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Disproved: Everything matters equally and I can just multi-task

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Usually, priorities come up in the context of time management and operational concerns. But did you know that having unclear priorities can also reduce revenue?

source: BAH, HBR

According to "Stop Chasing Too Many Priorities" by Paul Leinwand and Cesare Mainardi in the Harvard Business Review, too many operational priorities correlates with a given company's ability to outperform its peers in terms of revenue. Having too many "#1 priorities" will reduce revenue potential. It will be harder to communicate the vision to both customers and employees. Also harder to execute.

Multitasking increases cortisol, the stress hormone. For many tasks it produces an effect similar to a drop in IQ.

For example, lately, I've been focussing on writing. This is an activity that makes everything else easier for me or unnecessary. This insight comes from the book and podcast The One Thing. Mostly habits really. Habit formation is kind of a baseline for everything else to fall into place. It helps to be very deliberate about what habits you form, and to make sure that they're aligned with longer term outcomes.

I've endured phases of my life where I went pretty deep into personal development topics. Lately, I'm more interested in organizing my own work as well as that of my team. If we aren't agreed on what must be done, in order to kick start focussing time and other resources, then they likely won't get the inteded outputs. This is kind of a "captain obvious" truth. Especially when working on new products, if people don't at least have a clear goal defined, then it's easy for them to drift.

When scaling up habits to a workgroup level, though, it's worth pointing out that we're mostly trying to manage the work, not the workers:

Having the right habits means having habits like watching the baton. Making sure that, in fact, only one thing is done at a time and it's the highest priority item. That people are supported sufficiently. That everyone is clear on goals, even if the path to those goals isn't validated yet.

Multitasking works great in software, where there is no switching cost. Expecting humans to multitask.. bad idea.

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Are you overmarketing your product?

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In his confessional expose, Ramit Sethi (@ramit) publically admitted and explained why he killed a $2mln product.

It seemed to be doing well on the surface. There were hundreds of meetups around the world. People were getting value from the product.

But the product's churn hovered around 10%. Which meant that they would lose all of their customers within 10 months, if they stopped acquiring new customers.

Ramit summarizes:

Imagine your job is to fill up a large bucket with water. You spend thousands of dollars choosing a clean well, testing the water quality, and painstakingly ladling each cup of water…  only to discover you’ve got a massive hole in your bucket!

They poured another $100k into the product and tried a number of changes, ultimately the churn wouldn't budge. Because his best customers consistently outgrew the program. And their friends left. Consistently.

So even though the product was earning $2mln/year, the profit margins were thin, and most importantly, the churn was a sign that something was broken.

Pirate Metrics to the Rescue

500 Startups (@500Startups) came up with the idea of Pirate Metrics, as the key high-level numbers that are related to rapid growth:

  • Acquisition
  • Activation
  • Retention
  • Referral
  • Revenue

Startups that figure out how these numbers interact and clear all bottlenecks start experiencing explosive growth. Because most of these numbers have exponential effects, if under the right conditions. It is a really useful troubleshooting framework for businesses that want to achieve high growth.

Looking at Ramit's numbers, it seems to imply that retention was so low, that the lifetime value of a customer didn't really justify the acquisition cost. So the core tension in his case was between acquisition and retention.

Turns out overmarketing is a very common problem…

If customers don't stay with you for very long and don't refer your product, that implies your product doesn't quite work for your market. Most new ventures overspend on marketing and underspend on product validation and development. Product. Operations. Support. Full alignment across the company is critical, to get retention and referrals. It doesn't make much sense to spend a lot on marketing if you don't have retention. A product your customers care about. This is why design matters a lot.

There are examples of this in lots of different industries: mobile, SaaS, hardware, biotech, etc. The list goes on. Anecdotally, this rings true. Here's an example from mobile:

The average cost to a brand for every app install has reached $2.51 on Android and $1.78 on iOS [in 2016]. But 70% of those new users may be lost just one day after install, and retention rates drop to 4% by the third month. That high churn rate means that the cost of acquiring users that are still engaged with your app three months after install is 25 times higher than just acquiring new users.

In this case, increasing your marketing budget only gets the word out about a product that doesn't satisfy customers. Which is counterproductive.

