I was recently interviewed for a Japanese creative industry magazine “Project Design” to talk about the relevance of “Growth Hacking” (Japanese article here), the approach to growing web and mobile startups that has come to prominence in recent years, to established and non-web businesses. I was interviewed in Japanese, but wrote up the main threads of the conversation in English below.
First of all though some context. Why was I being interviewed about Growth Hacking? I have been a involved a lot with startups one way or another. I have had numerous startups as clients over the years, companies with a good product-market-fit for Japan for whom my company has effectively been the growth team for the Japan market. Also through my role as a mentor for 500 Startups, Silicon Valley’s top accelerator program, where I offer advice to founders and growth hackers on how to grow in in particular, but anywhere for that matter. I also run Growth Hacking Japan University, a 7 week lecture course in Japanese that I have run twice now, and plan to run again soon, teaching growth hacking techniques and strategies to Japanese founders and aspiring growth hackers, and learning a lot from the participants at the same time.
Most of the time I work with bigger established brands, including cloud tech companies and web services, for whom we (Profero Tokyo) position ourselves as “the performance engine” that drives incremental results in one or a combination of marketing areas. I would not describe this work as “growth hacking” per se, but being so focused on KPIs and striving to create operational efficiencies, actually the work has a lot in common with what a growth team in a web startup would be doing, and this is recognised by several of our client partners. Ginger-Software, the disruptive native English writing technology, founded in Israel, is one brand for whom we fulfil this role in Japan.
At Profero Tokyo we are very conscious of the hybrid team we bring to each brand partner, the skill sets that combine when our specialists work together to create additional value, both through coming up with ideas that cross disciplines, as well as synergies that drive efficiencies for our clients, and in this sense we have embraced the growth hacking philosophy.
Here are my notes from the interview:
Growth hacking can inform the philosophy, techniques and most importantly the hybrid teams that established companies should bring to new business models.
Growth hacking needs an agile environment
The whole point of Growth Hacking is to grow a new business model as quickly as possible. That objective is shared by many established companies when they start a new business division or launch new products, so in principle there is nothing stopping big companies from “growth hacking”. However, growth hacking works best in the purest sense when nothing is held sacred, allowing the product-market fit to be established without constraints, such as “brand XXX’s target are always YYYY type of consumers”. Nurturing this sort of agility into the culture and environment of a big company is very hard to do, hence why companies tend to become less innovative as they get bigger.
One way of looking at what changes when you go from a small agile startup to a big established company with many stakeholders, existing customers and partners, is to think in terms of where the efficiencies are coming from, since all business models need to be creating efficiencies of scale of some kind or another if they are to grow.
In small companies with very little baggage and a small cohesive team internal efficiencies should be off the chart, but because the business model has no scale yet in the market, it enjoys minimal external efficiencies. As companies grow and gain momentum in their market they go through a tipping point beyond which they have broad awareness among their audience, people know what to expect, they can enjoy economies of scale when purchasing, and in general external efficiencies get better. But at the same time they tend to become more complex internally with multiple management levels, physical and social distance between employees in different departments, more complicated decision making processes and more friction in general.
So a lack of agility within some big companies would likely prevent a growth hacking type model to whir within it. But in its purest ‘bootstrapping’ sense growth hacking is not always necessary or the most efficient route to success anyway. Where a new business division can leverage the strength of established business models and a symbiotic ecosystem can be created, such as Apple succeeded in doing across its hardware and software business, then that is the quickest route to success, and Growth Hacking doctrine would demand that that is the route taken. iTunes was never a standalone music store. The App Store only exists because of Apple’s mobile hardware. Building out an consumer ecosystem in a pre-planned way can be the right approach, provided you get the strategy spot on.
Having said that, I remember reading an interview many years ago I think after the iPod took off, in which Steve Jobs said that his main role was insulating his R&D team from being influenced by the commercial influences elsewhere in the business, nurturing a free-thinking environment for a group of super smart product designers and developers. Everyone knows what happened after that. Although I would not call Apple’s astounding run of innovation growth hacking, creating a free thinking context in which experiment can happen and a tight team can work fervently together is I believe also necessary for the growth hacking scenario.
