High-Impact Entrepreneurship

Josh Silverman (former CEO of Skype and Evite) offers advice to entrepreneurs (interviewed by Om Malik) [Video, Transcript]

Endeavor is pleased to make public the following transcript and video from a presentation at the 2011 Endeavor Entrepreneur Summit in San Francisco. The event, which assembled over 450 entrepreneurs and global business leaders, featured dozens of entrepreneurship-related presentations by top CEOs and industry experts.

Bios:
Josh Silverman is a leading entrepreneurship executive; the former CEO of Skype and Shopping.com; and the co-founder and former CEO of Evite.

Om Malik is the founder of the blog GigaOm; an Award-winning journalist; and Author of Broadbandits: Inside the $750 Billion Telecom Heist.

Full Transcript

Om: Everybody knows you as the guy who ran Skype for a long time. You fixed Skype, and you did a lot of things there. What were you doing before that? Where did you come from suddenly?

Josh: I actually started my career working for a senator because I thought the best place to change the world was in politics. So I worked for Bill Bradley for a few years in Washington and then decided that I thought the private sector and particularly entrepreneurship is actually a much better place to change the world. So I ended up at a public company for a little while to learn how to run something, and then founded a company which became Evite. I built Evite for a while and ended up selling that to Barry Diller. We founded it right in the middle of the internet boom and sold it after the crash. And then I went to eBay, and joined eBay with the idea that they could send me anywhere in the world that they wanted to. I wanted China; they picked Amsterdam. Not quite what I thought, but ended up finding an opportunity for them in classifieds, getting eBay into the classifieds business. I built their online classifieds business in Europe for several years. I came back to the United States to run a company called Shopping.com and then got the opportunity — the privilege — to go run Skype in early 2008.

Om: You had a pretty varied life, different jobs. How do you go from being an entrepreneur to working for a big company? How does that work out?

Josh: It’s a different skill set. But, you know I had the great good fortune at eBay to be the guy who ran things that were very independent stand-alone businesses, that weren’t part of the machine. And that made life much more manageable for me. The one thing that I think entrepreneurship builds that’s incredibly useful to bring with you into a big company is the sense of ownership. I think wherever you are thinking like an owner and acting like an owner all the time, actually causes you to build better businesses, and deliver better results, and be more courageous. So hopefully that helped me a bit at eBay.

Om: So if I’m a founder or an entrepreneur and if somebody wants to buy my company, should that be a driving reason for me? Like if I’m going to sell my company to a big company, should I put really high up in the priority list that there will be an independent division where I will get to run things?

Josh: Gosh, hopefully you will all be facing these questions. You have built these very valuable businesses and have the good fortune to decide whether to sell or not. It’s been my experience that companies that are left to run as stand-alone business units get to carry on their mission and carry on the brand, much more successfully than companies that are really folded in and integrated. So I’m really thrilled that Skype is going to be a separate division of Microsoft reporting direct to Steve Ballmer. That gives me some confidence. But then again every entrepreneur has to weigh how much am I getting paid, what do I want out of life, what does my wife or husband want from me? There’s times when it builds a lot of value to have the company more deeply integrated.

Om: Let’s take a step back to your first venture at Evite. If I remember correctly, it was born during the height of the last “internet boom.” But then things didn’t turn out as planned and the company went through a down phase. How did you as a founder, as an entrepreneur, handle the ups and the downs of the business at that time?

Josh: The biggest difference between working for someone else and being an entrepreneur, was how high the highs were and how low the lows were. That was incredibly, all of you know, different. I had the good fortune to have fantastic cofounders, who continue to be dear friends of mine to this day and for me that was a big help. The three of us could really go through it together.