A much better use of your budget is to double down on the product. Improve your customer and user experience. Make sure that you are helping a small pool of customers achieve their goals, before you go out and trumpet your product to the world at large. And a great product will retain happy customers who want you to produce more for them. It will also generate word of mouth, lowering your average customer acquisition costs and increasing your referral rates.

Beyond initial market tests, with landing pages for example, there comes a point where you really do need to invest your resources into your product or service. It's in your best interest.

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How to know if your company’s agile transformation is working

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Came across a wonderful article on medium.com by Jack Skeels. The starting point is Jack bemoaning that HBR is now singing the praises of Agile at Scale (re-dubbed "Agile as Anything Management Wants"). According to him, the actual results of agile are significantly below what is promised. Most companies applying agile focus on process, because that's how they think they'll get efficiency gains. But they miss key subtle points underlying the whole thing. Like moving away from digital taylorism. And towards team self-management.

Management can easily kill agile if they don't understand how it really works

Tons of insight like the following:

In fact, probably the key metric you should use to judge your Agile implementation is how differently you manage and how many fewer managers you need.

During the last couple of years, I’ve used a “Team Ratio” calculator with dozens of companies…how many managers and leads versus team members? This is an aggregate “span of control” measure that reveals how flat your organization is. If you do the calculation, a ratio of greater that 1:8 means you’re flat, and likely have a really good culture, velocity and quality.

Having a good culture, velocity, and quality…where do I sign?

Again, this post doesn't really do the original post justice. It's one I've already gone back to a few times.

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Why outcome discovery trumps product discovery

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Discovery, at the product level, makes a lot of sense. You need to figure out exactly what product needs to be built, so that you build something that will hit a sweet spot for your customer. However, what that customer cares about is NOT your product. It’s the outcome your product helps them achieve. Outcomes are clearest in a B2B context. Almost all enterprise sales are driven by 4 factors: increasing revenues, decreased cost, decreased risk, or improved customer experience. For consumers, this isn’t always clear cut. In many cases, though, there are specific objectives the customer is trying to achieve.

And yet, discovering client or stakeholder ideal outcomes is more important than discovering products. It might sound like an academic distinction that has little practical meaning. But actually shifting from products to outcomes is the most important step in moving from a “my company” focus to a “customer-centric” focus. Because a product is still something that only you and your team cares about. An outcome is the main thing your customer cares about.

The Copernican Revolution of focusing your product development around your customer

Instead, I think the core learning process my team goes through is how to achieve specific business outcomes for specific people as quickly as possible. Usually this is a case of being laser focussed on only what must be shipped first in order to achieve those outcomes.

All other ideas are added to the backlog and delayed until after the immediate next release. Any time spent analyzing them, developing them, testing them, or reporting on them delays your current release. And your highest priority outcome. Counterintuitively, this includes longer term activities like planning, estimation, or budgeting.

If you allow all of these other features to creep into your release, you are delaying the possibility of achieving your customer’s outcome. And your customer has to achieve their outcome before you can achieve yours. That is the true total cost of incrementally adding the extra features. Not just the extra product team time (regardless of how much more time it does require).

Let’s gather round the pork barrel and see who negotiates what

The fact of the matter is that it’s not worth aligning around big laundry lists of features that go into a release. Because it then becomes a case of pork barrel politics in favor of individual stakeholders in a larger company. If that is going on, the main goal or outcome of a release is already difficult to see. And everyone wants to get in their piece of pork.

When do you know you have a useful outcome?

Let’s say you have 200 possible features you can build and ship. Of that 200, you can combine them into subsets that achieve a particular benefit for one or more clients. These clients can be external or internal. So the goal of a release is to make that subset small enough to make an impact for at least one person. Possibly a few people. Or one client.

1. A Specific Person, Company, or Role in a Narrow Market Segment

You have one specific person or at least persona in mind. You can use the Hero Canvas, or not, doesn’t matter. But it’s important to frame discussions of value around people impacted.

Having a specific person in mind grounds your effort. Most of the meaning around products will be based on how they impact your customer’s lives. How it plays into the stories they already tell themselves about their struggles and efforts.

Also, by choosing a specific persona or person, you choose an angle or perspective. Similar to the Copernican revolution, you “choose your sun”. This is what gives life to your business, not the other way around.