Rapid Prototyping cycles for product-market fit
So when is Growth Hacking relevant and possible for big businesses? At its heart Growth Hacking is an ongoing series of experiments, each one built on the intelligence gained from the those than ran before it. This is essentially iterative prototyping, a concept that is no way a new idea for big companies, but in the case of web startups they are doing it in public, or to anyone who will pay attention, and getting feedback directly to tune the product and the marketing mechanics at the same time. For many reasons not least the desire to keep new developments unseen from competitors, it is harder for big companies to do this process in the open.
The iterative method is founded on data. If there is no way to capture the performance of the product as data and use that data to make informed decisions about how to improve the product and market it better then forget the Growth Hacking idea. It’s something else at that point. This may well limit true growth hacking to web and mobile companies where the products are literally plugged into the market itself, but I am open minded on this point. All kinds of products are getting hooked into the internet-of-things now, and reporting performance data back to engineers and designers. Either way it does not stop other companies from using the ideas and approaches that are bound up with growth hacking.
Implicit in the argument above is the assumption that the marketing model and the product experience can co-evolve together. Often when companies get big and established one ends up downstream of the other. In many growth-hacked web services these days, the user experience itself comprises viral mechanisms that bring other users in, so that the product does its own marketing. Even if the viral effects are not wired into the product in this way, the product and the way it is distributed needs to allow for really short prototyping cycles. This principle is something that big companies could learn from, or at least aspire to this ideal, since often they place marketing downstream of R&D, which can end up in the miserable scenario of trying to sell products that are unsellable.
Connect customers & growth team directly
Spelling this principle out in terms of the people involved, the ideal is to short cut the feedback loop between those designing and creating the product and its ultimate customers as much as possible. The word “growth hacking” feels very cold and technical, not really the ‘human insight based thinking’ that we like to boast about in marketing, nor the ‘customer centric culture’ that corporate CEOs work so hard to advocate in their companies. In a way though the growth hacking approach is the MOST customer centric approach there is, provided that the data being collected and used for optimising with actually does represent the value the customers are bringing to your brand and bottom line, in both the short and long term.
Thus the quintessential growth hacking metrics-based process of experimentation and optimisation is in simple terms a way to short cut the ‘prototype > test > iterate’ loop and make it spin as quickly as possible with the least separation between market and product evolution. This efficiency is what underpins the “fastest route to success” philosophy at the heard of the growth hacking movement.
Anyone who has worked in a science laboratory or R&D lab recognises this process, and so in a sense growth hacking start-ups have effectively put the lab at the centre of the business. In too many big businesses not only can the R&D department become a costly appendage, but the scientific approach often loses out to internal politics or other constraints, or else the R&D amounts to just tinkering with existing formats because the bigger vision has been forgotten or become obsolete.
Defining the necessary conditions
So I believe big companies can benefit from growth hacking style approach to growing a new business model, but they have to set up the context to mirror to some extent that of a startup in the following ways:
- It should be run by a few people who “own it”: passionate about the idea and strongly incentivised to make it work, ideally through equity ownership
- These leaders should be given the responsibility to take decisions without committee agreement, leading to forthright decision making and accountability
- Allow risk taking and accept failure as a natural part of the process. Experimentation is needed to hit on the right formula, and you are unlikely to hit on it first time.
- Start off with as few people as possible. The last thing the leaders need is a big team to manage before they know what it is they need to be doing.
- You need to create an efficient, no-fat-on-the-bone base upon which to build out a profitable model. Too much resource early on, either people or money, will lead to inefficiencies that will at worse kill it prematurely, or else get baked into the business and restrict profitability later on.
- Give the business brand-independence, enough for it to be able to tell its own stories and connect to a distinct audience that becomes its early adopter customer base from which an early majority can be recruited.
