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

December 25, 2019 by Luke Szyrmer Leave a Comment

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.

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.

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.

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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The Kindergarten, the Construction site, and the Assembly Line

December 18, 2019 by Leave a Comment

Last night, I went to a local meetup where we played Legos. It was an event organised by Krzysztof Niewinski. In particular, it was a simulation workshop of large scale product development using alternative organizational structures. But there were lots of colored bricks involved. And the specs were pictures of the end products that needed to be built.

Without getting into too much detail, we covered 3 alternatives with the same group of 20 something people: component teams, cross functional teams of specialists, and finally "T-shaped" interdisciplinary teams where everyone could do everything. In short, we were experimenting with output using alternative ways of working. Each round took roughly 10 minutes.

Here's what happened

In the first round, we had specialized component teams each dedicated to working with only two different lego colors, a supply team, an integration team, a quality team, and 8 different product managers who wandered from table to table. Sound familiar? Kind of like a massive construction site with lots of project managers. Or in a large company developing and installing software. Most of the building teams sat around doing very little in practice. There were lots of bottlenecks and confusion around getting supplies and exact requirements. I had a chance to engage in chitchat with my table mates. And a stressed out senior executive that walked around and yelled at anyone for not doing anything.

The second round, we continued to have individual performers who were specialists, but they worked together, which resulted in a lean assembly line. The time required to first output went down almost 50%. But there was less top down control. And more legos on the table, relative to the previous round.

And finally–the last round–everyone pitched in and contributed how they could. There were still some constraints, in that people working outside of their expertise could only use their left hand. Despite that, it only took a minute to get the first outcome, so almost 9 times faster. But there were lots of extraneous legos on the table. It was lots of fun, and it was a very tactile learning experience for everyone who pitched in. Just like kindergarten.

What does this mean

This boils down to control, profitability, and speed. This is just as true for startups as it is for large companies. Most of the conflicts among co-founding teams boil down to differences how founders value control and money, according to Harvard professor and researcher Noam Wasserman in Founders' Dilemmas. In big companies, any larger product development program will implictly or explicitly make a call on these three, based on how the work is organized. It depends on what you optimize for, as Krzysztof the facilitator pointed out.

The construction site was optimized for control, especially of costs. There were enough people to do the work, and enough legos could be procured if you were willing to wait. But the level of resource scarcity locked up the system, relatively speaking. And it took a long time to finish anything.

The assembly line required a slightly larger up front investment but the speed at which things happened increased dramatically. Even though the constraints on each individual were exactly the same. As an expert in yellow and green bricks, I was still only allowed to touch these, even though the configuration was completely different.

The kindergarten required even less top down control and more resources, as well as trust that the teams will get on with it. There was be a higher use of resources (lego blocks laying on the table). At any given moment, you won't know exactly what is going on, because everyone is contributing and collaborating. The teams were releasing stuff like crazy. So at that point, does it really matter that you need a bit more money up front? If they are releasing stuff so quickly, presumably this translates into revenue, which keeps the kindergarten afloat and then some.

Choosing the metaphor works that best for your company

The way you organize the work matters. And it feeds into culture. Larman said "Culture follows structure". In a software context, it means you want to allow for chaos and experimentation. And not really just squeezing features out of development teams.

As a company scales from a successful startup to a larger company, the trick is to keep enough of that "kindergarten juice" in the culture and in how the work is organized, in order to allow your company to continue innovating. If the emphasis on control changes as a product matures, you can introduce more of that as needed. But do so consciously, and watch your output and outcomes like a hawk.

By micromanaging the process, even as an assembly line in a feature factory, you're still missing out on pretty big upside (assuming you care about having lots of new products released).

That said, even a kindergarten needs boundaries. So that the teams don't cut corners in quality for example. That's kind of the point. There are a handful of non-negotiables around safety, health, and security in a kindergarten, and everything else is optimized for discovery.

So for a bunch of interested strangers on a random school night, who dug into a few alternative structures and held everything else constant, it was clear that there could be very large differences at play. 14x faster, not 14% faster. These would be results any agile or digital transformation program would love to achieve. That said, it wasn't clear if these differences came from structure only, or the culture around it. And if culture is involved, that could be what's preventing the massive change in the first place.

Key Takeaways

The way you organize work matters, and it feeds into the culture, particularly in a larger company.
By organizing work, you will be making choices about tradeoffs among variables that matter.
Control, in particular, seems to be inversely related with learning and speed.

