Growth as a core part of marketing began at Facebook under the direction of Chamath Palihapitiya. In 2007, he joined the early team in a nebulous role – one that fell somewhere between Product, Marketing and Operations. According to his retelling of the story on Re/code Decode, after struggling to accomplish anything meaningful in his first year on the job, he was on the verge of being fired.
Sheryl Sandberg joined shortly thereafter, and in a hail mary move, he pitched her the game-changing idea that led to the creation of the first-ever growth team. This idea not only saved him his job but earned him the lion share of the credit for Facebook’s unprecedented growth.
At the time, Sheryl Sandberg and Mark Zuckerberg asked him, “What do you call this thing where you help change the product, do some SEO and SEM, and algorithmically do this or that?”
His response: “I don’t know, I just call that, like, Growth, you know, we’re going to try to grow. I’ll be the head of growing stuff.”
And just like that Growth became a thing.
FOUR PHASES OF GROWTH
There are 4 major phases that startups will go through before they get to steady-state.
Acquisition and exit can happen at any of these phases. However, progression to each phase is intrinsically linked to growth velocity, and therefore have an impact on the perceived value by investors, employees and potential partners.
# 1 – Getting Product Market Fit —
A business has achieved Product-Market Fit when they have built something that people want to pay for.
It’s not a myth, most startups will fail before reaching product-market fit.
The search for PMF is never a straight line as it happens over multiple cycles of iteration. Businesses usually start with a market, then they build an initial version of their product, study the market to know who actually gets value from the product and then proceed to redefine both the market and product.
It is elusive and really hard to reach. It’s also important to note that reaching PMF is not a guarantee that you’ll necessarily remain there since the market is always evolving.
“You know you have fit if your product grows exponentially with no marketing. That is only possible if you have huge word of mouth. Word of mouth is only possible if you have delighted your customer.” Marc Andreessen
How do you define your customer? What are their problems? How do you intend to solve them? How do you ensure they are so happy with your product that they are willing to give you a glowing recommendation without prodding?
#2 – Getting Positive Unit Economics —
If you don’t understand your unit economics, your business will die. It might take a while, depending on how much money you have in the bank. But it will eventually go bust!
There are two questions that every founder should take seriously, and compare, as they begin their entrepreneurial journey: (a) What is a customer worth to me? and (b) How much do I spend to get one customer to buy from me?
The customer’s worth over a period of time before attrition is their lifetime value (LTV), and the investment directed at getting the customer to generate revenue for the company is the customer acquisition cost (CAC).
Positive unit economics means the LTV should be at least 3x > CAC.
As a business, your growth is dependent on figuring out structural advantages that shift the growth levers to make this happen in a scalable and sustainable way.
If you can prove you can replicate this same outlook, LTV>CAC, at scale, then you got the investors’ confidence and their cash.
#3 – Getting Profitable at Scale —
Scaling isn’t easy. It’s even more difficult to scale to profitability.
An average entrepreneur can expand the business, hire more staff and increase production. They may even succeed in increasing revenue. But only a few entrepreneurs are able to scale while remaining profitable.
The problem is that the term “Getting Profitable at Scale” is horribly vague and undefined at its root if you really look at it.
One of the most important things to remember about scaling your business is that it’s not a guarantee. Rather, you need to have a solid execution plan and consistent experimentation programmes to ensure you grow profitably.
Your strategy should include how you intend to implement new processes, models, and infrastructure to ensure you grow successfully and profitably.
#4 – Getting to Steady State –
A business in a steady-state can replicate other products with fairly predictable outcomes. They can do so in other products, verticals, markets and geographies without losing the core of their business.
To maintain a steady-state, the focus should be on what customers are demanding, and obsession with replicating the connection they have with the product. A lot of the marketing budget will be allocated to brand, PR and entrenching the product in the minds of the users.
However, it is important to note that a steady-state cannot be maintained forever and will fall into decline at some point.
MOVING ACROSS THE FOUR PHASES
The time it takes for early and mid-stage companies to move from one phase to the next varies widely, because there’s a lot of randomness in business.
Phase 1 and 2 are quite important for survival. And it’s always the most difficult hurdle to cross.
Companies that quickly go through these 2 phases have the virtuous cycle advantage. They attract more investments → top talents → rapid growth → more investments.
This is why it is very crucial to bake growth into the product development cycle from day 1, and set the ship to focus on the True North.
This involves having a team with the primary responsibility for building and optimising a system for acquiring and retaining engaged customers at scale through cost-effective channels.