I learned a tremendous amount on the downside—all the things we were doing wrong. For a company that’s been successful and—and since Evite I’ve then come in to run three other companies that someone else founded—and one of the great lessons I’ve learned and took from Evite was when everything’s going well, there’s a lot of success bias. That you’re doing well because of all the things you’re doing. And in fact in every case it’s true that you’re doing really well because of some of the things you’re doing and in spite of some of the things you’re doing. And the art is to tell the difference. And so now coming into companies and running them, having been a founder myself, I think I bring a lot of empathy for what it takes to build a business and why you have the privilege of fixing all the challenges. Because businesses that grow really fast have a lot of operational issues. Having empathy for that is good, but also being able to really challenge a lot of sacred cows, a lot of conventional wisdom and tease out the “in spite ofs” versus the “because ofs.” I learned a lot of that at Evite. On the downside we suddenly had to cut a lot of staff, stop doing a lot of things. And it became very apparent once the market fell apart, what were the “because ofs” and what were the “in spite ofs.”

One more lesson was never waste a good crisis. There is a crisis situation, and there is a boiling frogs situation. Do people in the room know the term boiling frog? Well, just in case you don’t—and I promise I haven’t tested the theory—but I’m told that if you put a frog in water and slowly turn up the temperature, the frog never actually catches on and boils to death. A business that’s a boiling frog business is actually a really difficult situation to be in, because getting the will for drastic change is really tough. And we’ve all seen plenty of boiling frog business out there. I’d argue that eBay was one for quite some time. And actually a crisis situation where you can see that you’re hitting a wall at 100 miles an hour is very liberating because you suddenly have the opportunity to throw everything out the window and try something radically different. So when the internet boom burst, we suddenly were in a crisis situation, I laid off 60% of my staff, we dramatically focused the business on doing just a few things and we actually got to break even in a very short amount of time, and learned a tremendous amount in the process.

Om: So why do we tend to make the right decisions in a crisis, and not during the good times? What is it, that as founders and entrepreneurs, we should be avoiding in order to not make the mistakes of living the good life too much?

Josh: It’s super-focusing, right? What do I need to survive? What do I need to build value for my customers in the next six months? And so we all talk about focus. I’m sure all of you as entrepreneurs talk about focus. What I talk with my team about is the vital few and the worthless many. So, the worthless many are the 100 things you could do and all of the worthless many are things that make sense, that are really valuable, that you’d be proud to get up in front of your board of directors or investors and talk about and explain why you’re doing them. If it’s a dumb thing to do, it easy and you’re not going to do it, let’s cancel those. There’s a hundred things you could do that are all valuable and those are the worthless many. The vital few are the five that you’re actually going to do, that deliver the most value, and the courage is to say no to the other 95 that are all good ideas. In a crisis situation it’s really easy because you’re looking at your bank balance, or whatever the crisis is. You really have a lot more courage then, to say no to all of the worthless many.

Om: What was your single biggest takeaway, from Evite, the boom to bust? You mentioned never waste a crisis, be super focused, but what is one takeaway all of us can learn from your experience?

Josh: Well, there’s several along the way, but if we’re talking about particularly the boom to bust, the biggest mistake I made was selling the business. We sold too early. We sold during the bust, and in reflection I had never lost faith in the business. I always believed that Evite delivered a valuable service to people, had a great brand, and had a business model and a revenue model that was going to make it a sustainable, profitable business. As a young entrepreneur, when the world fell apart for us, I looked around and all of my comparable companies traded at a discount to cash. Meaning that if they had 20 million dollars in the bank, they had a 15 million dollar market capitalization. Investors just wanted their money back. And it felt to me, I was 29 or 30 at the time, like the world had come to an end and the best thing I could do, the most honorable thing I could do for my investors was to give them their money back. And so we spun up an auction, and we sold the company and in hindsight, you know we had a business that was continuing to grow, that was doing fine, and I really still believed in the vision. And the business continued to do fine. Had we waited another three or four years, it would have been worth eight times as much, ten times as much as we sold it for. Never would have been a billion dollar company, but it’s a good solid, profitable, small publishing company. And so that perseverance and particularly the ability to see that cycles come and cycles go, and to be really contrarian and look inside in your heart instead of looking too much at your environment. That was a big takeaway for me.