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Why building for the entire market bloats timeframes, and what to do instead

September 25, 2019 by LaunchTomorrow Leave a Comment

In High Output Management by Andy Grove, Intel's founding CEO, Grove suggests that Intel operated in an environment where they needed to manufacture units to a market forecast. From the beginning in the 1960s, they didn't have the luxury of selling up front and building exactly what was sold. Nowadays, this is pretty much the defacto environment for product development. Even in the case of software, where there is no manufacturing or reproduction cost, timing the scope to match demand is a core component of a software company's success.

In order to plan the release of a product, you need a clear scope of what product development needs to happen first. This includes breaking down tasks, estimating them, and then mapping the specific features to expected customer value. This way you come up with a set of features that need to be created, in order to release the product (or release it again).

How this typically plays out in practice

In practice once this is agreed, new ideas come up. New stakeholders propose specific changes or additions to that original scope. You might even want to try reaching more prospects in a related segment.

1. Add a bit more scope: The natural impulse-in this environment- is for product development teams to simply add scope to the list of stories or tasks which were already agreed.

2. Push the release back a bit: As soon as they add another feature, this effectively means more work needs to be done. So the effective date when everything will be done is pushed back. Usually this means the estimated completion date needs to be adjusted, even if this isn't explicitly acknowledged by the team.

3. Delay market feedback a bit: If the release date is moved back, the team delays getting market feedback. Depending on the size of the feature, it might be a few days in a software context. Or a few weeks.

4. Reduce probability sales: of If the feedback is delayed, you reduce the team's confidence that the product will sell. The less feedback you have, the lower the probability of hitting your sales forecast when you ultimately do release. So your probability-weighted revenue goes down, the later you release. In a sales context, "money follows speed" is common knowledge. Being able to close a deal quickly is really important, because if you don't, it's likely the customer will change their mind. And finally, if you are less certain about your sales forecast, this typically influences your overall confidence level in the product. And one of the most natural things done in this case is too…add a bit more scope.

Deja vu. The cycle repeats.

Paradoxically, the more scope you add, the lower the chances of market success of the release. Because you're innovating in a vacuum/ivory tower/echo chamber/<insert favorite metaphor here>. Even though you think you are improving your product's chances. Having too many features is overwhelming for prospects and difficult to communicate for you. The paradox of choice kicks in.

Also, if you delay the release date, you are likely to struggle to make sales until that date. There are "forward contracts" or "letters of intent", however customers will only go for something like this if they are highly motivated to get your solution. It also adds a layer of complexity and obviously a delay, thus making it harder to sell the product.

Implementation notes for startups

In the startup case, you need to get enough scope to attract early adopters in Moore's technology adoption curve. This will typically be one or a handful of related features which address a core need of theirs and which they can't address anywhere else.

The idea is that you need enough scope to go after a narrow group of people, just to get started and out the door. Trying to build enough scope for the entire market will mean you'll never actually move ahead with your business. Because you need to launch it first. The sooner you get it out there, the better for you.

Once you have nailed that first segment, you expand to adjacent segments. You modify the product to appeal to the adjacent segments. And then go sell to them. Do this incrementally, so that you have the benefit of revenues from the first customers. And confidence from initial market success.

Implementation notes for established companies

The above is true for larger companies; however, they have internal operational challenges to overcome also. In particular each of the 4 parts of the circle are often represented by different department heads. Each has his or her own agenda to push.

And while each incremental change might seem to make sense in the short term, the overall effect is the delay of a release. And no one is individually responsible for it.

source: Randy Olson | the operational usefulness of pie charts

Moreover, in a large company environment, go-to-market decisions are often made based on overall market size. While this is useful to think through e.g. positioning of a new product, thinking in terms of top-down market pie charts doesn't translate into a plan to enter the market. Different slices of the pie will want different features, with some overlap across the market.

It's ok to plan to enter the entire market eventually, but it's smarter to prove the approach works on a small corner of the market–before you expand outwards.

Acknowledge it's uncomfortable, and just do it anyway

I get it. It feels unnatural to be selling something that isn't perfect. It's easy to succumb to a fear of rejection, and just put off the prospect of releasing the product for as long as you can. I've done it in the past on my own dime. I hear the mechanism at play when mentoring founders. I see the dynamics play out in larger companies every day. Every product team with an ounce of humanity is susceptible to this.

