Andy Deemer: [00:00:10] Hi, my name is Andy Deemer, and you are listening to the Fail Better podcast. Everyone else talks to amazing product managers and legendary startup CEOs about their hugest successes. Enh! I’d rather learn about the failures, so we can avoid making their mistakes with our products. Well this is the Fail Better Podcast, where I get those same great product leaders to open up about where they screwed up, and what they should have done instead. Today I’m talking to a great CEO. The first company he co-founded, GameSpot, is still one of the biggest and best videogame websites in the world. He ran all product for Yahoo! Emerging Markets as their Chief Product Officer for years. Now he’s the founder and CEO of the global agile training and consulting company, GoodAgile. He’s also my big brother. His name is Pete Deemer, and Pete, thank you for coming on the Fail Better Podcast.
Pete Deemer: Hey!
Andy: Tell me, in your 25 years of running tech companies, what are you most proud of?
Pete: [00:01:15] Definitely GameSpot. It was and is a great product and the fact that it’s still in existence, twenty one years after it’s founding.
Andy: [00:01:24] Yeah that is pretty remarkable. It’s funny that ZDNet acquired GameSpot, and a lot of it was shut down by their parent companies. GameSpot, meanwhile is still this huge influential brand. What was it like having a bunch of executives coming in and bossing you around?
Pete: You know they didn’t really do that. I mean, in a funny way, we took over ZDNet more than they took over GameSpot. My two co-founders and I all moved into pretty senior roles in product management at ZDNet. And over time managed a bigger and bigger chunk of their product line.
Andy: Swallowing the fish that’s trying to swallow you guys.
Andy: But that’s not what we’re here to talk about. So this Fail Better Podcast. What company are we actually here to talk about?
Pete: [00:02:12] Well, looking back – so I’ve been involved in entrepreneurial ventures for almost 25 years now, and I’ve done successful startups and unsuccessful startups. But the one that I look back on and feel like I learned from was a small company called Tekadence, and in the space of about a year managed to drive the company into the ground. So–
Andy: Before we get there, tell me the original–
Pete: or rather than say “drive it into the ground,” I think it’s probably more accurate to say I was one of the pilots when it flew into the ground.
Andy: [00:02:54] Let’s slow down a little bit. What was the pitch. What was the original company pitch.
Pete: [00:03:00] Well, so the company Tekadence was started by two co-founders. One had been founder of a company called iFilm, and the other was a technology person who had worked at Adobe and worked on After Effects.
Andy: [00:03:15] He was one of the creators of Adobe After Effects, wasn’t he?
Pete: [00:03:18] Yeah. The two of them had come together and founded Tekadence. It was a small company, still a dozen people, and the idea was it was going to be a visual tool to enable people to very rapidly develop Java Desktop Applications without writing code.
Andy: To use a buzz word of that time, like a WYSIWYG Java application?
Pete: Yeah, sort of a WYSIWYG development for Java applications. So the two founders had approached myself and my GameSpot cofounders about an angel investing in the company, and they had a great demo and told a great story, and we put in a little bit of money. I was feeling increasingly bored in the larger company environment of CNET, and starting to look around for other things to do. And Tekadence had what I thought was a really cool product and a team that was starting to kind of flail a little bit, and they needed stronger executive leadership. I decided to make the leap from CNET to become CEO and try to turn the company around, and raise a real round of funding and bring the product to market. The situation when I got there was the product development for the one-dot-oh release was in its latter stages, but the company was running very short of money. So my first job was to raise enough funding to get through the product release and then attempt to raise a larger round that would enable us to market the product aggressively and grow the company aggressively.
Andy: [00:05:01] And how did that go?
Pete: [00:05:03] Well, um, you know, it was very interesting. One of the first days I was on the job, I took the senior team for a meeting that I had set up with a senior person at a major enterprise software company in the valley. This company, I felt, was a prospective investor in Tekadence. The contact there was a friend of a friend. The senior team and I went in and sat down and gave a demo of the product, talked about the strategy, and this person we were presenting to just tore it to shit. He explained with amazing clarity and amazing brutality exactly why the product was not what the market wanted, and why as a business we were doomed to fail. It was one of the most painful single hours of my career. We walked out kind of stunned. And obviously in that situation, all of us had placed major bets on this. I mean, the two founders of the company had spent the previous two years working, you know, night and day to build this product. I had just left a pretty senior position at CNET and had invested some of my own money in this company and, you know, your first reaction in that situation is to try to discredit the critic. And so sort of on the drive back afterwards it was like, “Ah, he doesn’t know what he’s talking about. They’re threatened by what they see us building, and this is a negotiating tactic. They want us to believe that what we’re building isn’t worth anything, so they can negotiate a better deal on the investment.” And so we came up with the whole litany of reasons why this was… this guy was full of shit. In hindsight, the guy was not full of shit at all, and everything he told us was absolutely correct. Our reaction to that meeting was arguably the single biggest mistake we made during my tenure as CEO because, you know, had we taken a step back and said, “As painful as it is, this guy may very well be right. And before we do anything else we need to validate that. We need to figure out, is what he’s saying correct or not. Because if what he’s saying is correct and continuing down the path that we’re going, is absolutely the worst thing we could do.” You know at that point there was still the possibility, however remote, of a pivot. Six months later, when we released the product, there was no possibility of it. We did not have the money in the bank still to continue. So I think our reaction to that hand-grenade that was dropped in our laps was to cover our eyes and pray that he was wrong, which I think is a natural reaction but it’s also the worst possible thing we could have done at that point.
