TiniesPosed2-500
In 2006, we created a online marketplace for virtual goods in Second Life.

Our competitor had a daunting network effect advantage, but we had no intention of fighting over the existing market. The real market in our eyes was consumers yet to come (they never really came, but that’s a different story).

To drive traffic, we built relationships with large media companies. However, to make the virtual goods marketplace thrive, we needed great products to sell, which means we needed great content creators.

It almost came to a sudden end when one of our engineers stole from the marketplace.

Wynx Whiplash was a fabric designer IRL. She fell in love with the creative potential of Second Life like the rest of us.  And she made a very nice income in SL by creating and selling the “Tinies”. The Tinies were a new kind of insanely cute avatar (hence the picture above). One of her Tinies was an adorable sheep, which she agreed to sell on our fledgling platform.

One of our engineers wanted those sheep.

He didn’t mean any harm. Our company was called the Electric Sheep Company. He had created some NPC bots for a technical experiment, and he figured, why not make them sheep since that was the name of our company.

So he went into the database and gifted a large number of the sheep to his avatar. He did not pay for them. I don’t know exactly what was going through his mind. I don’t think he even realized that he was stealing by doing it. Maybe he rationalized it the way people did with Napster, because there was no marginal cost to duplicating the virtual good. I’m not even sure he thought about it that far. But no matter how you slice it, it was stealing. Wynx charged money for those creations.

Then he plopped those sheep down in a wide-open virtual field that Electric Sheep was about to develop for a client.

Enter Prokofy. Prokofy was a demagogue blogger. If you ever read Ender’s game, think Peter’s Demosthenes. IRL she was a writer living in New York. I had met her in person and she was smart and delightful. Online, she was a he, and a wickedly clever troll. Back then, our company was target #2 only after LindenLab itself, the maker of Second Life.

Lo and behold, while scouting out what ESC was working on, Prokofy came across this field of endless sheep. And being who he was, he immediately took a picture and publicly accused us of stealing from content creators.

Which soon got to me. My reaction was first to shrug. More Prokofy pitchforks and torches. I wasn’t concerned, because it couldn’t be true, right?

Wrong.

One of our employees had stolen from our customers.

First and foremost, it was flatly immoral. Secondly, if the other content creators thought we would do such things, they would reject our marketplace and our plans would be toast.

Utter toast.

I am pretty sure there was an avatar in Second Life named Utter Toast, but I digress.

Thus ensued one of the craziest couple hours of my life where I had to reach out to Wynx, explain what had happened, beg forgiveness (and make sure her account was credited), try to put out the fires, and work with our CEO to take action on the hapless engineer who had little comprehension of what he had done and risked.

We got a little lucky. Of all the content creators this engineer could have stolen from, he chose one of my closer friends. I had personally helped Wynx build her online business, and there was a lot of trust between us. She accepted my explanation and worked with me to defuse the situation. If it had been almost anyone else, our reputation could have been ruined.

Ruined simply by a thoughtless step taken by someone who had the power to access our systems.

Why do I tell this story 8 years later?

Uber.

Uber has been suffering a string of PR upsets because they are playing a hardball, whatever-it-takes game with competitors. And showing their true stripes in the process.

In the latest Buzzfeed story, the writer shares that the head of Uber NYC looked up a journalist’s travel information without her permission. Uber claims that this is against policy, but as my virtual worlds story illuminates, policy doesn’t mean much if you don’t have security infrastructure and processes to back it up. Violations merely take thoughtlessness. As we have learned over and over with Facebook, those violations of trust can have big implications on people’s lives.

In virtual worlds, everything you do can be tracked. Everywhere you go. Everything you own. Everything you type. Everyone you interact with. This data can be incredible for life-logging purposes, but such a panopticon existence is also a bit scary.

That same dynamic is coming to the real world, with huge implications. It’s not just our mobile phones, wearable devices, and Internet activity. Skybox (now owned by Google) is a private satellite company that peers down on the world and sells the data, and the Internet of Things is going to cause an explosion of data.

Privacy might be a thing of the past. We don’t know yet.

For me personally, I choose the tools I work with based on a guessed moral compass of a company. This always comes from the CEO. I don’t think Mark Zuckerberg or Travis Kalanick have a strong moral compass, and so I choose not to give Facebook or Uber much of my data. Rightly or wrongly, I actually think that Larry Page has a decent moral compass, so I give Google a lot of data.