Focus on a small subset of customers with a similar set of needs, and only build the scope that they need. Keep it laser focussed. And get it out there, even if it's not perfect. Especially in a business context, if your product addresses the core need they have, they will be happy.

Ultimately, fear of rejection just a bias that prevents you from learning what you need to know to make your new product a success. If necessary, speak to customers about their problems only–and don't show them your solution right away. Most people are happy to gripe to a friendly ear, especially if it's about something they care about. Don't make promises you don't expect to keep. But start speaking with flesh and blood customers right from the beginning.

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The one thing Steve Jobs did that turned around Apple

July 26, 2019 by LaunchTomorrow 1 Comment

After a nasty battle with Apple shareholders, Steve Jobs, then the original founding CEO, was ousted. He went on to create NeXt computers (later acquired by Disney). In the meantime, Apple drifted as a company. It proliferated product lines. Lost focus. And the share price entered a death spiral phase. A few years later in 1997, he was recruited back to save the company from very poor public share price performance.

When we got to the company a year ago, there were a lot of products. There were 15 product platforms and a zillion variants of each one. I couldn't even figure this out myself. After about three weeks. I said, "how are we gonna explain this to others, when we don't even know which products to recommend to our friends?"

In this keynote at 1998 Macworld, he announced early successes, such as a 3rd consecutive profitable quarter. In my opinion, one of the most powerful parts of his talk was the following grid:

In effect, after a strategic review of all 15+ product lines, Jobs decided that these four were the only products worth focusing on. Consumer was aimed at consumers and education. Pro was aimed at publishing and design. Everything else was shut down. Here was his rationale:

As a matter of fact, if we only get four, we could put the A-Team on every single one of them. And if we only have four, we could turn them all every nine months instead of every 18 months. And if we only had, four we could be working on the next generation or two of each one, as we're introducing the first generation. So that's what we decided to do: to focus on four great products. And the first one that we introduced of course was the Desktop Pro product.

Notice that the main practical reason Steve Jobs cited for this change is the reduced product release time, or cycle time. Or low velocity in agile terms. He could release a lot of resources. Focus them just on these 4 great products. And get out of the bureaucratic quagmire that was holding the company back.

This was the kind of "zero-based thinking" decision that a hired gun CEO would be afraid to make, but a founding CEO could find the courage to do. To implement a company redesign and rethinking from first principles, rather than just tinkering around the edges. Steve Jobs knew what life before Apple was like, because he was there. And he already had a successful "go" at building the company. So it didn't take much to identify that the company needed to be slimmed down and focussed in order to become stronger.

Of course, there was uproar amongst developers with vested interests in existing product lines. To a lesser extent, among clients of the cancelled products. But this marked the beginning of Apple's long climb to a corporate icon and stock market darling.

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A Minimum Viable Product Helps You Release Earlier

December 10, 2015 by LaunchTomorrow

When releasing a new product, the first step is to get a minimum viable product (MVP) released. The minimum viable product encompasses the essence of the Lean Startup ethos. An MVP helps go through one cycle of the Build-Measure-Learn loop. Eric Reis warns “Customers don’t care how long something takes to build. They only care if it serves their needs.” You also need to already have a customer chosen in order to be addressing a customer’s need. The main goal of an MVP is to learn about the customer and the market. You want to validate or reject your hypotheses.

Let’s say you want to build a software company helping people learn foreign languages. Entrepreneur Derek Sivers points out that you can get started by just scheduling a language teaching session. It’s very manual. It’s not automated at all. At the same time, it’s an extremely high-bandwidth way to learn about your customers’ needs. Most importantly, it’s useful for them. Once you have some experience delivering this type of service, you have much better chance of successfully prototyping a solution which addresses the same customer’s need.

You identify one specific need the customer already has. You learn what the customer thinks about it, how they dream they could overcome the problem. You hear them vent about their frustration. You dig deep into specific aspects. You seek out find you can address. You find out how your customer thinks about the problem. This is gold. It helps you identify where to focus your efforts, so that you address what your customer finds the most vexing.

By focusing on the must-have features only, you release a product or a service that addresses a particular need. It’s rudimentary. Yet it works. It might not even require a line of code. Must-have features are essentially all related to specific changes you want to induce. Your target customer will not consider the product valuable otherwise.

It’s also consistent with Ken Schwaber’s value burndown charts. Develop the highest value features first. If the product ends up being successful, then in fact, these are the extremely valuable core product features. They define the product. If it’s not successful, then try to repackage the core with a new set of extra features, in order to go into a different niche.

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