Andy: [00:08:00] But you must have shown it to other people in the industry and other potential investors. Did they have different feedback?
Pete: [00:08:07] We did, and you know, we showed it to other folks and what we got was sort of a tepid response, which we interpreted at the time as “They just don’t quite get it.” Which, I think in hindsight was actually, they were probably thinking many of the things that we have been told in that first meeting but they didn’t have the spirit, or the candor, or the cruel streak to tell us quite so bluntly. In hindsight, over, you know, many years as an angel investor, and as a senior person at Yahoo!, we would just have a constant stream of start ups coming through the door pitching Yahoo! on investments or partnerships, and so often you’re in that meeting, you see these poor startup founders pitching you their idea, and they they’ve spent maybe years working on, and they put every penny to their name into it, and it would so obviously just be such a nothing burger of a product. You’d look at it and just kind of cringe. But of course you didn’t want to be a jerk and so you’d say, “Ah, it’s an interesting thing. I don’t think it’s a good fit for us right now, but we encourage you to come back to us, you know, in six months and show us what you’ve done.” And so it was the polite kiss-off.
Andy: [00:09:27] A lot of times, from start ups that I’ve worked on, when you’re showing it to people for the first time you think, “Well, you know, there’s still some rough edges, and they’re just put off by the rough edges, but we’ll sort those out.”
Pete: [00:09:39] Yeah. That’s definitely true. And, you know, as a founder, it’s like you’ve got this vision in your head of how amazing the product is going to be. And at any given point you look at the product and it does have so many rough edges and it’s so far from that wonderful vision in your head that, when you show to somebody and they’re not instantly wowed, your thought is, kind of like, “Well, if they could only see the vision in my head, then they’d be wowed. And when we get the product to the point of the vision in my head, then they will be wowed, and the fact that they’re not wowed now, it’s not valid evidence of anything, because they’re not seeing the real thing.” And part of the problem is that, I think, in any product development, the essential characteristics of a product do actually become visible very early on. The rough edges are there, but the essential characteristics are actually visible. And if you can’t grab someone’s attention with those essential characteristics, then that’s a major, major red flag. You know one of the characteristics of great entrepreneurs and — you know, not just entrepreneurs, but great leaders at big companies, too – is their ability to not believe the lies they’re telling themselves about how everything’s going to be good and this product will be successful. It’s almost taking that paranoid opposite position of being convinced that what you’re creating has deep flaws in it, that you just can’t see, and having the courage and the discipline to figure out what those flaws are, and get them fixed. It is the biggest trap that you can fall into is as a founder.
Andy: So you guys ignored the advice and disregarded people with tepid responses and just churned forward toward the release?
Pete: [00:11:31] Yeah. Worked day and night, and were convinced that once the product was done, that it would be an instant hit. And I think… this was the other kind of classic founder mistake we made, was belief that our product is so great that viral popularity will propel it to success. And again that’s just a wonderful dream, but it’s kind of like somebody dreaming of being a movie star and saying, “Well, if I can just get on the bus to Hollywood. When I get off the bus, I will be discovered. I’ve just got to figure out a way to get to Hollywood. And then everything else will sort itself out.” You know, the reality, of course, is you step off the bus and that’s when the real hard work begins. That’s when the real struggle starts. And, of course, so we released the product and had some really cool early successes. A speaking slot at the Apple Worldwide Developers Conference (WWDC), which was very cool. I got to demo the product on stage with Steve Jobs standing off, you know, on the wings the stage.
Pete: Yeah. You know we gave a great demo, and we got a great response. People liked what they saw, but it was more like, “Huh, that’s cool, but it’s not something that I actually need, or will use.”
Andy: Who was the target market?
