Welcome to the fifteenth of our Entrepreneurial Wednesdays series. In this series, I share my thoughts on lean entrepreneurship as I take my first steps in my journey. I will be sharing my lessons learned with you.
By now, you should be absolutely overwhelmed with information on pivoting. Like I already mentioned, pivots are art and the information well is really deep. But there is one thing you should never forget whenever someone mentions pivots. You have to understand that pivoting can work as a tool for correcting the mistakes you have made. It can save the whole startup! I feel really frustrated when startupers look at pivots with disgust when it is the pivots that give them new opportunities when approached the right way.
What should I do next?
With this article, we are jumping to a different area of building startups. The question is. How much time should you invest when you want your company to be successful? I don’t take A LOT as an answer. The answer with some startups is ”I don’t know.” You can invest a lot of time but waste opportunities by researching other alternatives. Or you can do it vice versa. None of these two is good (obviously). The most important thing to understand is which activities generate value and which are just waste of time. It begins with understanding the answer that you realize you have found the tool for time allocation. Well, it sounds so easy when I put it like this. It’s not. But once you understand that each and every activity should aim for something, you will understand what to do next.
What is your engine running on?
According to Eric Ries, sustainable growth is based on three growth engines: paid, viral or connected with the customer. These are different ways of achieving growth. When you find yourself in a situation when your company is growing and you don’t know why it is as bad as if it was not growing at all (why? check this out!). The next thing for you then should be ”studying” your growth engine and understand why is it moving the needle of your company (in other words, why is it so successful in attracting so many customers). Once you understand which growth engine is no.1, you can focus on this one and build the foundations for even better performance.
The main objective of growth engine is to generate and bring in NEW customers. The point here is that you cannot only rely on the customers you already have without trying to acquire new. At some point, you would lose the sustainability. Even though, there are some ways of how your actual customers can help your growth: word of mouth (best described in book from Gary Vaynerchuk – The Thank You Economy), side-effect of using the product (when you use PayPal your friend receives an email and gets to understand the service), paid advertisement (only if marginal costs are lower than marginal profit), and finally by continuous use (such as subscription, monthly payments, especially SaaS startups).
Okay, what now?
In some startups, the team finds itself in a deep discussion on what to do after the company went public. Obviously, there are many things that need to be done. But first things first right? But what should be the no.1 thing? I think, the company should ”divide” its attention to both growth and product development at the same time. Without ”divided” attention you can find yourself with a good product but no users. The company needs to invest energy into searching and acquiring new customers, optimizing the service for actual customers and either build higher overall quality or cut the costs.
This has been just a small glimpse of what’s to come next. Now you know and understand the background for growth engine and why it is needed. In the next article, I am going to dig deep into the three growth engines I mentioned and discuss churn rate and its importance. Looking forward to it!