New technologies can be applied in a number of different markets or segments. And the details will vary widely based on which segment you choose. For example, you invent a way for drones to collaborate autonomously. This invention can be used in agriculture, military, construction, oil exploration, or games. In each case, it’s the same base technology, but you will prioritize different first features for each one as you productize the technology for each application in each segment. Without targeting a specific market, all you have is a clever invention.

2. Their success metric

You have an understanding of their motivations, metrics, and how they define their own success. Again this is often clearer in a B2B context. Here’s an example of different metrics with an HR department:

focus on the right metric–one which customers actually care about

The problem [our failed startup] set out to tackle, reducing turnover and improving new hire performance, was felt acutely by our buyers (CHROs / Heads of Talent). It was NOT felt acutely by our users (recruiters). Recruiters are measured against average time-to-hire, not new hire retention or performance. We were trying to improve outcomes about which users would pay lip service, but which didn’t impact their paychecks or promotions. –Sam Stone of @ansarotech

By choosing a person or group of people, they will be measuring themselves against particular metrics, such as the average time-to-hire for recruiters. By helping that person with that metric, you improve their life. Provide value. Whether you do that with a product, service, article, app, or anything else doesn’t really matter to them. It matters a lot to you. But to you only.

3. No side effects

You aren’t causing unintended side effects that matter to that person. To counter-balance the previous point, if you significantly do improve one metric but damage something else that matters to that person, then they won’t be interested.

Like taking aspirin for a headache and getting a stomachache as a result

Let’s say your product speeds up the average time to hire for recruiters, but it requires that they work 12 hours days in order to achieve that outcome. In particular, they need to stay at work for 4 extra hours per day, to maintain the information about candidates in your SaaS app. For many recruiters, this will be an unacceptable side effect, as they will have to sacrifice family time also, in order to achieve the outcome.

4. Easy to execute or confirm

If you are at a validation stage, it should be easy to validate what the outcomes are by talking to those customers.

Make it easy, so that it’s done quickly

If you are already building product, this implies you have built your product in a way that is cheap to release. In the software case, this means you are using a lot of automated software testing. So you are sure of exactly what is in the product and what is working. And you can release as soon as all of your tests pass. Better to commit to fewer features, but only release ones that work.

If you are in a big company, it should be easy to get alignment around a particular outcome. There can be multiple conflicting agendas of the stakeholders, and it may be difficult to agree what the intended outcome is. Figuring this out takes time, but it’s still relatively the fastest path to the outcome, if you want to work sustainably.

The challenge with outcome discovery is often that the #1 or #2 are unclear. And after they become initially clear, they often change.

Case Study

Sometimes you discover a smaller, nearer term outcome that helps align everyone as an incremental step. For example, in an enterprise software case, it can be worth helping a different stakeholder in the shorter term.

Giving a salesperson something to demo, before delivering an initial release only directly to a client. The salesperson has a lower bar. She only needs to build a picture and narrative around the product. She don’t need it to be fully functional, taking care of all edge cases and side effects.

What if my releases require Herculean efforts?

Release scopes need to be as small as possible, and organized around specific outcomes which you are trying to achieve. Because this means it gets out to customers faster. And you achieve the outcomes faster.

If releases are really big, then quite possibly, that’s the most productive outcome you need to address. It makes more sense to streamline your existing processes, before it’s even worth looking at creating new products. If you don’t streamline first, you’ll create resource locks among partially finished and unreleased products all over the place.

Actual time frames will vary significantly by industry. A good general rule of thumb nowadays is a maximum of a month, for any product that doesn’t have a manufacturing component. For example, you’re unlikely to be able to build an oil tanker in a month. But you could come up with a design prototype for one in a month.

Why discovering outcomes first matters even more than discovering product

The person being helped decides whether your help was valuable. It doesn’t matter how much effort or resources or blood you lost, if it’s not relevant to your target customer. Usually, product teams don’t spend nearly enough time to getting deep enough into the customer’s world. They don’t need to at first, but at that point they are relying a lot more on luck than they care to admit. Taking beta they don’t need to. Even using the word product already pre-supposes a solution. Namely, that it’s a product. As opposed to a number of other solutions, like a service.

