6 Truths and 4 Signals of Growth | Part 2
Interpreted from growth journeys of software companies like Notion, Figma, Basecamp and Arc
In the previous post we covered a list of truth that we could derive from the journeys of software companies like Notion, Figma, Basecamp and Arc.
Below are the list of truths explored in the last part of the series.
Truths
One of the key moments that contributed to Figma's rapid growth within an organization was the launch of the design system feature. Figma used a data layer that started by answering simple questions rather than fancy dashboards.
Notion templates and workspaces allowed users to showcase something about themselves. A product that creates something people want to share, as it reflects something about themselves, serves as a breeding ground for growth.
Great communities are built piggybacking on a great product experience that resonates with users, not on on transactional referral or advocacy programs, where there is a direct exchange of "if you do this, you get this" schemes.
SaaS products that optimize for bottom-up growth offer value throughout the journey of a product, like a page-turning novel.
Pricing is not only a way to capture the value on the table, but it is also a way to keep your teams focused on what drives value for users and what should be optimized at an organizational level.
Last but probably the most bitter of them all, the DNA required to make real product-led growth happen cannot coexist with an enterprise motion. It is crucial to choose one, as they cannot coexist simultaneously.
While truths hold true, they may not necessarily help you move forward on the journey of growth. On the other hand, signals are principles that can help you navigate your journey.
In this post we break down the following questions to get to our four signals.
What type of projects growth team should take up ?
Is there a way to classify growth projects ?
If you only had two questions ask to get started on growth problems, what would they be ?
What are must-have’s before setting up a dedicated growth team ?
What type of projects growth team should take up ?
The growth team is responsible for running projects that allow people to experience and share the value of the product. If successful, it transforms into a system that not only distributes product value but also informs the product teams about the evolving dynamics of value.
Is there a way to classify growth projects ?
While many people currently classify product growth work into four areas: Acquisition, Activation, Retention, and Monetization, it sounds good in theory, but there is a lack of evidence of its usefulness. There is no evidence of any teams being classified in this way at Notion, Figma, Arc, or Basecamp. Maybe I am wrong about this, but users don't see or experience the product behind these four walls. Does their mode of operation change when transitioning from one area to the other?
Also, dividing your product growth areas like this can increase the chances of dropping the ball between teams and resulting in a broken user experience.
When the product has a large user base, it becomes necessary to focus on all four areas simultaneously. However, this typically does not happen at an early stage.
How do you classify growth projects at a fairly early stage ?
There is a better way that can be more conducive to growth. To answer that, let me share the following insight from Josh Miller, Co-founder at Browser company, who focuses on a single metric for measuring growth: the percentage change in the number of users who have used the browser for five consecutive days. According to him, this is a significant moment when users start to see the value of the product and exhibit sticky behavior. Let's call this moment "Aha," a point in time determined by data or intuition that indicates when most users have experienced the core value and developed some type of sticky behavior.
While every growth project has an objective associated with it and is unique by nature, there is value in dividing growth projects into two areas based on different modes of changing user motivation.
Before the Aha ( maybe we call it BAha!)
In this period, user functions in an operating mode that is in safety and reward mode, wary about the every step based on the promise of value made. This area starts from first time hearing about the product to landing on the website to signing up to experiencing that aha enough times that develops some sticky behaviour.
Starts from - first time hearing the product
Ends at - Aha moment, product value threshold
User - depends more signals of trust
Product - optimizes for time to value with a great experience
Growth - looks for creative ways to tell the product story
Examples of growth levers- Bringing traffic from existing channel, onboarding, invite-only, build-in-public
After the Aha ( AAha!)
Users have experienced first time value that is enough to bring in some type of sticky behaviour. User gets it.
Starts from - User crossing the product threshold value
Ends at - Monetisation
User - want to explore more features and are more vocal about they like or what they do not like.
Product - optimizes for discoverability out different features and use cases that builds repeating habits.
Growth - conducts experiments to test willingness to pay.
Josh Miller from Browser company mentions two teams at Arc. The Storytelling team is responsible for everything before users have experienced the product value, while the Membership team is responsible for users who have experienced the product value. It is not necessary for every context to have these two teams from day zero, but it is beneficial to consider the growth objective from the perspective of "Before the Aha" and "After the Aha.”
If you only had two questions ask to get started on growth problems, what would they be ?