Om: So after you were a founder, you became a CEO of a unit, and then later CEO of a stand-alone operation. What is the key difference between being a founder and a CEO?

Josh: There’s a lot of special privileges that come with being a founder. The courage and ability to take very difficult stances. You really have that as a founder. You’re usually the largest shareholder in the company and boards are loathe to fire founders, should be loathe to fire founders, because you simply can’t go out in the market and hire another one. It’s also been my experience that there’s a certain insight that you get from being a founder about what your customers really want. I noticed in Evite that for myself and the other founders, you could ask the three of us a hundred questions, put us in separate rooms and we’d have the same answer 95% of the time. And I think it’s because in the earliest days, we were watching every single customer interaction with our product. And learned so much from that really one-on-one customer interaction. By the time I came to Skype, we had 50 million customers, I’m obviously not doing that. It’s become a large and diffuse business. And there’s something about the soul of the business that comes from being there when there’s three employees and you’re talking to every customer one-to-one that’s just hard to replicate.

The CEO is an employee. They’re an employee. Board hires CEO, board can fire CEO. And as much as you want to be courageous, it’s the very rare CEO that can have the same courage, that certainly that has the same leverage, as the founder does. The advantage that the CEO has is the outside perspective, the ability to really challenge a lot of sacred cows and challenge convention and hopefully separate the “because ofs” from the “in spite ofs.”

Om: So if you’re a founder, how do you become a good CEO?

Josh: Great question. For me it was really valuable that I had worked in a few really good companies before I was a founder because you’re trying to separate, you’re trying to build a world class team. Everyone is saying “I’m hiring the best people in the world.” Many of the entrepreneurs I meet tell me that they have the best CFO in the world. I’ve had founders look me in the eye and say “I have the world’s best CFO.” But they’re 24, they’ve never worked at anywhere else, and they’ve never met another CFO. So of course they have the best CFO they’ve ever met, the best VP of Engineering they’ve ever met. The opportunity to surround yourself with greatness and know what the bar should look like so you can hold your team accountable to truly be the best, the easiest way to do that is to have worked in some places with really, really great leaders that you can benchmark and role model for yourself. There are ways to do that if you’ve been fortunate enough to be really successful without having done that or you just don’t have the chemistry to work in a big company, which I totally respect, what I’ve seen people do really well is reach out to industry leaders and get good mentorship. If you look at Mark Zuckerberg, for example, he spends a lot of time with some awfully accomplished people and has gotten a lot of feedback about what world class should look like on his team.

Om: So, if you were to give advice to people in this room, who are younger entrepreneurs who are transitioning to building bigger businesses… You know 50, 100, 200 people. What are the things they should be keeping in mind as they grow their businesses? Like what were the lessons you learned. You know Skype had 50 million customers, now it’s like 590 or 600 million. So let’s not kid ourselves, there was a huge growth that happened when you took over and where it is today. During that time, what were the key lessons you learned when you found a company which was still in the hyper growth stage?

Josh: Beware the tyranny of choice, I would say is one of the first. The tyranny of choice is getting back to the worthless many. And a real conviction around the very few things that matter is super important. Really surrounding yourself with the best in your team and holding them accountable. Building a system that allows for accountability in an organization. This is the biggest place—after founding Evite I’ve now come in and run three other companies that had very successful first acts—and I think the thing I’ve seen people go wrong the most in is as you’re scaling the company, allowing way too much matrix. Way too much, if it’s a software company, the way the software is built the way the organization is designed, so that it’s really hard to hold any individual accountable. If most of the things that need to get done in the company require two or three or four people on the executive level to work together to accomplish it, that’s just not world-class. And if you think about what are the three or four things that have to be done super, super well, build a system from the top down that allows you to have one person whose butt is on the line to be held accountable for that. I think that’s probably the most important thing for scaling a company really well.