Key Takeaways

  • True outcome discovery and alignment is even more valuable than product discovery at an early stage.
  • Outcomes focus you on people for whom you want to create an impact, as this will ultimately drive your success.
  • A well-chosen outcome needs: a clear person affected, a metric they use to evaluate the outcome, no side effects, and easy and clear path to execution

Next Steps

Get details of my hero canvas course over here, to help you narrow your focus on the outcomes your customers and users care about.

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How to grow your new venture 10% week after week after week

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One of the really “hard things” about the startup game is getting on a growth trajectory that grows exponentially. VCs debate how fast you should be growing on a weekly basis. But one thing about growth is clear. Instead of having the occasional bump in sales or growth, high growth startups are systematic in how they pursue their results. In particular, the heavy focus in this deep dive is on channel testing.

Strategyzer’s Business Model Canvas: channel testing

The following is based on a discussion with Nemo Cerovac (@ncerovac), the cofounding team member responsible for the explosive growth of FishingBooker, a site that has been dubbed the AirBnB of fishing charters.

Nemo Cerovac

Meeting customers where they already are–at first

In our first year, we spent a lot of time on the captains’ side. Finding things that worked for us. We realized that initially we could do 10% growth weekly by sending emails to captains.

Targeting captains in the harbour

We tried to target a couple of Captains in the same Harbor, call them up, talk with them. Initially, reactions were mixed. “Why would I sign up on the platform that is getting a commission from this? Why would I register there? You didn’t exist? I don’t know who you are.”

What started happening eventually was they heard from potential customers and previous customers. We were heavily targeting consumers with ads.

Once we got one or two captains from the Harbor, and we were killing it with Google ads, they start saying, “Oh, I got like two clients from this FishingBooker this month.” Moreover, the same Captains who were skeptical initially came back. They’re like, “Hey, you know you contacted me like three, four months ago. Let’s talk again.” It was a roller coaster.

Going and meeting everyone in person helped a lot. When we went to Florida, we were going from Harbor to Harbor. Just meeting people there. Just talking with them, showing them the platform, and just meeting every notable potential user.

In the end, I think it was the user drive that got us the captains. At first, it’s also no harm. You’re showing captains the approach: “Hey, this looks professional. You don’t need to do anything. If we get you some bookings, then we earn something from it.”

Growing the user base

There were a lot of chicken and egg problems. To be honest, Vukan’s mindset helped a lot. Vukan, the CEO, was super focussed. We were really pushing hardcore. We were figuring out each channel. For users, we figured out that the best channel for consumers at the start was paid advertising: Google ads. Finding them where they are, not where you want them to be.

Basically, most people search for “fishing charters in Maldives” when they’re preparing for the trip. Or they just reserved a hotel, and now they want to plan their activities. That’s the moment of strongest intent. The easiest moment to convert.

Once we figured that out, we then just focused on adding money. To convert as many as possible. We were trying to stick to this ratio where 30% of the revenue goes to paid advertising. We were pushing hard.

The Golden Numbers

Every Monday, we would have this white board in front of us. We listed our golden numbers. Golden numbers are the metrics that are the most important for your product–to make it or break it, at that stage. [Ed note: check out this KPI checklist to choose golden metrics for your team].

In our early days, our golden numbers were:

  • number of captains that register on the platform
  • number of captains that finished their profile or uploaded at least one of their boats there
  • number of people that booked this week or this month
  • the number of bookings started but not completed

Every Monday we would look at our numbers from the previous week. We would compare them to our targets from the previous week. Our goal was 10% growth per week. Especially in the start, we had a heavy focus on testing. As fast as possible. Find what’s working, and what’s not working.

Let’s say we wanted to have 10 Captains registered that week, and we hit seven. We then discussed why this happened, and tried to analyze why. Was it something that we can influence? or something that we can’t? So, sometimes it would be like, “Oh, I was sad. I was sick. Or I wasn’t focused.”

If it was a problem in our control, and a channel was getting lower and lower results week on week for 4 weeks. We then decided we should try something else, since there was a clear pattern over time.

These numbers and discussions forced us to think about immediate results. You want to act upon things that give immediate results first. You don’t have time to think about, “Oh, what would happen if we did this or that?” Should we go do a road show? a conference or not?

A failed channel experiment

After going to conferences, we realized it’s a waste of time. For us. At that time. We didn’t get anything. If you’re building the right thing, you don’t need the conference to continue building things.

