The Big Pivot of Slack (from Glitch)
If you take care of the employees, they will take care of you.
— Stewart Butterfield, CEO/Founder -Slack

Slack, the internal communications tool, recently had their IPO (initial public offering) on the NYSE.

One of the hardest things to do as a company founder is to pivot your business model. I mean it forces you to say, “The market is telling me this doesn’t work. I better pivot, or I won’t exist.” And when you do pivot, it is likely in the same industry vertical as the one you just left...i.e. You pivot from making accounting software for CPAs to check-writing software for CPAs. Rarely is it a pivot to a completely new industry or even a new product.

That’s what makes Reid Hoffman’s interview with Slack Founder and CEO Stewart Butterfield so fascinating. Stewart pivoted from a video game company to an enterprise-grade internal communications platform that has taken the business world by storm and made his investors very happy.

The GUmbo

Pivots Spring From Failure

1 - Flickr

Before Slack, Stewart was first involved in founding Flickr, then an interactive game company, with Caterina Fake. Flickr was about to fail until he came up with the general idea for what it would become, a photo sharing site, while he was purging over a toilet in a New York City hotel. He was purging because he was emotionally distraught from the news that he was going to have to give investors about shutting down Flickr.

Flickr would eventually sell to Yahoo for north of $20 million.

2 - Slack

Before Slack was a company communications tool, it was an interactive game, Stewart’s second. While that had strong daily active user adoption, referred to as DAU in the industry, less than 3% of those users were staying around longer than 5 minutes after signing-up.

For 18 months, Stewart and the team experimented with various ways to make Slack users, then called Glitch, “stick” around. Nothing worked.

They still had $5 million in the bank, but the writing was on the wall. So on a random Monday morning, he called his team and the board into his office. Over tears, he told everyone that Glitch had to be shut down.

Taking Action

I’ve been “let-go” and a part of layoffs. It sucks for everyone...I think. I’ve had one CEO cry in front of me. Not that crying is the absolute only way to illustrate emotion, but it is a potential barometer.

On the heels of a press release that Glitch was shutting down, Stewart worked with the employees to put up a website with all of their credentials. The press release referenced the website so that the employees could all get placed with new jobs immediately.

$5 Million In The Bank

Investors didn’t want their $5 million back. They wanted to know what other ideas Stewart had for possibly getting a return on their money.

They wrote down several ideas on a whiteboard and stack-ranked them. The best idea they had was to productize and market an internal communications tool that they had built to run Glitch. That tool would become Slack.

Great Leaders Tell Stories

There are so many wonderful qualities that Stewart seems to possess but of all of them this may be the most vital.

Think about it. Stewart had to tell team members, board members and ex-team members essentially, “We’re not a B2C game company anymore. We’re a B2B chat platform now.”

It’s vital because if people don’t believe in the journey, then they won’t follow you.


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Show Links

Slack IPO Financial Highlights:

You can hear the full interview from Reid Hoffman with Stewart Butterfield here: