1: The technology team at IMVU agreed to a hard deadline: Six months—180 days—to launch the startup’s product and attract its first paying customers.
“It was a grueling schedule, but we were determined to launch on time,” writes Eric Ries in his book The Lean Startup. As the company’s Chief Technology Officer, he was responsible for meeting the deadline and delivering the app, which would allow users to create avatars for Instant Messaging.
The resulting product was large and complex. Corners would need to be cut. “We spent endless hours arguing about which bugs to fix and which we could live with, which features to cut and which to try to cram in,” he writes.
As launch day got closer, the team’s fears escalated. They envisioned critical newspaper headlines: “Inept Entrepreneurs Build Dreadful Product.”
“Teeth clenched,” six months after starting, “we released our product to the public.”
Crickets. Nothing. “It turned out that our fears were unfounded, because nobody even tried our product,” Eric notes. “After all the hours we had spent arguing about which features to include and which bugs to fix, our value proposition was so far off that customers weren’t getting far enough into the experience to find out how bad our design choices were.”
Customers wouldn’t even download the product.
Eric and his team had spent six months writing code for features customers did not want. Thousands of lines of code would need to be thrown out. Months of work for nothing.
He was depressed. “As the head of product development, I thought my job was to ensure the timely delivery of high-quality products and features. But if many of those features were a waste of time, what should I be doing instead?”
2: At that time, Eric was reading about the lean manufacturing revolution. The first question any lean manufacturing expert is trained to ask is: Which of our efforts are value-creating and which are wasteful?
“Learning to see waste and then systematically eliminate it has allowed lean companies such as Toyota to dominate entire industries,” Eric notes.
So, Eric began applying the lean manufacturing concepts around waste and value towards launching a business. Starting with all the internal debates about prioritizing features customers would never discover. “If we had shipped sooner, we could have avoided that waste,” Eric writes.
“Also, consider all the waste caused by our incorrect strategic assumptions,” he notes. “I had built interoperability for more than a dozen different IM clients and networks. Was this really necessary to test our assumptions? Could we have gotten the same feedback from our customers with half as many networks? With only three? With only one?”
What if they hadn’t supported any networks at all?
“Is it possible that we could have discovered how flawed our assumptions were without building anything?” Eric asks. “What if we simply had offered customers the opportunity to download the product from us solely on the basis of its proposed features before building anything?”
Eric realized that startups needed a new definition of value.
“Anybody who fails in a startup can claim that he or she has learned a lot from the experience, writes Eric. “They can tell a compelling story.”
But entertaining stories aren’t enough. “Learning is the essential unit of progress for startups,” he argues.
But generalized “learning” won’t do. The key, Eric believes, is “Validated Learning” because it is backed up by empirical data collected from real customers.
Validated Learning is the “right” way to think about productivity in a startup: “Not in terms of how much stuff we are building but in terms of how much validated learning we’re getting for our efforts.”
3: After their initial failures, Eric and his technology team built new versions of the product which generated superior results with actual customers.
“The next few months are where the true story of IMVU begins, not with our brilliant assumptions and strategies and whiteboard gamesmanship but with the hard work of discovering what customers really wanted and adjusting our product and strategy to meet those desires,” he writes.
In one early experiment, the team changed the entire website, home page, and product registration flow to replace “avatar chat” with “3D instant messaging.”
They ran an A-B test where customers were split automatically between these two versions of the site. “Not only were the people in the experimental group more likely to sign up for the product, they were more likely to become long-term paying customers.”
Failed experiments are validated learning, too. “We went so far as to pay customer service agents to act as virtual tour guides for new customers.”
The result? “Unfortunately, customers who got that VIP treatment were no more likely to become active or paying customers,” notes Eric.
“Our product development efforts became magically more productive—not because we were working harder but because we were working smarter, aligned with our customers’ real needs,” he writes.
“Positive changes in metrics became the quantitative validation that our learning was real. This was critically important because we could show our stakeholders—employees, investors, and ourselves—that we were making genuine progress, not deluding ourselves.”
Almost twenty years later, IMVU has continued to be an unqualified success. Millions of users have turned the site into the world’s largest avatar-based social network and a top-five-grossing app in the Apple App Store.
Reflection: How can I apply Eric’s “Validated Learning” concept in my work?
Action: Discuss with a colleague. Take action.