Warning Label

by Joshua Chuang

Hypothesis-driven, lean entrepreneurship can be the difference between a successful venture and a failed one. This strategy requires one to propose a hypothesis, develop a test around the hypothesis, test it, and learn from it. At its core, hypothesis-driven, entrepreneurship strives to reduce the biggest risk startups face: building a product that no one wants. A powerful tool for entrepreneurs, but potentially dangerous for those who don’t fully understand it or who overlook certain dangers.

The following serves as my warning label to the entrepreneurs out there following the lean startup methodology:

1. BEWARE of AssumptionsPeople tend to presume they understand how things work, when in fact they often don’t. For example, with Cake Financial, the founder and CEO, Steve Carpenter, assumed that the user-interface wasn’t what people cared about and focused his attention on the back-end. He also assumed that Yodlee would be a bad business partner, based on his prior experience. Both are completely valid and, seemingly, reasonable points. However, other plays (like Mint) were able to capitalize on Yodlee’s abilities to create a strong product. Don’t make assumptions/presumptions! Whenever possible, test your assumptions.

2. BEWARE of false positives and negativesConsider the following scenario. You’re friends with many people in the VC and tech industries. You make an assumption that people in this world want a product that automatically folds your laundry (I hate folding clothes, one of you should really make this product). Your friends all love it, and you’re receiving some good press from some famous blogs. All signs point towards making the product, right? WRONG! This is a false positive! While it could be true, it’s not a definitive positive (and you should never read it as one). One might begin building an expensive prototype when, in fact, there was no real demand. So what should you do? When designing your test, create a checklist of potential outcomes and their associated implications. Could I be receiving good press simply because I’m connected to the right VC firm or right advisory board? Are my friends supportive because they believe in me or because they believe in the product? Next time you hypothesis test something, make a checklist first.

3. BEWARE of the “Customer knows best” mentalityPart of the lean startup methodology requires creating minimal viable products, testing them, and improving them based on feedback. Learn as much as you can as quickly as you can. However, what happens when people start asking for numerous improvements/features? What happens when users fundamentally dislike one of your key features? I wish there were a simple rule as to when you listen to the customers and when you stick to your beliefs. Like many things in life, the answer is “it depends”.

In short, my advice is to take your “belief” and test the crap out of it. If the feedback says make changes, but you still wholeheartedly believe you’re right, then try and figure out why they’re wrong. Ask those you trust whether your reasoning makes sense. As I’ve already established, every entrepreneur likes to believe they know best. What I’m telling you is to never trust your gut alone. Prove it if you can. And if all else fails, then make a choice and pray it works out.

Good luck entrepreneurs. You’ve been warned!

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Reality Distortion Fields and Naive Entrepreneurs

by Lucas Vargas


First coined to describe Steve Jobs’ charisma and its effects on employees, the reality distortion field (RDF) term has been generalized to refer to the effect on an audience’s sense of level of difficulty. It makes the audience believe that accomplishing a mission, no matter how complicated it could be, is possible.

But then a question comes to my mind. Is it possible for an entrepreneur to apply a lean startup methodology if he creates an RDF? To answer this question, we must distinguish two types of entrepreneurs.

The first group consists of people who create the RDF but not necessarily believe that the mission can be fulfilled. They use the rhetoric and charisma to convince their interlocutors, motivate them to accept an idea, regardless of whether they believe it or not. I would classify them as smart. I believe that Steve Jobs is part of this group of people. He doesn’t really believe that all the products he develops are going to be a success. He takes advantage of his celebrity status to create a lot of publicity and influence his employees, customers, and partners by saying: “isn’t this feature cool?”, even when he doesn’t think such feature is really cool.

The second is the group of people who link the RDF to passion. They declare their belief in the success of the idea and, as a consequence of expressed sincerity, they are able to convince their interlocutors. These are naive.

The biggest difference between the smart ones and the naive ones is that the former group has the ability to push back early on, to pivot even when minimum evidence is presented to them. They are the ones able to run a lean startup properly, to use customer feedback intensively throughout the development of the product in order to reach product market-fit. It doesn’t mean that they will replace their vision with data or customer feedback. Rather, they have a structured process of using customer development and analytics to prove or refute their hypothesis.

The problem happens with the naive ones. When they create an RDF, they deeply believe that their idea is going to succeed; therefore they don’t pay attention to signals sent from the market, to what clients say. The extremely passionate naive entrepreneur believes that customers don’t know what they are looking for or there will be a different set of customers who will approve the original business idea, therefore the idea is still a success (at least in the entrepreneur’s mind). He is going to convince everybody that his idea is right. Employees will start believing that customer feedback was misinterpreted, while partners and investors will trust the entrepreneur’s vision. In this case, RDF is not compatible with the lean startup.

