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  3.13. PayPal and Learning to Change (2 min.)

PayPal was originally founded to develop cryptography software for handheld devices. However, since there was little customer interest, they moved to enterprise applications for handhelds devices. Shortly after, they moved again to consumer applications for handhelds devices, and then again to a digital wallet application. Even after their fourth pivot (i.e., change in direction), PayPal still had no success. Eventually, the company shifted to handheld device-to-handheld device payments, which at least attracted the interest of some venture capitalists, who eventually invested $5 million in a famous event where the investor “beamed” the money from his Palm Pilot to the PayPal team’s handheld device.


Although initial adoption looked hopeful, however, eventually users for the money transfer application topped off at around 13,000 users. During this time, almost as an afterthought to support the handheld business model, the PayPal team created a website that supported email-to-email payments. Surprisingly, the website seemed to be getting a good deal of attention, and the team almost resented the constant prodding from "those eBay users" to do something more with the product. But as the users of the PayPal website passed the 1.3 million mark, the PayPal team finally realized that their real market opportunity was in email-based payments, and so they shut down the handheld device payments application.

Success often lies in the ashes of failure. PayPal “failed” at each step and adjusted until they discovered their real opportunity. Failing fast is about learning to change quickly and being dispassionate enough about the product so you can let go and move on, if necessary.