Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How Slack Pivoted from Failed Game to Workplace Empire
Transcript
- Lucas: So in 2013, a tiny gaming company called Tiny Speck had exactly three months of runway left. They'd raised seventeen million dollars to build a massively multiplayer online game called Glitch, and it had bombed. The founders were sitting on a failed product, a dwindling bank account, and one thing they hadn't meant to build — an internal chat tool. Luna: And that chat tool becomes Slack. But the leap from 'we made this for ourselves' to 'we're going to bet the company on it' — that's the part I've never fully understood. Lucas: Right, and that's exactly what makes this pivot so instructional. Stewart Butterfield, the CEO, had actually been through something similar before — he co-founded Flickr, which started as a feature inside a failed online game called Game Neverending. So he had the muscle memory of 'we built the wrong thing, but we found the right thing inside it.' Luna: He'd already lived the pivot once. That's rare — most founders don't get a second chance to recognise the pattern. Lucas: Exactly. And the decision to kill Glitch wasn't easy. The team had spent four years on it. They'd built a rich, whimsical world — think Salvador Dali meets Dr. Seuss — but the player numbers never took off. At its peak, Glitch had maybe ten thousand daily active users. For a massively multiplayer game, that's a ghost town. Luna: Ten thousand sounds like a lot until you realise World of Warcraft had twelve million subscribers at the time. So the gap was enormous. Lucas: Enormous. And the cost of keeping the servers running was eating the venture capital. So Butterfield did something painful: he laid off most of the team — about forty people — and kept a core group of eight engineers and designers. Their mission wasn't 'build a product.' It was 'figure out what we have.' Luna: And what they had was this internal messaging system they'd called 'Linefeed' internally. It was basically a persistent chat room with search, file sharing, and integrations with their other tools. Lucas: Right. And here's the key insight — they didn't just like it. They found that it made them dramatically more productive. Butterfield later said that the team was about three times faster after adopting it internally. They could search conversations, they didn't lose context, and they didn't need to email each other constantly. Luna: So they had a product that solved a real problem — for themselves. But how do you validate that it solves the problem for other companies? Lucas: They did something very deliberate. They started by inviting a handful of other startups to use it for free — companies like Rdio and CoTweet. And they watched how those teams actually used it. They didn't ask them what they wanted; they observed behaviour. And they noticed something: the teams that adopted it deeply never stopped using it. The channels became the company memory. Luna: That's the classic sticky product signal — high retention without a lot of marketing push. But at that point, they hadn't even named it Slack yet, right? It was still called Linefeed. Lucas: Correct. The name 'Slack' came later — it's actually an acronym for 'Searchable Log of All Conversation and Knowledge.' Which is a bit retro-fitted, but it stuck. And when they launched the public beta in August 2013, they already had about eight thousand companies on the waitlist. That's the kind of organic demand you cannot buy. Luna: Eight thousand companies from zero advertising. That's insane. But let me ask the skeptical question: wasn't there already IRC? Or HipChat? What made Slack different? Lucas: Great question. HipChat launched in 2010, IRC had been around since the 1980s. But Slack solved two things those tools didn't. First, it made search actually usable — you could find a file or a decision from three months ago in seconds. Second, it had integrations out of the box — with GitHub, with Trello, with Dropbox. You didn't have to be a developer to set it up. And the design was just… beautiful. That mattered in a world of ugly enterprise software. Luna: So the pivot wasn't just about switching markets — it was about a fundamentally better product experience. It was consumer-grade design in a business tool. Lucas: Exactly. And the timing was perfect. In 2014, remote work was still niche, but distributed teams were growing. Slack gave those teams a virtual office — a place where conversations didn't end when you left the building. By 2015, they had five hundred thousand daily active users. By 2019, they went public at a valuation of over twenty billion dollars. Luna: And then Salesforce bought them for twenty-seven billion in 2021. Not bad for a pivot from a dead video game. Lucas: Not bad at all. And what I find so instructive about this story is that the pivot wasn't a desperate lurch. It was a deliberate process of finding what you're accidentally good at. Butterfield has said that the hardest part wasn't building Slack — it was admitting that Glitch was never going to work. Luna: The sunk cost fallacy kills so many startups. People double down on the original idea because they've already invested years and millions. But Butterfield had the clarity to say 'this is not going to get better. Let's look at what we have.' Lucas: And that's a lesson that applies way beyond startups. I think any business that's been doing something for a while develops internal tools, processes, or expertise that might be more valuable than the core product. The question is whether you have the courage to see it. Luna: It also helps when you've done it before. But I wonder — how many businesses have a potential Slack sitting in their basement and just never notice? Lucas: That's the haunting thought, isn't it? And it's why I think the glitch to slack story is so valuable — it shows that the next great product might already be inside your company, hidden in plain sight, solving a problem you didn't know you had. Luna: So if you're listening and you're running a business, maybe take a look at the weird internal tool your team built to get around a bad process. That could be your Slack. Lucas: Absolutely. And on that note — I'll say something a little meta. If these conversations have moved your work forward in some small way, here's the honest truth: a handful of listeners chip in monthly through Buy Me a Coffee dot com slash fexingo, and that's actually what funds making this many episodes. No ads, no sponsors — just listener support. Luna: Yeah, it's a small group, but it makes a huge difference. It keeps the show independent and lets us cover exactly the stories we think matter. Lucas: So if you've found value here, that's the path. And now, back to pivots — because there's one more angle I want to explore around Slack's strategy. Luna: What's that? Lucas: The network effect. Slack got more valuable as more people in an organization used it. But it also got more valuable as more organizations used it — because eventually, contractors, vendors, and partners all wanted to be on Slack too. That's a two-sided network effect that made the product incredibly hard to leave. Luna: And that's why Microsoft Teams struggled to compete at first — even though Microsoft had a huge installed base, Slack had the network already wired. Migrating a whole company off Slack is painful, so people stay. Lucas: Exactly. The switching costs are high. But Microsoft eventually caught up by bundling Teams with Office 365, which is a whole different kind of competitive pressure. And that's the next part of the story — what happens when your successful pivot attracts a giant's attention. Luna: We'll save that for another episode. But for now, I think the key takeaway from Slack's pivot is: pay attention to what your team can't stop using. Lucas: Couldn't agree more. That's the show. Thanks for listening.