The challenge now is how to solve the problem of the naive entrepreneur? Their problem is that they don’t realize when their inside the distortion field. Therefore, they should create tools to prohibit them from entering that mode. In order to do so, they must have phases and solid milestones for each phase since the inception of the startup; such plan has to be approved by the team – employees and investors. Milestones have to indicate what hypotheses need to be proven according to a timeline. If hypotheses are not proven within the expected time, pivoting is necessary. This way, the entrepreneur will not be able to create a distortion field because the plan for pivoting had been designed and approved by everybody. An attempt to change the plan would create distress among the team and potentially tear the company down.

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How Do You Break Into The “Reality Distortion Field”?

by Brett Gibson

There are many things in life that can be taught, learned and practiced.  Programming can be learned, developers can be purchased, coding can be practiced. 

Repetition and practice help people become great at many things, but there are some things in life that cannot be taught.  In 1981 Burrell Smith at Apple Computers founded the term “Reality Distortion Field” to describe the charisma of Steve Jobs.  It’s evident to me that some people have it and some people don’t. 

Contagious enthusiasm, intoxicating vision, distorted reality.  Sharing your vision with someone and having them embrace your ideas and take ownership is a gift that many people strive for, but few people have.  Vision is the ability to see something in your dream-like world and know that you can build it, then inspire others to join and help you.  Steven Covey describes this power in his New York Times bestseller, “Seven Habits of Highly Effective People” as “beginning with the end in mind.”  Some authors and self-improvement experts call it “positive self-visualization.”  In the tech community, it’s called the reality distortion field.  It’s the ability to see beyond the horizon into a technology powered world that is more efficient, connected and meaningful than the present.  My modern heroes are people that have the risk-tolerance and risk-management skills to inspire the world into believing (and purchasing) their way into a new paradigm of solutions and ideas.

We are entering a world that will be driven by people that shape the reality distortion field.  I recently had lunch with Brent Grinna (HBS ’10).  Brent showed me his I-phone app to connect university alumni in cities worldwide.  His eyes lit up as he described the functionality and value of knowing there are University of Virginia grads in Brussells, Belgium (in the event I need a partner in crime on a chocolate binge in Europe!).   I intently followed Brent’s vision as we talked.   The hypothesis that drives his reality distortion is that if alumni knew they were neighbors, they would help one another and interact in new and meaningful ways.

David Vivero also has a reality distortion contagion.  David sees the world in a different way than you and I.  As the founder of RentJuice, David sees efficiency, awareness and transparency created by online platforms to connect renters with landlords and brokers.  David was so intoxicated with his idea that he taught himself how to code so that he could always inspect his team’s work and contribute to the solution.

As I embark on my start-up journey, I wrestle with reality versus distortion.  I have the passion for distortion but too often use the lens of logic and reason.  The true visionaries of our time have been women and men who see into a world that does not currently exist.  These people view information as currency and technology as the bridge.  They are shaping the world we live in, designing the products we use and improving our lives and our future daily.  I’m excited for the remainder of our semester in Tom Eisenmann’s HBS course, Leading Technology Ventures.  My horizon continues to be expanded. 

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When RDF Doesn't Allow Lean: A 1st-Hand Account

by Ashwin Limaye

I would like to question the compatibility of "reality distortion fields" (RDFs) and lean startups through my personal experience working at the Management Innovation eXchange (MIX) this summer. MIX was an ambitious idea – building an online platform to share management ideas, bring together leading CEOs, managers and thinkers and ‘reinvent management for the 21^st century’.

Prima facie, MIX had three major ingredients of a lean startup: Leverage, Iterations and Low burn. The MIX generated phenomenal leverage: the founder was a highly-regarded management thinker, the CEO held contacts within a large consulting Firm and the ‘friends and advisors’ comprised prominent CEOs and business professors. Together, they brought rich contact lists, an initial customer base and sponsors who were able to offer favorable deals such as funding for the web development team and informal partnerships with leading industry associations. The MIX was quite lean: a five person team, two of them wealthy enough to not draw salary, one an intern and all of them working out of their own home or office space donated by a generous corporate sponsor. With major costs covered, the team had enough cash in the bank to last 12 months. Most importantly, the MIX team iterated: The team started with a basic, admittedly cumbersome product launched in April 2010 and made heavy use of google-analytics, expert input and customer interviews over the next 4-6 months to refine the portal and add new features to improve the user experience.

