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Category: Startups

Communicating context to drive specific behaviours

Words like “consultant”, “workdriver” and “special projects” still create a PTSD style effect in my head. These words drip with corporate context, very clearly and precisely signalling whether you were succeeding or failing. The email announcing a VP moving to “special projects” triggered a global cascade of watercooler conversations where we each dissected and calibrated their missteps and realigned our own. It feels like a high performing culture because you’re communicating in flow – there are barely any words exchanged but you can replay together how a pattern of behaviour over years became fatal for said VP. It’s almost a cult like sensation. People worry about leaving because they fear never experiencing this level of flow (read: intelligence) ever again?

Tim Fung from Airtasker reminded me of that on his webinar this morning. Why do leaders communicate? His example was a mistake he made, sending an email whilst under stress that the expected working hours were 8:30am – 6pm. On reflection, he wasn’t trying to communicate an expected outcome – people in seats. Instead his company was under serious financial pressure and the next few weeks required a mammoth effort to keep the dream alive, but he failed to communicate that context and lost good people because of it.

So what was Tim trying to communicate? Well the zeitgeist answer would be that he was trying to communicate a cultural expectation. But if your company goals are service quality and people focus, perhaps that internal culture would be counterproductive? No, this wasn’t an attempt at ongoing cultural change.

Tim specifically reflected that the goal of this communication was to set context. He wants to know that when a specific context is shared, a certain set of behaviours are triggered at scale. For example if an “investor presentation” is announced for a few weeks time, an increasingly large ship needs to transform immediately. The operations team cut costs, HR cancels all off-sites, engineering ships the shiny MVP that wasn’t quite ready. This is not a cultural theme that persists during the year, but instead a carefully communicated and indoctrinated context that dictates specific behaviour.

I suppose most of the time this context, just like culture, is set through repetition. But what if you could construct context more deliberately? If there are 3 regular events that are critical to your business every year, how could you communicate the context of those events in a crystal clear way? For example if you are Apple and your company’s innovation appetite pivots on the annual WWDC event, how do you describe that context to a new hire or even a customer?

Pivot points get a lot of discussion in the startup world, but I think these context events are the pivot points every company needs to know, and communicate heavily and precisely.

The 3 stages of a services marketplace

The Silicon Valley alter that is the whiteboard

1. The Hands On phase

Like every great episode of Silicon Valley, it all starts with a whiteboard. Customer (demand) and worker (supply) names are written on the board, with relevant skills and availability scribbled down. Everyone gets on the phones and calls each side, trying to make connections. Every connection is a new possibility, a new thread in the web you’re trying to spin. You’re losing money on every one, but if you’re doing it right they start to become sticky.

This means customers are not just delighted that you introduced them to someone that can solve a problem for them, but that it has the seeds of an ongoing relationship. They enjoy working with the person, they need that problem solved ongoing and (for your benefit at least) they see the value you add as the third wheel.

At worst they appreciate the comfort of having you on the phone to handhold them through the process, at best you are a critical part of the value chain that is hard to replicate without scale. Except you don’t yet have scale so this might cost you big time upfront – software, insurance, data, templates, logistics, call centre etc. Don’t resent the cost, because it’s also your barrier to competition. Watch that burn while you find market fit.

2. The Acquisition Marketing phase

Once the relationships are sticky and your churn is under control, you need to scale quickly to bring your unit cost down and start to pay off that upfront investment (or raise on a growth pitch to kick this can down the road). It’s time to look at the chicken and egg problem of liquidity. What services are not getting traction, and how might each translate into an efficient performance marketing campaign?

You probably have no brand equity, so your performance marketing needs to be very targeted and ideally not competing with established sector players. It’s also tricky to scale, because your segments could be very small and fast moving. 95% of marketplaces are demand constrained, so start by focusing on 1 side only.

Start testing campaign segmentation by customer type first until you get your CPA down to at least breakeven, before trying to solve for secondary variables like geography or availability. You’ll also need to start building a view on Lifetime Value (LTV) by each segment, so eventually you can think about bidding based on Return On Ad Spend (ROAS) or similar metrics. But every customer is different, and so this quickly also becomes a scale challenge that will require marketing data investments.

Don’t purely optimise on cost however, as the goal of this phase is to build number of connections not the number of users. Don’t underestimate power users who create a lot of connections even if they don’t spend a lot, you need to talk to and learn to love these people without becoming too dependant.

This phase is why 50% of startup investor’s money goes to Facebook and Google, you need to learn to love their tools and optimise (aka the sexier “growth hacking”) like crazy. But this needs to be just a phase – if you never graduate then you are at the mercy of the next algorithm change and/or well funded competitor. Don’t become the next GroupOn who spent like crazy here but never graduated.

3. The Product Growth Phase

Also called the Network Effect phase. This is the holy grail, where your product flywheel starts to spin and growth happens organically. There are 3 major things required here.

Finally and foremost – you need to understand what part of those calls in phase 1 relied on the human touch, and what was to overcome objective friction. Pour the gold of your customer service team over the trust issues, and scale the rest in-product with great UX that makes your funnel so intuitive as to be invisible.