The importance of a brand narrative
This last point about the need for brand independence is often forgotten I believe, but companies whose founders understand how to grow a brand often take off faster and win big in the long term. This is because they are making the technology mean something more than what its features would imply on their own. In my experience people often forget that the experience people have is fundamentally different depending on what they are looking to get out of it, and this is dependent on how well it is branded and the communications around it. No first time user touches a feature set without preconceptions, so framing this interaction and the ongoing usage is the role of the brand.
Founders and companies with simple, powerful brand identities and compelling ideas around their technology, such as Phil Libin with Evernote’s “remember everything”, or Mark Beniof’s with Salesforce.com death-to-software narrative, are so good at selling their technology story that we forget just what masters they are at branding. Both men had plenty of business experience before founding the companies that made them famous, and it shows.
I would say that successful startups always have a strong “founders story”, a vision to make the world better, core values, that for better or worse get baked into the brand perception from early on. Even if they are not a consumer-facing brand, this narrative is important for getting others excited about its potential, which is always necessary. These stakeholders are the investors, journalists and early hires in tech startups. But the same thing goes for new business models springing off big business, where the equivalents would be the board members, the individuals transferred in or hired into the business as well as the consumers who would adopt the new product.
So although it is very hard to generalise about how business models should get built out, the brand story and how it enables businesses to captivate each subsequent audience as it builds its following is one, and the other is the way the internal team expands.
Growth teams and growth hackers
It is my belief that team structure is the most important area of growth hacking for big or established companies to take note of, not least in starting off slim, but what type of people are brought into the mix.
If we generalise a growth team into specialists and generalist, a room full of generalists is not ideal, but then nor is a room full of specialists, and yet this is often the make up you see.
You definitely need deep vertical expertise. In a web start up you might have an SEM specialist, a PR specialist, a contents marketing / social media specialist and product developer as the first 4 members of a growth team. The challenge is getting these relatively diverse skill sets to work cohesively together so that much needed synergies emerge. It is even harder in big companies where these verticals might already exist as distinct departments, potentially physically separated.
In order to get them working synergistically you need someone who can speak all all their respective lingoes, and who has a sense for the difference between just showing up in that area, and actually driving competitive advantage. Who is that person? It needs to be someone who has themselves dived into these skill sets at one point, not to the extent that they became an expert in all of them, but typically in one area at least.
These multi-skilled individuals are the sort of people who, being quick learners, dive headlong into a knowledge specialism for a while, get to the point where they understand 90% of it, can perceive the nature of expertise in that last 10%, but do not fancy spending the next 3+ years to perfect those skills themselves. And then they move on to another vertical. They get bored as quickly as they get inspired, but rather than being a weakness, it equips them with a rare combination of literacies.
Not T-shaped, but “rake-shaped” talent is key
In management theory they are similar to the T-shaped people, but actually more like a “rake”, or Japanese “kuma–te” meaning “bear’s claw”. You heard it here first! Ideally you can find one of these talents who also has leadership potential, and build the team around them, since they can be the bridge that gets the teams working together efficiently.
These sorts of people are rare and hence very valuable assets, especially if the areas they can bridge between map to the necessary skill sets of your business, and have the communication skills to forge a team spirit. These sorts have been key drivers in the growth of the US silicon valley tech startups, where they are highly prized but they are even rarer in Japan. These people represent the “growth hacker” archetype, and so perhaps more so than “growth hacking” the approach, it is this archetypal skill set that is most important to highlight beyond web and mobile startups.
In Japan deep vertical expertise is celebrated and rewarded. Finding your craft and plugging away at it for a lifetime earns you respect and career progression. This is no bad thing, and Japan’s ongoing success as an economic force is built on this tradition. Japan does not have a shortage of specialist, I believe.
However, the way companies and careers are structured it makes it hard for multi-disciplinary careers to be nurtured within companies, and hence there are not many growth hacker types around, and I believe this is a limiting factor on Japan’s economic success going forward that needs to be addressed.