Pete: Well, and that’s a big part of the problem, is that we created this hypothesis that there was a large number of people out there, who wanted to build desktop applications using Java, and they didn’t have a tool, and they needed a tool to do it. There actually weren’t that many people that wanted to build desktop applications in Java. The people who did want to build desktop applications in Java were typically developers, for whom the WYSIWYG was a nice convenience. But the way Tekadence Magic worked is that basically it generated the code, but the code was not actually editable. It was essentially a black box that got output at the end of the development process. And the people who actually needed to develop Java Desktop applications, which was already a kind of vanishingly small market, those people needed the ability to get hands on with the code itself which the tool couldn’t do. And the people for whom the black box output wouldn’t have been an issue, essentially non-technical users, really didn’t have a whole lot of need to be building applications. So it was… in recounting it now, I just kind of shudder with embarrassment at how wrong we were about so many things. This is one of the rare instances where I think we got every single thing wrong. Normally you get a couple of big things wrong, and that’s what screws you. Here we got everything wrong.
Andy: Give me a solid example.
Pete: There wasn’t really a market, of any size. So that’s strike one against you. Huge strike one against you. The small market that we could serve, the product didn’t really serve them particularly well. And we bet everything on viral success. And we didn’t have a Plan B for what happens if that viral success doesn’t appear magically by itself. And, you know, those are three of a number of other terrible mistakes.
Andy: How many copies did you sell.
Pete: [00:15:07] I think like four.
Andy: These were– these were large enterprise licenses, for like $20,000 each?
Pete: Oh no, no, no. These were like four copies at like 500 bucks each.
Andy: Oh. [Awkwardly laughing.]
Pete: I know.
Andy: How did that feel, when you released it and you sold four copies?
Pete: [00:15:30] Well, you know, here’s the funny thing I’ve learned. And this actually is a really profound realization for any startup founder. Success, when you achieve it, doesn’t feel nearly as good as you thought it would. And failure, when it happens, doesn’t feel nearly as bad as you thought it would. You know, with GameSpot, it’s like we worked night and day for several years, building this product, making it successful. We got recognition, pretty quickly, and we sold the company, you know, making all of us — I mean, not rich by Silicon Valley standards — but by normal human standards, you know, we did very well. But in the final analysis, you kind of feel the same. And with Tekadence, you know, the great fear — I mean I had never experienced true failure before. You know, GameSpot had been almost an instant hit, I mean, from the first couple months after we launched the product, and then with Tekadence it was like, “Oh shit, we’re going to crash and burn here.” And I realized pretty quickly that things were not on a good trajectory. You know, but when it happened, and when you make– when you tell everybody, “Hey, we’re out of money, we’re closing the doors.” You dread that moment. But then when it comes, it’s painful, and really sad and really disappointing in the moment, but then, you know, the next day you wake up, and you say, “Okay, what am I going to do next?”
Andy: [00:17:09] I want to hear about the day that you closed it down, but what did you guys try to do before that? Was there tinkering? Were there pivots?
Pete: [00:17:19] No, I mean part of the problem is that we had raised enough money from angels, and sort of nonprofessional investors, to be able to finish the product development and release it. And our hope was that with the finished product in hand, it would start to get traction with customers, and that we could use that finished product and early traction to be able to go out and raise professional money. So when the product was released, and it just didn’t get traction, all of a sudden we had no money in the bank and no realistic chance of raising money. And there just wasn’t any room to pivot. I mean it rapidly became pretty clear that unless everybody at the company was willing to work for free, there was just no path forward. And again, had the product shown early signs of success, and had it really started to get traction, I think we could have managed to get past a period of no money in the bank, and not being able to make payroll — just because people had invested so much of their- you know, they’d put so much heart and soul into the product. I think we could have made it past it. But when it really wasn’t getting traction, I think everybody realized around about the same time, that this just wasn’t going anywhere.
Andy: [00:18:53] A lot of start ups, it seems like the team behind them really believed that there’s going to be world domination, or at least a world-changing effect of the start startup. But this one, it sounds like pretty quickly things were just on a downhill trajectory.
