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What is Growth Strategy?
A quick primer on the mercurial business discipline.
This brief essay is a primer on growth strategy adapted from our Growth Advising practice at Uncorrelated Interests. I’ll be writing at greater length about growth practices in the coming months.
Read Time: 3 minutes
The words “growth” or “strategy”, especially when used in tandem, typically trigger the bullshit detector of most executives, who through clenched teeth respond to the utterance with a half-hearted “yes, tell me more” .
I get it. Most discussions of growth strategy ARE bullshit.
This has not been helped by the “growth hacking” movement, a series of tactics peddled by (mostly) clickbait specialists with suspect near-term and scant long-term positive impacts .
So what exactly is growth strategy, and why is it not only useful but necessary? Some principles that guide our views on the topic:
Marketing is just one growth lever
Performance marketing is an eminently useful growth tool, but it’s just that - one tool. Too often I see “growth” team in an org chart, only to peek under the hood and find a marketing team rebranded.
Growth strategy includes the marketing engine, yes, but also the product, the revenue model, and in the case of inorganic growth, financial leverage. That is - growth strategy is a multi-disciplinary function that requires buy-in from all major decision-makers.
Systems > Components
Companies are systems composed of highly inter-dependent components. Optimizing a single component may appear positive in isolation but be ineffective or even deleterious when considering the whole.
I’ve often seen this manifest when the marketing spigot is turned on and run well, only for it to significantly harm the company’s cash reserves because the core product’s retention simply isn’t ready. Only by considering the interactions between components will a company unlock its optimal growth potential.
Meaningful > Statistically Significant
One negative externality of the mass adoption of Lean principles across the tech ecosystem is the obsession with iterative (a/b) testing as the default “growth mechanism”.
This is not to say that a/b testing is prima facie poor, but I’ve seen far too many instances of incrementality misapplied. 5% MoM improvements are great…unless you actually need 5x improvements over a short period.
That is, it’s easy to become addicted to statistically significant results that aren’t in fact meaningful to the business. In our view, iterative methods are great for extracting incremental yields but will rarely if ever result in fundamental changes to the growth trajectory.
Instead, what’s needed are macro-level changes in thinking - new ways to solve a given problem, or perhaps choosing an entirely different problem to solve.
Revenue Model Sensitivity
The simplicity of classifying a company’s revenue model - subscription, transactional, F2P, etc - belies a far more complex and sensitive system (that word again) that must be tuned over time. In our experience this manifests in a few consistent ways:
A “set and forget” approach to pricing, typically when the company launches.
Improperly segmenting or actually failing to segment their customers to understand their behavior.
Maintaining the same unimodal revenue model from launch rather than exploring or evolving into a multi-modal scheme that, while more complex, better extracts returns from different customer segments.
This piece is a bit of a tease, an “outlook hors d'oeuvre” if you will, about the business practice of growth. Ostensibly everything I write about here in our newsletter is geared toward growth.
I’ll do my best to both pepper principles throughout our deep dives into different businesses and occasionally pull out the concepts more explicitly - highlighting the theoretical underpinnings of our thinking.
Much more to come.