Case Study: How Slack Grew Out of a Failed Video Game
Slack, one of the best-known workplace chat tools, began as a side project inside a struggling video game company. When the game failed, the team noticed that the internal tool they had built for themselves was more valuable than the product they were selling. Here is how that pivot happened and what it teaches any small business.
Key takeaways
- Stewart Butterfield's company Tiny Speck built an online game called Glitch, which launched in 2011 and shut down in 2012.
- The team's internal chat system became Slack, which launched publicly in 2014.
- Salesforce announced in 2020 that it had agreed to acquire Slack for about $27.7 billion.
- The lesson: the tools and processes you build to solve your own problems may be worth more than your current product.
Most successful products are not the founder's first idea. Slack is one of the most famous examples. Its founders did not set out to reinvent workplace communication. They set out to build a game, failed and then paid attention to what was working. The story offers useful lessons for small business owners about pivots, internal tools, timing and knowing when to stop.
This case study relies on widely reported facts about the company's history. Where details come from interviews or company accounts, they are described as such. The worked examples for small businesses at the end are hypothetical.
Background: Tiny Speck and the game Glitch
Stewart Butterfield was already known in technology circles before Slack. He co-founded Flickr, the photo-sharing site, which grew out of an earlier online game project and was acquired by Yahoo in 2005. That earlier experience matters: it was not the first time a game project of his had produced something more successful than the game itself.
After leaving Yahoo, Butterfield co-founded a new company, Tiny Speck, to build an ambitious, whimsical browser-based multiplayer game called Glitch. The game launched in 2011. It had a devoted community and won praise for its art and creativity, but it did not attract enough players to sustain the business. In late 2012, the company announced that Glitch would shut down, and it closed that December.
What they did: the pivot to Slack
The tool hidden inside the company
While building Glitch, the Tiny Speck team worked across locations and relied heavily on a chat system to coordinate. Over time, they extended it with features that made their work easier: searchable history, channels organized by topic, file sharing and integrations with other tools. It was built for their own needs, not for sale.
When Glitch was closing, the team recognized that this internal tool solved a problem that many companies shared: email was a poor fit for fast, ongoing team conversations, and existing chat products had not captured the market. Instead of shutting down entirely, Tiny Speck kept a small team and turned the internal tool into a product.
Testing with real teams
Slack was released as a preview in 2013, with the team reportedly persuading friends at other companies to try it and give feedback. That early testing helped shape the product before the public launch in 2014. The name was later described as a backronym for "Searchable Log of All Conversation and Knowledge," which reflected the product's focus on search and history.
Tiny Speck itself was renamed Slack Technologies. The company's early messaging focused less on features and more on the outcome customers wanted: less email, less confusion and teams that worked together more easily.
Common mistake
Treating a failed product as a total loss. When a project fails, the knowledge, relationships, code, processes and tools it produced often still have value. Before closing anything down, list what you built along the way and ask whether any part of it solves a problem for other people.
Results: from side project to acquisition
Slack grew quickly after its launch. Much of the growth came from teams adopting it on their own and inviting colleagues, rather than from top-down company purchases. A free plan let teams start without a sales conversation, and paid plans unlocked more features for those who relied on it. This bottom-up approach, sometimes called product-led growth, became a model for many software companies.
The company listed its shares on the New York Stock Exchange in 2019 through a direct listing. In December 2020, Salesforce announced that it had agreed to acquire Slack in a deal valued at about $27.7 billion, and the acquisition was completed in 2021. Slack continues as part of Salesforce.
| Year | Milestone |
|---|---|
| 2005 | Flickr, co-founded by Stewart Butterfield, is acquired by Yahoo |
| 2011 | Tiny Speck launches the online game Glitch |
| 2012 | Glitch is shut down after failing to attract enough players |
| 2013 | Slack is released in preview to early teams |
| 2014 | Slack launches publicly; Tiny Speck becomes Slack Technologies |
| 2019 | Slack lists on the New York Stock Exchange |
| 2020 | Salesforce announces a deal to acquire Slack for about $27.7 billion |
| 2021 | The acquisition is completed |
Lessons for a small business
You do not need to be building a venture-backed software company to learn from Slack. The underlying lessons apply to service firms, shops and agencies.