Despite all the above, the MIX was unable to generate the kind of takeoff the team expected. User growth was slow, response rates low, referral rates even lower, and while usage was high, contribution rates were merely 3-4%.

In hindsight, I believe that living in an RDF was the fuel that drove us yet also the smoke that blinded us. Building a web portal for knowledge sharing was hardly new. To drum up the interest of investors and partners, we needed a grand vision: “Management is becoming outdated and should no longer be the exclusive of grey haired CEOs and academics … time to for new ideas to come forward … Management 2.0… ”. It kept us motivated around the basic hypothesis that managers out there have new ideas and will find value in sharing and debating them and helped us rope in some elements crucial for success – sponsors, supporters who sent out the initial invites and thinkers who provided content (blogs, videos, etc) for free.

But the target customer did not swarm to the MIX to register and contribute, despite the fact that they said they loved the idea and visited often. Blinded by our own reality, we missed out on some critical customer testing, setting extremely high standards for our customers in believing that they would take time to pen down their management experiences and idea, and that they would have the editorial competence necessary to make insightful, well-structured contributions. That they might not should have been a hypothesis but instead became a ‘customer selection criteria’. We forgot to let the customer define the product. Another assumption induced by RDF was that of virality: we thought an excited customer would get us many more, kicking in the network effect needed to ‘wikipedia’ our concept. Only a customer living in our reality would have contributed thus, and most of them did not.

I contend that for such ‘big-idea’ startups, the RDF becomes an essential component of their energy and existence and necessitates behaviors and decisions that cannot be ‘lean’. Maybe a non-lean approach –more marketing dollars and a decision to trust one’s gut and unveil the final product – is better suited and more likely to succeed. Whatever it may be, it doesn’t look lean to me.

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Reality Distortion Fields and Lean Startups: Compatible?

by Joyce Chan

Many entrepreneurs, like Steve Jobs, create a “reality distortion field” that allows them to sell their vision to potential employees, investors and partners. Is an RDF compatible with the lean startup?

Lean startups are: constantly changing products to fit the customer needs and maximizing the learning process from every marketing / product change.  The ability to create a “reality distortion field” (RDF) is an extremely powerful skill. An RDF is only compatible with a lean startup when the entrepreneur has a vision that is in touch with the customers’ needs and is willing to hold to lean startup principles. An entrepreneur with a great understanding of market demands only needs to hone his ideas in the lean start up; the business’s general concepts are already appealing to the user.  However, RDFs may be harmful to employees, investors and partners as their leader’s vision may be wrong, risking lost time, money and effort. 

RDFs are an excellent tool for the entrepreneur attempting to lead a team of people in a highly viable environment.   These leaders can emote a certain passion and charisma that energizes employees to reach goals more quickly, allowing for more iteration.  Investors see these individuals as trusted guides that walking them through the convoluted and crowded market of partially formed ideas.  To partners, these entrepreneurs have long coat tails that can be ridden to the land fame and fortune.  All players believe they, both collectively and individually, have the power to triumph through every pivot regardless of the barriers.  This overwhelming exhibition of positive thinking is effective at keeping moral high.  In the right environments, RDFs centralize the driving vision of the audience.  This unity acts as the stabilizing force in a continuously changing work place, giving people security in a potentially risky situation.

However, RDF may also inhibit creativity in a team and could lead to pivoting in the wrong direction.  The purpose of a lean start up is to create a product through a rapid trial and error process, making improvements as new insights come to the surface.  It is possible for the iterative process to move the product out of the original scope.  However, entrepreneur’s RDF could skew better judgment, potentially encouraging team members to ignore key takeaways from the past round to keep the product within the original vision.  Learning is a key component to lean startups as it prevents creators from making the same mistake twice.  If learning is imparted by a RDF, the team may just spend time spinning their wheels making little progress or progress in the wrong direction.

A RDF can be compatible with a lean startup as long as the entrepreneur holds to lean startup primary principles.  RDFs empower other to move forward with a common grand goal and inspire them to look beyond potential obstacles.  These are great qualities for any business, especially ones with tight deadlines. However, entrepreneurs must be comfortable learning from mistakes and pivoting when they receive feedback to go in a different direction. Steve Jobs is hailed as the man with the ultimate RDF and even he could not force Apple TV on to the market.  With the right vision and consideration of lean startup principles, RDFs have the potential to propel a lean startup to success.

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