I’m still maybe a bit harsh on conferences. People who attend conferences usually want to chill in a half-work environment. Some people go to build up their ego.

This photo was taken during an education event in Brazil called Bett Educar.
Photographer: Marília Castelli | Source: Unsplash

The upside of conferences, though, is if there are potential clients or users attending. If somebody can benefit from what you’re doing is there–and it’s not just two people– then it might be worth it. Like ship captains, in our case. Or people that are interested in fishing. Then you can try to invest your time in it.

But even then, be careful. Let’s say you convert 10 Captains at a conference. That’s the same amount that we get from sending cold emails to Captains and calling them on the phone in one week. During that one week, you can sit in the office and work on this for 20% of your time. Then you are free to do other stuff with the rest of your time. During a conference, you’re running around. You are trying to meet people. And you need to prepare beforehand to know who’s attending. If you have time, you introduce yourself earlier. Basically, you need to measure and compare the benefits of using each channel.

Conferences do have a place. They help us to connect. They help us meet new and interesting people. So, I definitely recommend people attend conferences, as long as they have this perspective.

The 10x Game

Something I call the 10x game came from this idea of focusing on immediate results only. Often when you start, you start thinking about a lot of things. A lot of concerns. It’s easy to get distracted.

You even start thinking of problems that are not immediate problems. Or immediate tasks that you need to complete now. For example, you are trying to think of how to optimize the process for 1000 users, but you only have five. It’s just not the best use of your time at this moment.

Sure, you need to think about that in the future. But at the moment, park that idea. Put it aside. Because it sucks time from what matters now.

You can do it, if you focus on what must happen now

Here’s how the 10x Game works

1. Pull out a box of multicolored post its with your team

2. Calculate what order of magitude you want to start with. This sounds complicated but actually it’s really simple. Take the number of clients you currently have. And then figure out the next power of 10 from that number:

  • 10^1=10
  • 10^2=100
  • 10^3=1000
  • 10^4=10000

Let’s say you have 33 customers. Then 100 would be your next power of 10. If you have 0, just use 10 as a baseline.

3. Assuming that is your next milestone, what marketing channels do you think will help get you to that number? So if you don’t have any customers yet, how do you want to get your first 10 customers. Take your stack of post-its, choose a color and brainstorm at least 10 different ways you can reach your target customers.

4. Then, repeat for the next power of 10 using a different color, and repeat again.

5. Finally, loop back to your first set of ideas. Priortize them. You can do this using dot-voting or any other mechanism that works for you & your team.

This results in a lot of ideas, clearly prioritized in terms of what you need to do first. It give you the space to think big, but also helps you drill down into what needs to happen right now.

Same channel today, different results

When you have 10 Captains and you want to grow 10 more Captains next week, then maybe a conference is not the best way to go. Or a hundred Captains in the next two months. The conference was more useful for branding purposes. Just not relevant to the golden numbers at the time.

Now, FishingBooker goes to a lot of conferences as a brand. You want to position and build a strong brand. You want to be in people’s minds. Once you have a budget for that, it becomes an opportunity. I saw the team a couple of months ago. They were speaking at a Google conference about their experiences.

building the brand is a good use case for conferences at a later stage

FishingBooker is roughly a hundred people today. It’s still one of the top Google ads spenders in Eastern Europe.

Conferences were just one of the channels we tried. And as you can see, different channels are appropriate at different levels of a startup’s growth trajectory.

Stepping back

This is Luke again…

This same insight can be applied to pretty much any channel you might consider. Everything from cold outreach, PR stunts, or any other marketing tactic which you might dream up. The numbers give them context. They are a filter to help you focus on what matters right now.

On a small scale of the first 10 customers, it’s possible for the co-founders to do the majority of this work, possibly with some help. As the startup being growing, there will be different requirements to hit 100 customers. And 1,000. And so on.

Key Takeaways

  • Use Golden Numbers to drive team conversations about inputs, tasks, and alternatives needed to achieve results
  • Focus on factors under your control and take action on trends over time
  • Channels that might be inappropriate initially can be very appropriate later when the company is larger

If you enjoyed this post, and would like to try out the 10x Game with Luke’s help, there will be an upcoming online & free 10x Game workshop you can join. Get notified when this happens!



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