Om: One of the challenges I have seen writing about startups is the founders not being able to scale with the company. You have this idea and there is purity of your vision and the company grows to be something bigger and you suddenly realize that there are market forces at work, there are data driven MBAs who are going to show up, because that’s how businesses get scaled. How do you reconcile as a founder with something like that?

Josh: Hopefully before you’ve founded your business or early in your career you’ve discovered the few areas where you truly have a spike. And what I’ve seen is that there isn’t a pattern. Right now it’s very in vogue that the CEO be a technologist who is great at product. I do think product is an awfully good spike if you’ve got to have one, but you see plenty of examples of great leaders who are not necessarily product people or engineers, but I think in every case they know what they’re really good at and it should be something that does really matter for the business. They involve themselves really deeply in that, and they hire great people for everything else and know to hold them accountable, but to pull out. And I think that’s key. I do think for a founder, there should be a really important role in the company for setting the direction of the company, understanding what the customer wants, but it’s rare that their skill set will be rounded enough to be deeply involved in everything and many of the founders that I see and where they go wrong is they try to be too involved in too many places.

Om: We’ve talked privately a couple of times and you’ve always given good advice on how one should think about leadership, and I particularly remember one story you told me about how every action you take as a founder has a big impact on the outcome of the company. Can you share a little bit of your insight into that, and share that anecdote you did? Because that really helped me think a lot about my business and how I work with my team.

Josh: Sure. You have these seminal moments that are lessons, or I do. One of them for me is as Evite was really getting going, at some point I turned my desk from facing this way to facing that way. And my secretary came to me and said, everyone’s convinced you’re selling the company. I said, why would they think I’m selling the company? And she said, well it used to be that when they walked past your desk to the door, they could see what was on your screen. And you’ve turned your desk and now they can’t, and as a result there must be something you want to hide, and if there’s something you want to hide it’s probably that you’re selling the company.

Now the truth is, that my lead database administrator was a 52 year old Chinese man who really believed in Feng Shui and having the CEO’s back to the door, he was literally losing sleep every night. It was a very easy thing for me to fix so that this poor man could sleep better at night. But the lesson I took away from it is that when you’re the leader of an organization, people are watching every single thing you do. They’re interpreting into every body language you have, how often are you on the phone, how often are you stepping away to conference rooms? So smiling every day, carrying yourself with confidence and conviction, all these things about what people want in a leader, it’s really important, it’s part of the job, it’s actually an important part of the job.

For me, my wife has been a really essential partner. When I was at Evite, I was lucky enough to have co-founders who we could go and commiserate with each other, and when one of us was down, the rest of us would bring us up. But I don’t get the luxury to have a bad day in the office, to really feel pessimistic and down on the business. I can do that at home with my wife, but my job is to really have conviction and direction and make people feel led. There’s a wonderful book about an explorer who gets stranded in the Arctic and it’s called Endurance. I don’t know how many of you have read Endurance. It’s the best leadership book I’ve ever read; it’s amazing, if you ever get a chance. This crew is stuck in the Arctic, and this is way before cell phones. Their ship is wrecked on an iceberg in the middle of a thousand miles of iceberg and there’s no one around, and there’s essentially no chance they’re going to survive. The captain leads the crew through 19 or 20 months of this and saves every single one of them. And at every turn, he’s making decisions. And some of them are terrible decisions. And when I say terrible decisions, like the boat’s wrecked, so now you take the lifeboats out and haul them full of gear and food and go to find water that you can put the lifeboat in and try to go someplace, and you might haul that for two weeks only to find a mountain and have to go back three weeks in the other direction. And that’s painful, that’s hard. But at every turn, he made a decision. He looked at the composition of the team and how they were bonding and working together and just kept people moving forward. In tough times as a leader, that’s what you got to do.