1. Look at what you built for yourself
The most useful products often start as tools made to fix the creator's own frustrations. A spreadsheet template your bookkeeper loves, a client onboarding process that saves hours or a training guide new staff praise may solve the same problem for others. Many small businesses have turned internal tools into new revenue lines such as templates, courses, consulting packages or software.
2. Notice what customers and staff actually value
Slack's team saw that they were relying on their chat tool far more than on many features of the game. Watch for similar signals: which services clients keep asking for, which part of your offer gets the most praise, what people would miss most if you stopped. Those signals can point to your real strength.
3. Know when to stop
Glitch had loyal players and creative strengths, yet the team accepted that it was not working as a business. Ending a product you care about is painful. Setting clear success measures and review dates in advance makes the decision less emotional and more timely.
4. Test with real users before going all in
Slack's preview with outside teams let the company learn from real use before its public launch. Small businesses can do the same with a pilot offer, a waitlist, a beta version or a handful of trusted clients.
5. Use your experience as an advantage
Butterfield's team had been through a similar pivot with Flickr. Experience with failure, when you learn from it, makes the next attempt faster and smarter. Keep notes on what you learn from every project, especially the ones that do not work.
Pro tip
Once a year, run a "hidden assets" review. List the templates, checklists, tools, processes, data and relationships your business has built. For each, ask: Does anyone outside the business have the same problem? Would they pay to solve it? You may find a new product hiding in plain sight.
Hypothetical example
Imagine a small bookkeeping firm that built a detailed onboarding checklist and set of email templates to bring new clients up to speed. Other bookkeepers in an online community keep asking to see it. The owner packages the templates into a paid toolkit, tests it with 20 peers at a discount and refines it based on feedback. Within a year, the toolkit brings in steady extra income and attracts referrals for the firm's main service. Like Slack on a much smaller scale, the business turned something built for its own use into a product.
What went right
- The team recognized value in its own internal tool
- It tested with real teams before the public launch
- A free plan made adoption easy and helped it spread
- Messaging focused on outcomes, not just features
What it cost
- Years of work on a game that did not succeed
- Difficult decisions, including closing a product people loved
- Staff changes as the company refocused
- Uncertainty about whether the new product would work
How to evaluate a pivot of your own
If you are considering a change of direction, a short, structured process keeps it grounded:
- Write down the evidence. What do sales, customer feedback and usage data say about your current offer?
- List your assets. Skills, tools, processes, relationships, data and reputation you could reuse.
- Find a painful problem. Look for a problem your assets solve that people already spend time or money on.
- Test small. Offer a pilot, preview or pre-sale to a handful of real customers.
- Set decision points. Agree what results by what date would justify investing more, adjusting or stopping.
Your hidden assets review
- List every internal tool, template and process your team relies on
- Note which ones outsiders have asked about or praised
- Pick one with clear potential value to others
- Talk to five people who might use it and ask what they would pay
- Run a small paid pilot with clear success measures
- Review results and decide whether to invest, adjust or drop it
Frequently asked questions
Was Slack built specifically to be a business product?
Not originally. It started as an internal communication tool the Tiny Speck team used while building Glitch. It became a product when the company decided to turn that tool into its main business after the game shut down.
How much did Salesforce pay for Slack?
Salesforce announced in December 2020 that it had agreed to acquire Slack in a deal valued at about $27.7 billion. The deal was completed in 2021.
Is pivoting a sign of failure?
Not necessarily. Many successful companies changed direction after learning what customers really valued. The key is to pivot based on evidence rather than frustration, and to keep the skills and assets that still have value.
How can a small service business apply this lesson?
Look for internal processes, templates or expertise that clients or peers keep asking about. Packaging them as a product, course or add-on service is a low-risk way to test whether they have value beyond your business.
Related reading
The bottom line
Slack shows that a failed product does not have to mean a failed company. Tiny Speck's game did not work, but the tool its team built to work together became one of the most successful software products of its era, leading to a deal Salesforce valued at about $27.7 billion. For small businesses, the lesson is practical: pay attention to what you build for yourself, listen to what people actually value, test before you commit and be willing to let go of an idea that is not working.
