailto:[email protected]

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Oh Yeah…

Interested in getting more experience?

We’re hiring!

http://www.imvu.com/jobs/

Technology

Lean Startup Pitfalls Uncovered