Pete: [00:19:11] Yeah, well, it’s– with any startup, you’re starting with a mental picture of success and because there is no actual physical reality to back that up, it’s by definition an exercise in, kind of, collective fantasy or a mass psychosis among the people involved. “Yes, we are a successful startup, even though we have nothing to show for the success, because success is coming.” And you can preserve that fantasy and that mindset, and use kind of small successes to bolster it. And so for example getting chosen to present at WWDC, that was like evidence that, “Yes, this is going somewhere.” And getting a big round of applause after we gave our demo there. It’s like, “That’s more evidence!” There is this great quote from Mike Tyson: “Everybody’s got a plan, until they get a punch in the face.” Coming to the market and getting that punch in the face, all of a sudden you realize, “Oh shit, we’ve been lying to ourselves without realizing it for all this time. What are we going to do now?” The funny thing is, with GameSpot, you know, we did basically the same thing. We had this vision, “We believe this can be successful.” We built the product, we launched it, and it was successful. And in a funny way, GameSpot as my first startup taught me all sorts of terrible lessons. If you believe in your idea, and you deliver on your vision, it will succeed. And Tekadence was almost like the anti-GameSpot, in that it showed us the reality actually that is much more common in that scenario, which is that you’re wrong. When you realize you’re wrong, unless you’re prepared for that, you’re screwed.
Andy: [00:20:56] Do you think you could have saved the company, with all that you know now? If you had just listened to that first potential investor?
Pete: [00:21:03] Ye- well, no. I don’t think we could have saved the company. I think we could have saved ourselves and our investors a lot of money and some amount of time. You know, short of taking everything that had been done, throwing most of it away, and starting over — that’s the only thing that could possibly have saved us. But in that situation, we wouldn’t have done that within Tekadence. If we had a better idea that was something completely different, we would have just done that from the get go. Yeah. No, I- you know, the basic mistake I made with Tekadence as an investor, and later as CEO, was failing to do due diligence on the idea and the strategy, and, you know, allowing hopeful optimism to trump a careful scrutiny of the reality of the situation.
Andy: [00:21:55] If you were going back in time and giving yourself a book or a tool, or a book and a tool, what would you give yourself?
Speaker2: [00:22:03] This sounds like a fairly uncreative answer, but frankly if I had read the book The Lean Startup before doing Tekadence… I think that book would have given me the strategies to recognize the reality of our situation much sooner. One of the key takeaways that I took from The Lean Startup is that every startup is a whole long list of assumptions that will make or break your company. There is a market, they have a need, and our product is going to satisfy that need, and we can make money satisfying that need. You’ve got those core assumptions that will make or break your company, and every startup founder believes that they’re going to satisfy all of those core assumptions. But the reality is, actually, chances are, that you’ve got multiple of those assumptions wrong, and until you figure out which ones you’ve got wrong, you’re on the path to failure. So you have to kind of start off assuming all of them are wrong, and then systematically validating each one, one by one, as quickly as possible and continuing to validate them as often as possible, and that’s where the whole idea of the minimum viable product comes up, is that the only real validation for any of these assumptions is going to come in the form of a real product in the hands of real customers. And so designing your company not to produce a product, but designing your company to validate these core assumptions early and often, by getting a product in the hands of customers as early, and evolving it as often in order to optimize those key assumptions. I think that’s really the key. So it’s a whole mindset shift. It’s like approaching your startup with a deep skepticism, and still having that great hope and great faith, but balancing it with a deep skepticism that we’re getting something wrong. And even if we get the other assumptions right, just getting one of these core assumptions wrong is going to doom us. So we’ve got to figure out which one do we have wrong as soon as possible, and get it right.
Andy: [00:24:11] I love his anecdotes about these insane bootstrapped MVPs, like I don’t know if you remember the Zappos founder driving over to his local shoe store to buy each pair of shoes over the counter and boxing him up and mailing them out to his customers, just to prove whether people would buy shoes online before he built the whole back end and delivery service. That was an MVP! He’s got some other great anecdotes in there.
Pete: [00:24:36] Yeah. Well, there’s a great quote, I don’t know if it’s in Lean Startup or somebody commenting about it, but it’s, “If you’re not embarrassed by your MVP, you’ve waited too long to release it.”
Andy: That’s great.
