But large inventories are expensive because they have to be transported, stored, and tracked. - Eric Ries

I consoled myself that if we hadn’t built this first product — mistakes and all — we never would have learned these important insights about customers. We never would have learned that our strategy was flawed. There is truth in this excuse: what we learned during those critical early months set IMVU on a path that would lead to our eventual breakout success. For a time, this “learning” consolation made me feel better, but my relief was short-lived. Here’s the question that bothered me most of all: if the goal of those months was to learn these important insights about customers, why did it take so long? How much of our effort contributed to the essential lessons we needed to learn? Could we have learned those lessons earlier if I hadn’t been so focused on making the product “better” by adding features and fixing bugs?

This is an old direct marketing technique in which customers are given the opportunity to preorder a product that has not yet been built. A smoke test measures only one thing: whether customers are interested in trying a product. By itself, this is insufficient to validate an entire growth model. Nonetheless, it can be very useful to get feedback on this assumption before committing more money and other resources to the product.

I call this building an adaptive organization, one that automatically adjusts its process and performance to current conditions.