What function does Growth serve?

A few years ago, the idea of a Growth team was still new to most companies. An easy way to understand what a Growth team does is to compare it with the Finance team.

The Finance team at any organization measures, understands and improves the flow of capital, in and out of a business. This team helps the business make important decisions like 

1. How many people can they hire?

2. What will the compensation structure look like?

3. What is the rate of scaling of parts of the organization that are capital intensive?

Eventually finance teams at every company will come to a realization that the single biggest lever for maximizing revenue potential is to actually have more users/customers. The revenue products that you build are in itself secondary optimizations of scale. Most startups usually face the “cart before the horse” scenario, where they build out a really robust finance organization, but they don’t build a growth team whose responsibility is to measure, understand, and improve the flow of customers in and out of your product.

So that is the role of Growth team within a business - To measure, understand and improve the flow of customers in and out of your product.

From my extensive research, here are the three mandatory skills a growth leader should possess -

1. Proficiency with data and data models - They should contribute to and build data models to simply explain how products grow into scale. A data model that captures the core levers to explains why a company grows.

2. Build testing and experimentation programs - Ability to organize a product design and engineering team around a testing schedule and justify the experiments that are important.

3. Identify, test and scale new customer acquisition channels 

As a starter myself, I am focusing on improving my skillset in two of those at the moment. If you’re great at all three - like Andy Johns says - you’re someone special!

If you’re evaluating the growth potential of a business (as an Investor or as an Interviewee), you can use this simple framework by none other than Chamath.

For those who don’t recognize the name, Chamath ran the Growth team at Facebook back in 2007-11 and was responsible for some really famous projects that Facebook undertook that we now sort of famously know, including the translation project.

(Top of Funnel) * (Magic Moment) * (Core Product Value) = Sustainable Growth

This is the growth equation he uses to understand at a very high level if the product/business has the potential to grow at scale for an extended period of time.

Top of Funnel (traffic, conversion rate) - Can the product capture traffic and convert that traffic at an increasingly higher rate into some meaningful level of usage? This is a very tactical part and is probably the least important out of the three factors.

Magic Moment - Magic Moments create emotional response in the user of the product. You should ideally do it early and often in the product experience.

For Facebook, it is befriending your first friend. Here is a tweet on the magic moment for Uber from one of my favorite growth leaders, Andrew Chen.

Core Product Value - How big is the market? Are you solving a legitimate problem? Is your Product-Market-Fit hypothesis correct?

For products that have nailed Core Product Value and Magic Moment, Top of Funnel naturally happens. At this point, customers are flocking. As a Growth PM, your job is to remove friction if it exists and allow the product to realize its full potential (grow as big as it can get).

In my next post, I’ll probably take an example of Amazon and talk about how to make this framework more practical.