LEARNING FROM FAILURECraig Daniel

Presentation to Lean Startup Circle Boston

September 29, 2011

Who am I?• Co-Founder & Head of Product at VisibleGains

• Worked in B2B Startups for majority of career since 1996

• A veteran in product failure

• Novice public speaker! ;-)

• Follow me:• http://twitter.com/craigdaniel• http://www.getproductsdone.com

Most of the case studies are about successes

But it’s easier to learn from the failures

We’ll focus on two common mistakes

•The Services Death Spiral

•The Rationality Trap

The “Services Death Spiral”

A customer loves your

vision

So you fill the gaps with services

But the product isn’t “ready” yet

And you make something that furthers your

vision

Case Study

An Interactive Video Platform founded in 2004

~$27 Million in funding

Competed with Brightcove, Ooyala, thePlatform

Business Model Hypothesis

Provide Interactive Video Platform and “Player

Development Kit (PDK)” to consumer agencies and big

media to make stunning video-centric portals on the web

Sell monthly access to the platform as well as “Jump

Starts” to train the customer team

Out Of Business: 2010

Cause of Death:

Services Death Spiral

permissionTV had some top tier customers like CVS, FOX, Liberty Mutual, Toyota, and Adobe. The interactive video-centric portals

were unparalleled by their competitors.

The basic problem is that we never got to a place where it was scalable

due to the Services Death Spiral.

How do you avoid the Services Death Spiral?

-or-

Split the services out to a new business entity

“The Rationality Trap”

You frantically build and

release your MVP, and it’s

going to change the world!

You received overwhelming

response that it makes so much

sense and they’d buy it

ASAPYou got “out of the building” to test your idea

Your shiny new product is a ghost

town

Why does this happen?

Humans are horrible at predicting what they’ll do in the future

Humans are irrational with their decision making

&

Case Study

A Healthcare Transaction Platform founded in late 90’s

$10’s of Millions in funding

Still in business today – servicing ~1 Million providers transacting with dozens of health plans & payers

Business Model Hypothesis

Provide add-on premium products & services to the very large provider base. Start with ePrescribing to deal with pain points around liability and office inefficiencies with

doctors writing illegible prescriptions

Charge a small monthly fee depending on transaction volume in an office.

Product shelved within 6 months

Cause of Death: The Rationality Trap

We had proven office efficiency gains, lowered liability, increased

safety, and greater patient satisfaction. It was the easiest pitch

ever.

We failed to recognize the rigidity of provider office processes as well as the resistance to adopt new tools if

the current system was working well enough.

“Don’t fix it if it ain’t broke.“ Even if it makes perfect sense.

How do you avoid the Rationality Trap?

• Use Eric Ries’ techniques around falsifiable hypotheses – Rather than validating…try invalidating your hypothesis

• Don’t sell or pitch during customer development. Listen.

• Ask for introductions to people who would “never use your product”

• Don’t assume they’ll use it. Focus your MVP on the minimum that it takes to get your customer to try the product

In closing…• Some further reading:

• 32 Startup Post Mortems: http://www.chubbybrain.com/blog/startup-failure-post-mortem/

• Services Death Spiral: http://giffconstable.com/2010/01/when-it-comes-to-startups-products-and-services-dont-mix/

• The Rationality Trap: http://www.predictablyirrational.com

• If you liked this, follow me:• http://twitter.com/craigdaniel• http://www.getproductsdone.com

• Any Questions?