Om: Can you share some of your tough times and some of the tough decisions you took and what we can learn from them?

Josh: Yeah, I would say when the Internet bubble burst at Evite, that was a really tough time for me. But probably what was even worse… On behalf of eBay, I’d gone off to Europe and identified classifieds as a good business, and particularly this company Marktplatz. It was kind of the Craigslist of the Netherlands. I thought it was an amazing business, and I convinced Meg Whitman, the CEO of eBay at the time to buy this company for 220 million Euros. It’s a company with ten million euros in revenue and five million Euros in profit. It was a big bet, on the bet that we could do an even better job running it than the founders, who by the way I think are fantastic. So we bought the company and about five months later, a competitor launched. So when we bought this company it became clear that the largest media company in the Netherlands missed it. And they were under enormous pressure from their shareholders. How could they have missed the online classified opportunity? So they threw absolutely everything they had into launching a competitor to us. They launched a better product than us. Their product was completely free whereas ours had some fees, and they used every asset they had. They had TV, radio, print and magazines to launch this company. And within three months of launch, it looked like they were going to be bigger than we were. So I had to go back to San Jose and tell Meg Whitman, ‘Remember that company we bought for 220 million Euros with my name on the door? It looks like we’re about to get beaten.’ And you can imagine how that went over. That was one of the worst days of my life, and particularly flying home from that meeting really felt awful.

On the plane ride home, I wrote a list of seven things we need to do to win. We need to have a better product defined as if you list it on our site it sells faster and at a higher price; we need to have better search optimization so we show up on Google better than our competitors; we need to have the perception of being bigger than they were, etc. There were seven of those. I came back and learned never to waste a good crisis. I reordered my team and said, ‘I know you all have job descriptions, and we’ve talked about career development paths; all that’s out the window. The only thing that matters now is winning. So now your job is this, your job is that, your job is that. Each of you has a clear goal I’m going to hold you accountable for. Here is the team you’ve got; come back to me in two weeks with a plan for how you’re going to win. I wasn’t sure if my whole team would quit or what they would do. They all really stood behind us as an organization and they kicked ass. Two years later, our competitor exited the business and it was really one of the proudest moments of my life was to see how the team rallied together to do that. It was really exciting.

It wouldn’t have happened had we not faced this competition and this crisis, and we ended up challenging a lot of sacred cows and doing things dramatically different than how we would have otherwise. The other lesson for me in that was how good competition is. Our customers benefited greatly because of this competition and our product got radically better and we got rid of a lot of fees and replaced them with advertising, and our business grew ten times bigger. Revenue and profits tenfold. We vanquished a competitor and did that all while lowering our fees and it worked out really well. But man, did it feel bad while it was happening.

Om: So the lesson in that is make tough choices, streamline your product, and essentially disrupt conventional thinking.

Josh: If you think of your business as always about to be disrupted, if you think to yourself, ‘If I were in crisis, how would I be acting? And is there a reason I’m not doing that now?’ Once a year I ask myself, ‘If my business were dying, what would I be doing? And should I be doing some of those things anyway?’ The other thing is again, the super clear accountability; this is absolutely the vital thing it takes to win, let’s get rid of everything else, the leader that has clear accountability and the ability to move unimpeded towards that goal.

Om: My personal take on this, as someone who’s seen a lot of startups. I think as the companies grow older, they go from one year, two years, three years, for some odd reason, the desire to fail is inversely proportional with the age of the company. A lot of the startups hit the wall mostly because they just don’t want to lose at something. They want to win at one little thing they do, but they’re not willing to win by betting really big. And I think that is a consistent problem I have seen with three to four year old companies. I think MySpace is a perfect example of a company that couldn’t get out of its own way, and even though it had that idea, it had the music, it knew that music was its future, and it just wouldn’t go there, because it wasn’t safe to do. Do you have any thoughts on that?