Pete: Yeah, which is so hard. As a founder, you have this vision, and you’ve talked this vision up to so many people. To employees, to investors, to your friends and family. You worry, like, “Ah, if we put something out there that looks like crap, we’re not going to be able to raise money. Or employees are going to lose hope. Yadda yadda yadda yadda.” It’s kind of like as a founder, having the courage to get an MVP out there, something that does look like crap, but is an effective vehicle for testing those key assumptions. And also having the selling ability to convince people that what you see is not what you’re eventually going to get. That this is just a test. Probably the most successful startup I’ve been involved with was a company I was a product adviser to them. It was a company called Expert City, and it was a professor out of UC Santa Barbara. He had developed this technology for a secure screen sharing. And they came up with this idea, they were going to build a market place for tech support where if you had a problem, you would log on this marketplace, and you could see tech support people who were online, and give them access to your machine, and they’d fix the problem. And it was a great concept. They launched with essentially a minimum viable product, and very quickly learned that several of their key assumptions were utterly wrong. One of the most key assumptions was that people would feel comfortable turning their machine over to a stranger over the net. They could easily have continued down the path and said, “Well, we’re going to market and message our way around this problem. We’re going to convince people it’s okay, it’s just a matter of people getting used to the idea.” But they had the courage to back up and say, “We’re headed in the wrong direction here.” They went back to the drawing board and they came back about six months later with a new product, which was GoToMyPC, which was more successful — but not even quite at the level that they had been hoping for. So they went back again, and came back with GoToMeeting, which of course has been phenomenally successful. And they were eventually bought by Citrix for $350 million, something like that. So that, I point to, as kind of the best example I’ve been involved with of an MVP that led to a major pivot, and not just one, but really essentially two pivots, and ultimately built something that was hugely influential and very successful, very popular, and made everybody a lot of money.
Andy: [00:27:21] Well, so everyone who hasn’t read The Lean Startup needs to go out there, go to failbetterpodcast.com and click the link there so I can make 10 cents from that purchase. As we’re talking about books and GameSpot, I’m suddenly reminded, when Osama bin Laden was executed or killed, what was found in his last hideout?
Pete: [00:27:46] Yeah, well, this was in the press reports, this is just insane, they were talking about items that were recovered by the SEAL team and brought back for the intelligence folks to analyze. One of them was a GameSpot strategy guide. I don’t even know what game it was for, but—
Andy: It was for Delta Force Extreme 2.
Pete: Oh my god, that’s so crazy.
Andy: How did you feel when you read about that?
Pete: Just aghast. Hahahah. The only word I could think of.
Andy: How about tool? Is a tool that you would have recommended your old self use?
Pete: [00:28:26] I would say, actually, two tools. One tool that I actually really like is – it’s a rapid prototyping tool called Balsamiq. That’s like balsamic but with a “q” at the end. It’s a really nice tool for rapidly sketching user interfaces, and you can use it to think through product flows, and build paper prototypes. It’s cool because you can sketch out UIs, but it actually draws the UIs — all of the lines are essentially in crayon — so it’s easy to see that it’s just a sketch. We’re not looking at a polished UI. But it’s great, especially for non-technical folks, to sketch things out.
Andy: Yeah, I love Balsamiq. What’s the other tool?
Pete: [00:29:15] It’s not really a tool. It’s a technique called The Pomodoro Technique. It’s a time management technique that I personally have found incredibly useful. It’s just a way of reducing task-switching, and maximizing focus.
Andy: [00:29:31] It’s basically setting a kitchen timer for half an hour and then taking a five minute break?
Pete: [00:29:37] Yeah. It’s a little a little bit more than that, but not much more than that. And then, obviously, I mean this I think probably goes without saying, but you know Agile practices like Scrum especially. You know, I can’t imagine you’d have a startup in this day and age that wasn’t using those practices either in name or just naturally following them, even if you don’t call it quote Agile. If I were to do another startup, those would all be key parts of the core practices.
Andy: [00:30:08] Who would you want to hear talk about their biggest product fail?
Pete: [00:30:16] You know, I think talking to Sean Parker would be super interesting, because here’s a guy who has a track record of amazing successes, Napster, and his involvement with Facebook, and also amazingly public disasters, like the unveiling of Airtime, four or five years ago or whatever it is now. He’s a guy who has really gone to both ends of the extreme of success and failure. I think he’d be a fascinating person to talk to
Andy: I will reach out to him. Pete, thank you so much for taking the time to talk to your brother about Tekadence Magic. As well as Gamespot and GoodAgile, which we didn’t really cover. But everyone should check out GoodAgile, and check out The Scrum Primer. The Agile Primer?
Pete: Scrum Primer.
Andy: Scrum Primer! That’s the book that everyone should read. I’ll put up a link to that at FailBetterPodcast.com.
Pete: [00:31:19] I’m not going to pay you 10 cents though.
Andy: [00:31:22] Hahaha. Ok thanks, Pete.
Pete: Actually, I will.
Andy: Thank you, Pete. And thank you, listener, for listening to the Fail Better Podcast. Again, I’m Andy Deemer and you can find the website at FailBetterPodcast.com. I’m putting up links to all the books and tools that’ll help you build better products, and with the pennies that I get in affiliate fees you can support this podcast. Now I do Twitter at Andy Deemer, I do LinkedIn at Andy Deemer, Facebook at Fail Better Podcast. Our theme music was composed by the wonderful Yuri Sazonoff. And tell your friends about this show, because you don’t want them to fail. Do you?