Learning from Failure
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Transcript of Learning from Failure
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?