Josh: Well, MySpace was really unfortunate, because that was just all execution. It’s way easier to be the attacker than the incumbent. It’s great to have an evil empire to attack, especially if it’s big. If you get just five percent of their market share, you can usually build a big successful business, and having a single identified evil competitor to go after it’s easier. If you do get the kind of traction that a Skype or a MySpace or someone else gets, and the competition that displaces you looks like you, shame on you. That’s really a poor execution play. But where I think companies tend to get complacent is when they think they’ve created a market and they own it now, and the only competition they’re looking after is the competition that looks like them.

So I’ll give you an example – eBay thinking that their competition is other auction marketplaces. And there’s no other option for a marketplace that can compete with eBay, or so it felt, and so at times they stopped taking risks. MySpace and all these companies, where they really start to lose is when they stop taking risks. But if you think about the value you provide to the customer in the right way, you start thinking about competition really differently. In the case of eBay, the value it provides is putting a buyer and a seller together, it’s got nothing to do with format. It’s about putting a buyer and seller together. And suddenly Google looks like a competitor because it can put a buyer and a seller together, and Craigslist. It took a while for eBay to really realize that because again it thought about itself in terms of a feature or a tactic rather than a value product.

Om: From that perspective, let’s talk about Skype. When you took over, I think the persisting question I had for your team is when is the Skype for mobile going to come out? I hounded you and everyone else in 2007, saying when is Skype for iPhone going to come out? It was the best review I ever did and you didn’t speak anything. But at that point, there was institution of hatred towards Skype on mobile. How did you convince a very core engineering group that mobile was the way to go? Like that’s something that even as a founder or CEO you may know what the right thing is to do, and convincing the people is much harder. So how did you do that?

Josh:Yeah, well it’s hard to imagine now, but when I arrived at Skype in 2008, it was really controversial whether Skype should be on a mobile device. The idea was well, we provide communication and phones provide mobile communication, so it’s kind of duplicative, which struck me as kind of insane that they would think that. But the biggest problem was, because they weren’t sure if they wanted to do it, there was no owner for Skype on the mobile. This was the thing that shocked me, there was no Skype for mobile team. So no team felt it was necessarily within their mandate – so yeah it was something that was important for the future, but it’s not something that I need to deliver to hit my goals in the next six months. When you’re a 12-person company you don’t face this that much, but by the time you hit 200 people or more, a lot of really important decisions get made by middle management who are really focused on what their goals are. And it’s really only the CEO who has the luxury to be outside looking in. And saying where is the world going, what should the direction be, and really leaning forward and holding the business to account for the future. So the first realization I had was that none of the teams owned mobile as a really front and center thing, and so it was like priority number three, four and five on a whole bunch of people’s lists. So I created the vision that was mobile, I made the leader report to me, which was a little hard with the org chart, but I really wanted to signal to the organization how important it was, so I brought in a new leader and let him hire a new team, and pretty quickly the other parts of the engineering division started to feel some competition. “Well, I want to work on some of those products, and why do those guys get to work on the iPhone, which is now really cool.” So step one was really building an organization whose sole purpose was to go in.

Om: So how did you convince the team? Was it really just the signal that you had hired this guy and he was reporting to you and he was going to hire other people? Was that a message to the rest of the team, or did you communicate with them? Was there any explicit act on your part that made the company turn around?

Josh: One of the problems that Skype had and maybe some of your companies have this, is way too much consensus management. Too many decision had to be made by consensus and too many conversations happened outside of the room. So you’d all get together and talk about mobile and people would go off and say, ‘These guys are smoking crack, it’s never going to happen.’ So there was a lot of vetoing by fiat. The engineers would say yeah, sure and then they just wouldn’t ship it. I dealt with that by structuring important decisions and insisting on a white hat and a black hat, so for important decisions, like should we launch a mobile product, I’d assign someone to be in charge of ‘we should’ and someone to be in charge of ‘we shouldn’t’ and I’d get the major decision makers in the room and let them hash it out. As the leader, I don’t want to be in the debate, because then I’m perceived to be biased, but to hear other people have a really good hard debate about the product, about the decision, listen with as unbiased a mind as possible and then say, “I’ve heard you both. I’ve heard the team, and here’s what we’re going to do.” And on mobile as well as many other things, just driving discipline around the idea that we can disagree, but once I’ve made a decision we’re going to commit.

