What a Unicorn Knows by Matthew E. May and Pablo Dominguez
INTRODUCTION
- A ScaleUp is a more mature yet still adolescent company generally characterized by rapid annual growth of over 20 percent for at least three years.
- Where startups search for product/market fit and consistency in customer retention, ScaleUps search for scalable product/market fit, or go-to-market fit.
- Companies vulnerable to drag lack clarity on exactly where and how to dominate specific spaces and segments to grow beyond their initial product/market success.
- Inertial slowing sets in when headcount grows, approval layers increase, and functional silos crop up.
- Without an effective system for consistently guiding new ideas from inception to launch, it’s difficult to have a winning product development pipeline.
- As Peter Drucker once rightly noted,” There is surely nothing quite so useless as doing with great efficiency what should not be done at all.”
- Five guiding principles that, when adopted, made ScaleUp success much more likely.
- Strategic Speed
- Constant Experimentation
- Accelerated Value
- Lean Process
- Esprit de Corps
- To create the organizational equivalent of slipstreams requires strategies, priorities, and objectives to be simultaneously linked vertically and horizontally.
- While every ScaleUp has an enterprise strategy and initial product/market fit, the unicorns seem to have discovered the power of companywide alignment.
- As Netflix’s cofounder and first CEO Marc Randolph wrote in his 2019 book, That Will Never Work,” The key to being successful is not how good your ideas are, it’s how good you are at being able to find quick, cheap, and easy ways to try your ideas.”
- Think like a Formula 1 pit crew, a team of over twenty with specific roles so tightly synchronized that they can mobilize on demand,
- According to a benchmarking study of over 1,350 companies in eighty countries by Qualtrics, over 80 percent cited customer experience as a competitive advantage, with benefits including increased customer loyalty and uplift in revenue.
- Post-sale improvements included templated configuration wizards and phased implementations (involving a series of” soft” launches and go-live rollouts, versus one” big bang”), resulting in earlier value delivery.
Principle 1: Strategic Speed
- A company looking to efficiently scale for sustainable growth must treat speed as the dominant priority: speed to market, speed in market, speed to value,
- Strategic speed, defined as the optimal executional velocity achieved through company-wide alignment of strategies and objectives that reduces drag as well as risk.
- OODA loop:Observe-Orient-Decide-Act.
- PDCA cycle:Plan-Do-Check-Act.
- The intent behind strategy is to force often difficult choices and make very clear, specific statements about what you are and, perhaps more importantly, aren’t going to do, and why or why not, in order to maximize the use of those finite resources and increase the odds of success.
- Thinking about strategy as integrated choice-making rather than comprehensive plan-making is an important distinction, because irrespective of size or scale, a company that doesn’t decisively focus resources on doing some things and not others will not succeed.
- Lafley and Martin argue that a strategy is best thought of as a set of five tightly integrated choices: winning aspiration, where to play, how to win, critical capabilities, and management systems.
- Asking What Must Be True about your choices allows you to tease out the preconditions for success.
- The goal of the Catchball Alignment step is to achieve company-wide alignment behind your top-level strategy by developing and synchronizing nested strategies both down as well as across the organization, effectively creating a whole-company slipstream that reduces decision-making drag and optimizes strategic speed.
- Playing spaces generally include:
- customer segments
- distribution channels
- product/service categories
- geographies.
- It is better to think about where to win, versus where to play.
- Whenever you discuss what you are going to do next, you must also be prepared to discuss what you are going to stop doing,
- You should continually experiment with the Where to Play choices so that you can win in new and different (i.e., innovative) ways.
- Highly differentiating choices are naturally more bold, thus risky.
- When considering your How to Win choices, avoid anything reminiscent of yesteryear advantages that have seen their better day:
- customer focus
- customer service
- feature X, more and better features
- better data/SEO/social media
- contracts/patents
- intellectual property
- lower price
- first mover advantage.
- While there is no such thing as a universal advantage, a few categories are worth pursuing, including:
- Exclusive partnerships (e.g., “powered by”)
- Strategic acquisitions/mergers (e.g., Salesforce + Slack)
- Brand dominance (e.g., Microsoft Office)
- Market aggregation (e.g., Uber, Airbnb, Amazon Merchant Services)
- Massive scale (e.g., Amazon.com)
- Network effects (e.g., LinkedIn)
- Deep expertise/knowledge (e.g., Gartner, Forrester)
- Special authority/designation (e.g.,” Board Certified”)
- High switching costs (e.g., SAP)
- Obsession with a signature experience or element (e.g., Apple design)
- Fierce customer loyalty (e.g., WhatsApp)
- Management Systems refer to processes, structures, standards, rules, and metrics that reinforce, support, and sustain your Critical Capabilities.
- Any strategy, no matter how good it looks on paper, is simply a string of beliefs and hypotheses — guesses, really — about what they want to happen in the future.
- Four What Must Be True questions:
- What must be true about the openness, structure, and dynamics of our chosen spaces?
- What must be true about what our company, channels, and customers value?
- What must be true about our critical capabilities and relative costs?
- What must be true about how our competitors might react to our strategy?
- Done right, you can fit an entire Strategy Design on a single page,
- A fintech ScaleUp we worked with that was looking to deploy a new strategy to move upmarket had Product Development, Inbound Marketing, Outbound Marketing, Business Development, and Customer Experience as their Strategic Priorities.
