Start-up Growth Engineering, Part I

Introduction to Start-up Growth Engineering

Overview

• Instructor: Prof. Mark Logan, University of Glasgow, School of Computing Science

• Topics Covered:

  • Why Silicon Valley is repeatedly successful in creating start-ups. This involves understanding the ecosystem, culture of innovation, access to funding, and talent density that characterize the region.

  • Growth Engineering: the foundations of start-up success. This encompasses the methodologies and strategies employed to achieve rapid and sustainable user and revenue growth.

  • The Growth Model: an overview. A structured framework that outlines the key components and processes for driving start-up growth.

Core Concepts

• Growth Engineering Definition: Techniques for systematically introducing a new product idea into a large-scale market and driving it to scale. This includes identifying target markets, optimizing user acquisition channels, and implementing strategies for user retention and engagement.

• Exponential vs. Linear Growth: Contrasting exponential growth (desired for active users) with linear failure over time. Exponential growth involves compounding effects, where the rate of growth increases over time, leading to rapid scaling. Linear growth, on the other hand, is characterized by a constant rate of increase, which is often unsustainable in the long term. *Illustrative Examples of companies and their interest index over time:

  • FARMVILLE™ was used as an example to explain interest in the product over time. Understanding the rise and fall of user engagement helps in recognizing the dynamics of growth and decline.

  • 100 in 2009

  • 50 in 2012

The Essence of Growth Engineering

• It's about creating and growing a product in a new market, not just product development or creating high-quality software. Growth Engineering focuses on the entire lifecycle of a product, from initial launch to widespread adoption, emphasizing market fit and user experience.

Generational, Systematised Innovation in Silicon Valley

• Silicon Valley’s success is attributed to generational, systematized innovation. This involves continuous learning, adaptation, and improvement, building upon previous successes and failures.

• Evolution of value over time: Semiconductors/hardware \rightarrow Microprocessor/PC/Software \rightarrow Internet/Platforms \rightarrow Mobile. Each stage represents a shift in technological innovation and value creation.

Examples of Rapid Growth

• Facebook: Demonstrating rapid growth in millions of unique visitors from January 2007 to May 2010. Facebook leveraged network effects and viral marketing strategies to achieve exponential growth.

• Instagram: Illustrating Instagram's rise to 1 billion monthly active users, including its acquisition by Facebook for $1 billion. Instagram's focus on visual content and user-generated content contributed to its rapid adoption.

  • Dec '10: 1 million

  • Sep '17: 800 million

  • Jun '18: 1,000 million (1 billion)

• Twitter: Showing growth in tweets per day from January 2007 to January 2010. Twitter's real-time communication platform and its use of hashtags facilitated rapid information dissemination and user engagement.

• LinkedIn: Presenting LinkedIn's revenue growth in millions from Q1 2010 to Q1 2013, broken down by Hiring Solutions, Marketing Solutions, and Premium Subscriptions. LinkedIn's focus on professional networking and career development drove its revenue growth across multiple segments.

Properties of Growth Engineering

• Compounding Growth Effects: Growth Engineering creates and exploits compounding growth effects. This involves identifying and leveraging feedback loops, network effects, and viral mechanisms to accelerate growth.

Compounding Growth (Generic)

• Users attract other people to consider the product. Word-of-mouth referrals and social sharing contribute to organic user acquisition.

Examples of Direct Invitational Loops

• WhatsApp: Users invite their friends, and some invitees sign up for WhatsApp. The ease of inviting contacts and the value of group communication drive user adoption.

• LinkedIn: Users invite their colleagues, and some invitees sign up for LinkedIn. Professional networking and career opportunities motivate users to invite their colleagues.

Examples of Content-Driven Loops

• People sign up for LinkedIn and create a profile. The profile is indexed by Google. People searching for a user on Google find the LinkedIn profile in search results. Some of those people visit LinkedIn.

• Users write blogs and posts, which are indexed by Google. People searching for information on Google find these blogs/posts in search results. Some visit LinkedIn, and some sign up.

Optimizing the User Journey

• Growth Engineering models and optimizes the entire user journey. This involves mapping out the user experience from initial awareness to long-term engagement and identifying opportunities for improvement.

• Traditional Approach (Marketing vs. Product Engineering): Marketing acquires users, while Product Engineering builds features. This siloed approach often leads to inefficiencies and misaligned priorities.

• The User Journey: A cycle of:

  • Acquire: Attracting new users through various channels.

  • Activate: Getting users to experience the core value of the product.

  • Retain: Keeping users engaged and coming back for more.

  • Refer new users: Encouraging users to spread the word and invite others.

  • Monetize: Converting users into paying customers.

Putting the Growth Model Together

• Optimize the user journey. Streamlining the user experience to minimize friction and maximize value.

• Generate referrals for compounding growth. Implementing referral programs and social sharing features to encourage user advocacy.

• Attract initial and further users using linear marketing (SEO, SEM, PR, Events). Utilizing traditional marketing tactics to drive awareness and acquisition.

The Growth Model

• Linear Marketing: SEO, SEM, PR, Events
  
  *Optimize the customer journey
  
  *Drive compounding growth

Summary of Growth Engineering

• A systematic approach to growing a product's user-base. This involves data-driven decision-making, experimentation, and continuous optimization.

• Models and optimizes the entire user journey. Focusing on the entire user experience to drive engagement and retention.

• Creates and exploits compounding growth effects. Leveraging network effects, viral loops, and other mechanisms to accelerate growth.

Next Lecture

• The critical importance of Retention. Strategies for keeping users engaged and coming back for more.

• Optimizing Compounding Growth Loops. Identifying and enhancing feedback loops to accelerate growth.

Further Reading

• The Lean Start-up by Eric Ries

• Brian Balfour's blogs on Growth (brianbalfour.com).

• Andrew Chen's blogs on Growth (andrewchen.co).

• Sean Ellis articles on Growth (growthhackers.com/growth-studies/).