Framing often starts with asking the right question. In many cases, a decision can look like it has ten related questions, and if asked in the wrong order, they can seem intractable. Often the best path through a decision is to pick the right question to start with.
Here we can use, Eigenquestion (creator; Shishir Mehrotra, founder of Coda). For a simplistic definition, the eigenquestion is the question where, if answered, it likely answers the subsequent questions as well.
There are two Eigenquestions that can tell a lot about what type of growth path or growth levers one should explore for their products. First question to ask is
What is the time to value of your product , In simple metaphorical way, Is your product solution a pain killer or a vitamin ?
( Borrowed it from Japna Sethi, former Head of Product-led Growth at Productboard. She advocates to use time to value as a lens to inform about your growth lever. )
A painkiller product solves an acute problem that the target user already understands. The benefit of the solution is right away, just like a pain killer.
A Vitamin product is where users invest a lot up front, and they may see benefit longer-term.
If you fall in the vitamin product category, it is important to focus on delivering a version of the product that allows users to realize its value quickly. This version may not encompass the complete value, but it can be a part of it.
For instance, If your product aims to enhance workplace culture, can it start by sending out e-NPS surveys? If your product focuses on project management, can it assist with assigning todos based on meeting minutes?
Your product should aim to provide micro "aha" moments that reduce the time to value. This can be achieved by either creating a smaller product module or incorporating various "aha" moments into your existing product.
The next question to ask is What is the natural frequency of the current day alternatives ?
Low frequency
Low frequency generally implies absence of strong existing habits. And there is room for building new habits. This can be done by either expanding the product offering with more frequent use cases or by taking a solution-led approach with community initiatives. Examples of products that have taken the approach include Notion, Airtable, and Coda. Instead of simply selling the product, they have built a concept around the solutions their product can provide. They rely on power users to help establish these new habits. The introduction of iPad can also be considered in this category.
High frequency
Existing habits are there to be leveraged. They often are crowded spaces that require a higher degree of innovation to switch. These changes are often accompanied by technological disruptions. For instance, the iPhone revolutionized the phone industry, while Figma did the same for design tools. Currently, Arc browser is aiming to do the same for Chrome.
What are must-have’s before setting up a dedicated growth team ?
A founder who understands growth
The founder would have continued building the first product if it weren't for building the more important product, the second product.
The company itself is considered the second product, which is deemed more important than the first. The second product is a dream team of individuals who collaborate on meaningful work together. This idea is derived from Josh Miller's conversation with Lenny, where he briefly mentions it when discussing the vision of The Browser Company (Timestamp added in references).
The first growth hire should initially test the existing growth hypothesis before exploring new ideas based on the results. Otherwise, they may risk implementing growth strategies from a different context without a proper understanding of the users.
Product PMF
A product whose approach to the problem has been validated from pain to promised land.
While a lot of advice out there says that a product should have product-market fit before getting into a dedicated growth motion.
While there is merit in it, it is not always true. A product whose approach to the problem has been validated from pain to promised land can benefit from setting a dedicated growth motion.
It does not sit well with me. There are some places where PMF is defined as when a product has a predictable, repeatable, unit-positive/profitable growth machine. My biggest contention is similar to the chicken and egg problem. I am not advocating that you set up a growth motion for a product that nobody wants or sell snake oil to all. But in some cases, a growth motion helps you discover the gaps in value proposition and make tweaks to deliver on that.
So, while I mention as a signal, it is not a strong signal to evaluate when to set up the growth motion.
A data layer
Equipping your teams with data about their behavior helps them become more empathetic towards the user's situation, allowing them to stand out in a noisy world by creating value based on existing knowledge.
It can be easy to get caught up in the allure of shiny tools that recommend implementing various types of data layer setups. During my research, I came across several articles that provide insights into establishing a data layer. But none of them gave a fundamental understanding of how to get started, and what may be right area to explore based on the stage of the product.
I suggest that the motivation behind setting up a data layer should align with the specific measurements needed by the product at that particular point in time. Not everything needs to be measured from day one. Keep in mind that these articles discuss data layers that cater to product growth strategies of different scales.
The data layer for a product with a comprehensive marketing and sales team will differ greatly from one that is being established for a product without such teams, focusing solely on pure-play self-serve bottoms-up motion. I highly recommend prioritizing what data you need to solve today's problem rather than preempting tomorrow's problem.
While I have the above recommendation, data layer is a complex topic, and I will be breaking that down from a first principles lens. That will be a part 3 of the series.