- Objectives and the key result match the two purposes. The objective is the direction… the key result has to be measurable.
Principle 2: Constant Experimentation
- Constant experimentation is one of the most critical inputs required to initiate as well as sustain a flywheel for both rapid growth and long-term success.
- Many executives don’t even recognize innovation unless it’s radical and disruptive, favoring a home-run-only mindset. Companies that have mastered company-wide innovation generally have embedded a discipline around making a significant number of small bets across a broad and deep portfolio peppered with the occasional well-timed gamble on a would-be gamechanger with such an undeniable potential payoff that it would be silly not to attempt the pursuit.
- Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right.
- The innovatively challenged (dare we say dysfunctional?) company places far more importance on data-backed prediction, preferring the illusion of certainty over running simple experiments that cost a tiny fraction of the time and money of an exhaustive data analysis and algorithm-based forecasts.
- We overscope, overscale, and oversell. At the same time, we underestimate, underresource, and underplan.
- In our experience, the root cause of inertia nearly always is a shortage of constant, company-wide experimentation.
- “Adoption is driven much more by understanding the customer’s psychology than it is by technology,” Scott [Cook from Intuit] advises.
- The more you watch, the more you understand. It doesn’t matter how much data you have collected or how robust your artificial intelligence algorithm is; to consistently discover Fresh Opportunities to experiment and innovate, try getting out more. Get to know your customers better.
- A good How Might We question strikes just the right balance of positivity and scope. It suggests a number of different hypotheses to test, yet is not so broad that it offers no strong guidance.
- If you’re halfway worried that your hypothesis might be refuted by an experiment, then it’s probably a good one.
- The Leader’s Guide to AARs [after action reviews] outlines four steps:
- Review what was supposed to occur.
- Establish what happened.
- Determine what was right or wrong with what happened.
- Determine how the task should be done differently next time.
- If you want a culture of experimentation, make it mandatory, a part of the work, not something special or something you stop” real work” to do.
- The overall PR/FAQ format is straightforward:
- Headline
- Subhead: one line explaining the headline
- Summary paragraph
- Problem paragraph
- Solution paragraph
- Quotes paragraphs (customer and internal)
- Get started paragraphs
- External (customer) FAQs
- Internal (company) FAQs
- The FAQ part of a PR/FAQ comprises the majority of the six pages.
- Fit
- Future success is compelling and measurable
- Clear alignment to company strategy
- Complements a strong brand
- Leverages current capabilities (technology, process, expertise)
- Chosen playing spaces (product/service, customer segments, etc.) are open and attractive
Principle 3: Accelerated Value
- We are beginning to see more horizontal thinking in high-growth ScaleUps, in the form of cross-functional “growth teams” composed of pre-sales, sales, customer success, support, marketing, product, and engineering, all organized around key products instead of departmental silos.
- Watch customers interact with your product. Watch for critical events: where they lean in, where they lean out, where they struggle, where they give up, and where they experience the all-important moment of joy when they succeed.
- One key metric must be tracked constantly: time-to-value (TTV).
- Pull is a defining aspect of lean. It’s not about moving potential customers through an ideal purchase funnel, sales process, or consumption chain; it’s about enabling them to succeed in accomplishing whatever they’re hoping your solution will help them do.
- Only customers can define value, and that value centers on the problem they’re trying to solve or the objective they’re trying to reach.
- Steer clear of stating Jobs with words like maintain, support, help, manage, and the like, simply because it will be difficult to know when the Job-to-Be-Done is, well, done.
- Avoid conflating the Job-to-Be-Done with the Desired Outcome; remember that the first is an objective, the second is a result.
- Customers are far more loyal to the Job-to-Be-Done than to your product
- JTBD example: Anubis protects your important information from exposure so your chances of losing confidential company data are minimized.
- Follow this ten-step process to conduct your next customer value gap analysis:
- Secure executive sponsorship.
- Assemble a cross-functional task force.
- Define clear workstreams in a project plan.
- Gather and analyze various customer data sources.
- Learn from customers who churned.
- Learn from customers who renewed or expanded.
- Observe your customers in action.
- Identify quick wins.
- Design and run an MVP.
- Refresh your customer empathy and journey maps.
Principle 4: Lean Process
- ScaleUps struggle with waste simply because growth has outpaced development of the standardized operational processes needed to sustain the business into the future.
- Efficiency and effectiveness are not the same thing. The first is about doing the work right, the second is about doing the right work. Nearly all waste comes from not doing the right work.
- In our work with SaaS ScaleUps on process optimization, the majority of projects entail shrinking “quote to cash” time.
- The enemy has seven faces:
- Overproduction: Anything done without regard to demand counts as overproduction. That includes something as simple as processing an order before it’s actually needed.
- Overprocessing: When there are too many non-value-added steps to achieve a given outcome, you’ve got overprocessing.
- Conveyance: The best you can hope for when transporting anything — digital information included — from one place to another is that nothing goes wrong.
- Inventory
- Motion: Needless repetition of any process (even a lean one) sucks time and productivity.
- Defects/Rework
- Waiting: Netflix completely eliminated the need to wait seven days to watch the next installment of a show you love.