Europe goes overboard on privacy and limits entrepreneurship because of it, but I also think that the USA has a lot to figure out here. Society has yet to face the implications that are coming for personal relationships, corporate behavior, and government power. It is actually interesting watching the evolution of how kids approach it, and I feel like every few years, each generation of kids is getting more sophisticated about the implications of the always-on Internet.

Privacy policies need to be simplified and made much clearer.
Consumers need to make smart choices about who they want to give data to.
The 30+ age groups have a lot to learn from kids here.
Companies, once they graduate from startup to “real company” status, need to go beyond “verbal policy” and put real security infrastructure and processes in place.
The government will always lag 20 years behind.
It is going to be really interesting, and possibly quite uncomfortable, watching society grapple with these issues over the next many years.

Fighting Our Own Biases

by Giff on November 8, 2014

In 2010, I became minorly Internet-known as an early adopter of lean startup. I blogged as I went. I made plenty of mistakes. One was not defending adequately against my own biases.

I have a soft spot for entrepreneurs of any kind. That’s one of my big honking biases. Liz Crawford and I were working on problems around product discovery. With an early MVP, we saw a ton of excitement from our alpha testers when they discovered a brand or designer they had never heard of before.

“Follow the heat!” I thought.

Since one of my passions is about supporting the entrepreneur, the notion of helping new designers find a bigger market was right up my alley.

I just needed to be careful. Entrepreneurs need to work on something they are deeply passionate about, but they also need to question their ideas with clarity.

Our first MVP was entirely manual behind the scenes, but rather than continuing to question our assumptions, we jumped to product. We recruited cool curators from around the country who loved to spot new talent. We built a bookmarklet to automate how curators submitted their finds and get it into our discovery database. We built Pandora-like smarts into the engine so that we could personalize items based on people’s favorite curators and likes/dislikes.

We worried about how big the indie market might be, but we didn’t try to test this. We also worried about the conversion rates to purchase with indie products, but decided to put aside business model testing and go for user growth because we thought that would attract investors more. Honestly, I think the increasing pressure to raise money made me make some worse decisions.

Even though we had high engagement and month-on-month doubling, raising money was not in our cards. There was a mix of reasons why, but while we saw decent growth, it was not as explosive as it needed to be. And when Liz and I started consulting for Birchbox, we saw the difference between their explosive growth and our pretty good growth.

In retrospect, I know that we jumped to “product” and “grow it” mode too soon. My bias towards this idea allowed me to conflate customer excitement into a stronger signal than it actually was.

When I talk about customer development and “Talking to Humans,” I often get asked how we can control our biases.

During qualitative research, even if you keep the customer from speculating about a hypothetical future, our brains are wired to jump to conclusions that match what we hope is true.

Some people try to solve this idea by explicitly trying to kill their ideas. If an idea is truly a “weed” (as Fred Wilson calls unkillable ideas), then it will refuse to die.

But that’s hard to do. Entrepreneur passion and a dose of irrational determination to do something completely new is a necessary ingredient.

It just needs to be controlled.

The other approach is the test ideas with multiple vectors into the problem.

You can’t just do qualitative interviews.
You can’t just do a landing page test.
You can’t just do a manual concierge.
You can’t just do an MVP.

You need to do multiple experiments. Some should be qualitative. Some should be behavioral. By checking and cross-checking, you will get closer to the truth.

The advanced version is to examine each test for possible biases, and design the next test to fight against that bias.

This all sounds highly unromatic, but I’m long past the romantic mythology of startups. However, I’m not done with passion and obsession, and I will probably never stop being an entrepreneur no matter how old I get. But it’s a hard game, and you need to steel your mind to be just as hard.

The Post-Lean Era

by Giff on October 28, 2014

Stuart Eccles, CTO of Made By Many and early adopter of lean startup, half-seriously announced the other night after a few beers that we were entering the post-Lean-Startup era.

At first I thought he was referring to something we’ve discussed many times: the pendulum has swung a little too far towards lean testing and could use more respect for vision and intuition.

But Stuart was asking a different question: what is the next thing that moves the needle?