Focus relentlessly on removing any friction in making a new connection; this could be through removing double commits, applying data and recommendation engines, teaching your users how their behaviour affects their success, systemically weeding out quality and fraud issues and many more concepts.

Finally you should clearly commit only to verticals where you can be number one. Your next key competitor will play in a narrower not a wider vertical than you, so you need to lead market share not just overall but more importantly in the key customer segments you care about. The network effect is a big moat, but it isn’t the winner takes all endgame it was first thought to be.

Are you working for a tech company?

Computer code screen

Is the company you work for a “tech” company? What does this even mean in today’s world where almost every company would grind to a halt without its technology systems?

There appear to be short and long term answers to this question.

The short term answer is that when you’re disrupting an industry and trying to raise capital, calling yourself a tech company helps. It promises higher growth, more access to tech VC capital, higher appeal to talent and disruption through innovation. These are all critical for kickstarting your startup and so adopting a tech company mantra at a startup phase makes commercial sense.

The long term answer is more complicated. In my experience, there are a number of behaviours within a company that determine it’s true identity as a tech company:

  1. Resourcing – At Google, the sales team proudly proclaim “we keep headcount tight so that we can invest in engineering”. Everyone knows the resource priority and it is actually realised. This is not purely a political hierarchy, the non-technical teams truly believe that only technology can scale fast enough to hit the audacious growth targets. There’s no such thing as “throwing bodies” at the problem – at least in terms of full time employees. Vendor or contractor growth however is a sign of masking an emerging problem here.
  2. Growth Targets – Technology works best at scale. For example, most national retailers don’t need automated warehousing because the number of SKUs and locations is not that high. If you’re Amazon however, you absolutely need this technology automation to even have a chance of hitting your massive growth targets – it only later amortises to become a competitive advantage. Tech companies truly believe that their growth goals far outstrip any organic growth projection for the sector as a whole.
  3. Time Horizon – Tesla believe that their most valuable asset will be the self-driving data accumulated over millions of kilometres of driving. This not only takes years of operating at scale to collect, but won’t become valuable until self-driving cars are truly pervasive and actually autonomous. It’s not a priority to fix the panel gaps on a $100k+ car, this will get fixed with scale and simplification. The core strategy and focus is their long term goal that requires almost puritan belief. This approach is certainly rooted in the evangelical beliefs of those who originally settled the west coast of the US.
  4. Leadership – You can’t stay the course on these long term goals if your leader doesn’t have the engineering ability and credibility to constantly reinforce the mission. As Bond Capital put it, “successful companies are led by planners – they have short and long term (10-20+ year) visions and business plans focused on data, execution, iteration, engineering and science”. It’s not just CEOs that need engineering ability, but also the board and investors are required to be increasingly technical in order to understand and support the tech company’s long term vision.

So, do you still believe you work at a tech company?

Leading Product through COVID-19

Last week Liam invited me to participate in a webinar titled “Pivoting Product and Product teams through a Crisis”. It was a real honour to be invited, as the panel was made up of a number of great product leaders from Sydney. Mable in particular has seen some big swings in supply and demand, as well as winning a very exciting Department of Health contract.

If you’d like to view the webinar, please see this YouTube video:

Pivoting Product and Product teams through a Crisis

Mastering Growth with Pirates

Mastering Growth Certificate

I recently completed the Mastering Growth online course with Harvard. As an avid listener of the Masters of Scale podcast I was aware of the content, but this course really made me take the time to reflect on the themes in the context of my role as CPTO of a startup.

The podcast episode that resonated most with me was featured in one of the lectures – Uber’s How Pirates Become The Navy. The episode is about the band of startup pirates learning the benefits and behaviours of becoming a navy. Coming from Corporate land however, I needed to do the opposite and learn when to be a pirate.

Google teaches you to plan big – if it’s not in the hundreds of millions of users or $ then it’s probably not worth doing. That implies that planning and robust debate is important, and exemplifies an engineering lead culture where scale is thought through.

When shifting to a startup, although you might get hired for scale they will give you credit for speed. The company and founders has lived through a period of survival and built a credit structure around that. If you want to earn enough credits to spend on that big scale investment, you had better show you can jump on a quick dollar today. It doesn’t really matter whether that dollar aligns with the strategy or not, what matters is that you moved quickly and you closed it. You have survival instinct.

The trick is knowing when you need to show this hustle. Anyone from corporate land can tell you that quick wins buy credits, but in corporate land there are very clearly articulated strategies and even words that will help you find wins. One example is a corporate mantra of being a “trusted advisor” – just go and get a customer testimonial that shows how they relied on your advice to make a decision. Pre-meditated decision making.

In startup land, it’s more opportunistic. You need to jump on the opportunity as soon as you see it, and then work out the messaging later. A key customer mentions a tangential opportunity? Launch an MVP and then test if there’s a market for it. Worst case the takeaway message is we moved too fast – there’s no punishment for that. Best case, you made a customer happy and a dollar. Now you can put your scale hat on, market size it, and think about whether it’s something worth planning for.

Is this a good core strategy? No, if you focused on this then your ever increasing team would be in an ever bigger state of fragmentation and disarray. As a rough rule of thumb, 20% of your effort should be launching MVPs and 80% should be landing the proven ones.

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