Growth requires an interdisciplinary team with the intersection of product, operations, analytics, business development, engineering, and marketing.
GROWTHLAB GROWTH PATH
The key objective of GrowthLab is to equip members with advice, resources, community and tools that will enable them to lead their organisation to steady-state growth.
Members will have the competence to build a repeatable, sustainable and cost-effective growth marketing models, develop testing and experimentation programmes, identify, and build customer acquisition channels at scale for their company.
GrowthLab outlines path and facilitates the journey to becoming a growth marketing leader.
Most marketing executives start their journey to growth by searching for the latest and greatest tactics. Posts like “100 Tactics To 4x Your Growth.” If you are constantly reading these articles, it may be time to stop because you are starting in the wrong place.
The GrowthLab Path is designed to help you develop mastery in growth marketing based on 4 key themes: Growth mindset → Growth model→ Growth Team → Growth Tactics
Every month, we will be focusing on different topics that will deep dive into these 4 themes. They will form the main architecture of this community.
Growth starts with culture. The DNA of an hyper-growth company is different from the one that wants the status quo.
Growth mindset is the core values that guide your team towards success based product vision and direction.
Having a growth mindset establishes the tone for everything else you do. It will inform the formation of process, hiring template for team members.
Most businesses want to grow and they have a vague idea of how to get there. But, they lack the key principles to achieve their goals.
Within this theme, we will discuss:
- Foundational elements of growth
- How to ideate scalable product
- How to build a growth culture
- And more…..
Growth model outlines growth mechanics and growth plan for your product. It could be a representation of the model in a spreadsheet that captures how your product acquires and retains users, dynamics between different channels/platforms, the core growth levers and how it fits within the business/revenue model.
Building the right growth model helps you identify the most impactful variables/levers around acquisition, retention, engagement and monetization.
The growth model is not static or set in stone. It should help you develop hypothesis-driven experiments and then you apply the learnings back to your growth model and user psychology. By doing this repeatedly, your growth model gets better over time.
These are a set of frameworks within the business/revenue model that helps your team make decisions, solve problems, evaluate performance.
Within this theme, we will discuss:
- How to identify your customer segment
- How to calculate unit economics
- Growth metrics and channels
- And more…
As technology continues to make data-driven marketing easier to implement and control, one thing remains constant: it’s all about the effectiveness of your team.
The difference between growth teams and your regular team is that growth teams work across the boundaries set in traditional organizations and relies on rapid experimentation instead of top-down planning.
Your growth should be executed by a cross-functional mix of people with a common DNA and set of skills organized to execute the growth process.
Your growth team should be largely overlapped with product, engineering and design. A growth team is made up of many different skill sets and can more easily push through ideas and experimentation that crosses traditional silos and boundaries.
Successful marketing has shifted away from acquiring customers at the top of the funnel. It’s primarily about acquiring customers that will stick around.
A key factor in the success of growth tactics is the product. You can’t sustainably grow something that sucks. All of the best growth hacks, from Facebook to Dropbox and Airbnb, have roots in the actual product.
Every company’s set of tactics are different, the aim is to figure out the unique combination for your product that makes growth scale.
For every tactic you implement, you should optimise results towards specific goals: awareness, acquisition, engagement and conversion.
- Branding / Positioning / Storytelling
- Building virality
- Search PPC
- Funnel Marketing
- Building the right partnerships
- Innovating products
- Content marketing
- Email marketing
- Social media marketing
- Conversion rate optimization
- Retention and virality
- Customer success
There are lots of randomness in business. But growth is not random. It is deliberate, calculated and can be modelled for repeatability. GrowthLab provides the path for achieving this.
|Stuff you may find useful
Chamath Palihapitiya – how we put Facebook on the path to 1 billion users.
(1) Top of the funnel – how do you get people through the front door
(2) Magic moment – how do you get them to the ‘aha’ moment as quickly as possible,
(3) Core product value – how do you deliver the core product value as often as possible. Don’t focus on things that destroy long-term value.
How The Growth Team Helped Facebook Reach 500 Million Users [article]
Growth wasn’t mitigated to a sub-function of a higher function within Facebook, it was a horizontal layer across a product like engineering/ops is a horizontal framework behind the product.
A Simple Framework For Building A Growth Machine [article]
Process first and tactics second when it comes to growth
Indispensable Growth Frameworks from My Years at Facebook, Twitter and Wealthfront [article]