When we all added lean startup / customer development to our repetoires, it was a big leap forward. It had a meaningful impact on product success rates and wasted effort. To some of us, it now feels like table stakes. Those of us in the business of creating ambitious new products are hungry for the thing to build on top and take us even further.

My question, which I suspect might be along the same lines of what Stuart is thinking, is this: “where does great vision come from?”

In Eric Schmidt’s recent presentation “How Google Works”, there is a sentence on how to create a strategic foundation: “create superior products based on unique technical insights”.

I actually disagree with this as too limited.

I think opportunity emerges from change — changes in technology, markets, and/or customer behavior. Change starts with technology breakthroughs, but also comes from the consequences of those break throughs. For example, many of the Internet startup successes from the last 5 years are business model or service/experience innovations, rather than technology innovations. But they were made possible by technical breakthroughs.

Startups often get created because a founder has a personal pain point to solve, and is willing to “question received ideas and rethink business from scratch” (Peter Thiel). In other words, they don’t know what is impossible.

The phrase “timing is everything in startups” is really about whether changes have occurred that allow the impossible to become possible.

The trick is that you can’t wait to know that the impossible is now possible, because others will fill the void before you get there. That’s capitalism at work. So you need to leap before things are a sure bet. Lean startup then comes into play to help you steer and minimize waste.

Bigger companies need to institutionalize this opportunity finding. They can’t wait for personal pain points. But observing or predicting change is not enough, otherwise we would see more innovation and less buzz coming from the cool hunters.

My belief is that effective opportunity finding comes at an intersection point of several capabilities and mentalities: business strategy, design thinking, understanding/generation of scientific/engineering breakthroughs, and a scrappy “hack the impossible” makers attitude.

Lean Startup has helped cross-functional teams figure out how to attack ideas. I think a next breakthrough comes from how we find ideas. And in lean startup fashion, we at Neo are trying to combine vision and experiments to see if we can solve for it.

p.s. related to all this is how you operationalize working through your ideas

Enterprise Innovation – A Proposed Structure for a New Business Studio

October 15, 2014

These are raw notes for an opinion piece on how to structure an “innovation” group. Comments very welcome. You’re a senior executive. You know “software is eating the world” and you have to embrace technology and disruption more aggressively. How do you approach it? If you are gunning for sustaining innovation (i.e. optimizations and extensions […]

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Innovation: to sandbox or not to sandbox?

October 3, 2014

Adrian Howard has a great talk on enterprise innovation up from the last Lean UX conference. In it, he is very down on sandboxed innovation groups. I actually both agree and disagree with him. I think sustaining innovation must be done within existing operational groups, and agree with many of the things Adrian recommends: training […]

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Predicting Failure from Failure?

September 18, 2014

Shane Snow’s new book Smartcuts is is a master class in weaving anecdotes together to make a point in an interesting way. He’ll take A, add B, weave in C, to get you to D. I’ll write more on the highly enjoyable book later, but the tricky part is if one component in the mental […]

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Announcing Talking to Humans (new book!)

September 16, 2014

At the beginning of the year, Frank Rimalovski, who runs New York University’s Entrepreneurial Institute, came to me with a challenge.  While they used my old blog posts on customer development tips and anti-patterns, and they had some videos from Steve Blank’s Lean Launchpad program, but students were still struggling with how to test their […]

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Favorite quotes from Creativity Inc.

September 5, 2014

I’ve been obsessed with Pixar for a while, and I’ve never marked up a business book like my reading of Ed Catmull’s book Creativity Inc. I looked on the Kindle website today and realized that I marked 63 passages in the book last May. I had previously posted favorite quotes from Pixar alumni. Here are […]

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Startup Marketing Is Dead. Long Live Startup Marketing

August 26, 2014

Marketing has become a dirty word in some startup circles, with the name of the day now being “growth hacking.” And frustrations over traditional marketing’s failures to adapt to a new hyper-connected, hyper-communicative world are valid. But demand generation is as important as ever. Stewart Butterfield, the co-founder of Flickr and founder of Slack, understands […]

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How Not to Design a Mobile App

August 18, 2014

Noah Lichtenstein of Cowboy Ventures recently posted an article to TechCrunch, “What Studying Students Teaches Us About Great Apps“. In their survey of 1,000 high school and college students, they asked about existing mobile usage, and then they asked the question, “if you had a magic wand to create an app that you would use […]

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