Om: So I see that three lessons in the story you just said. One, you gotta have people who have ownership of a certain product. Number two, every decision has to be a binary decision, the company whether it’s two people or 200 people, it has to have a binary approach to the decision, it’s either yes or no. No room for greys. And the third lesson you’re saying is let people debate amongst themselves before you pass your edict, you’re almost like a judge. Are those the three takeaways from that?

Josh: That was actually much better said than I could say it.

Om: Well I’m a blogger, my job is to compress it.

Josh: The only caveat a little bit – the binary one, I’m not actually sure. Something like the mobile decision, the company needs clear direction on it, but there’s times where you say, ‘Let’s put a toe in the water, and see if we can hit this milestone.’ If you can hit it, you get the right to go forward, if you can’t we’re going to kill it. You know who’s great at that is Mark Pincus. If they hit it, they get to go forward and if not, that game is killed and we go on to another one. I think both of those techniques can work.

I think an even better example than mobile is Skype 4.0. When I arrived at Skype, Meg Whitman had been talking about Skype 4.0 as the future of Skype. It was going to be our new platform. So my first week on the job I called the leadership of Skype 4.0 and I asked one question: What are we solving for in this product? Eight leaders and I got eight different answers, my favorite being the head of design who said “a great product.” And as I talked to the team about it they were evenly divided. Half of the team thought we’d never ship it. It was too hard, too complicated a product. The other half thought we should never ship it. It was an absolutely terrible idea that should be killed immediately.

What we did there is I gave the team a very clear mandate about what the product should be about. It should be about engagement and it should be about video. We want people to use the product for longer and we want to put video at the front and center of our experience and really differentiate our product. They had until December 31st to ship the product and I would break any process in the company to get them what they needed. They had carte blanche, anything they needed, they would get. So kind of no excuses. The last problem was is this a terrible idea? And for people who use Skype a lot, I’m sure you remember, going from 3.8 to 4.0 was a really big change in user experience. You went from this really narrow experience to a really wide experience. And a lot of people felt it was too big of a change and the customer couldn’t accept the change. And there was a big lesson I learned at eBay about that. eBay had done incremental change for years, they’d been afraid to get too far ahead of their community, so everything was just one hue different. And when you do that, it feels really good for about six to twelve months and your customers love you because nothing changes and three or four years from now, they realize they have the same product they had three years ago and someone else comes and changes their expectation such that what they thought was awesome a week ago they now think sucks.

So sometimes you have to really be willing to lean forward and get ahead of your customers and take risks when you know it’s the right thing to do, but you don’t want to be stupid about it. So we set up a way to test it and put a beta in the field for the first time where we forced a beta on one percent of our customers that they didn’t ask for. We wanted to see what they would do with the beta once they got it. Sure enough, 98 out of 100 people who got the Beta hated it for the first three days, and two weeks later loved it and didn’t know what they’d do without it. And it took us a few iterations. The first product sucked, the second product sucked less, and by the third beta, it was better than their old experience by a wide margin. So when we launched 4.0, the first few days we got a lot of negative press. We had the courage of conviction to say, ‘they’re gonna love it. You just have to give it a couple weeks.’ And that product had a really big impact if you look at the growth of Skype: 4.0 really worked and was very important to our history.

Om: For the record, I’m still using the old one. I’m that reluctant 2%. But you talk about changing people’s expectations; I’m glad you’ve lived up to my expectations. Thank you for meeting with us and sharing your knowledge.

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