So, super excited to be here today with Andy James, who is a, recognized growth expert, executive so, Andy, why don't you just give a little bit about your background and kind of show what you've been doing in the last few years? It's basically been 15 years of startups. I was fortunate to spend time at Facebook, then Twitter and Morgan spent a bit of time at Greylock Partners as an entrepreneur resident. Just some interesting companies.
Quickly. And then, I made my way over to the Worldfront where I spent the last 5 years, and, I've been the president of the company. Along the way, most of my work has been focused on product and growth. The 1st really 10 years of it was focused on growth, figuring out how to scale adoption and engagement of consumer products.
And then I, really spent the last 5 years focused on core classic consumer product development, so that I could be skilled at building innovative products to unlock growth that approach, not just the, the method of growth that we now know today is sort of data driven and optimization oriented. Got it.
And so And that you, you know, you've been working in this kind of multiple different companies, multiple different environments, multiple different kind of use James, and, and and you're sharing with us that you get, you get asked by so many companies about, like, I've kind of got this sort of like uncertainty that kind of has evidence of put a market Flint, and then how do I put it back away from there? And and like, and I'm sure you've got some lessons and some tips from there.
Can you you know, how do you think about that? Or how should that early stage founders be thinking about this? Yeah. So it's not a surprise that basically a restart up once the they want millions of users and they want to get there quickly. And so they usually reach out and ask the question of, how do I set up my growth team?
And the origin of that comes from really going back to, I think, 2011, 2012, where the growth teams within Facebook book and LinkedIn and Twitter received a bit of publicity it were written about, as if it was the secret sauce behind those companies, and certainly it played in important Beller. Growth team, especially within the network effects business plays an important role.
And so I think the majority of the, startup world on to those examples, and they said, okay, therefore, since they have millions of users and they had a growth team, therefore, I need a growth team. And it was just, like, one size fits all approach to thinking about growth. And and so usually look out into me and they'll say, I I wanna build a growth team where we're trying to grow more quickly, can you help me think through the structure of my growth team?
And the thing that I do is I I take a step back and trying to reorient the discussion. So the way I think about it is, growth income from multiple disciplines in multiple sources. But at the end of the day, everybody at the company, one way or another, is working on growth.
The 2 higher level categories of things you can do that stimulate growth in the new product innovation, which is delivering new value to your existing users to get them more engaged such that you grow as a result of that, or by creating new innovative products that helps you unlock and appeal to different parts of the market you haven't appealed to before. So there's a lot of growth that can come from innovation.
It's just it can be hit or miss, right, because the nature of innovation is you're you're sort of going out on a ledge and saying, I need to build something new and I have the suspicion that if I build it, we're gonna succeed in a way that we haven't succeeded so far. And then there's the other type of growth which is really consistent with that Facebook linkedin Twitter growth team in the aura around that, which is very data driven and organization oriented.
And so those teams will run experiments in the product, experiments through the marketing channels will be very, very data oriented, almost data oriented and how they make decisions. And then they're comfortable not swinging for the fences necessarily, but looking for these 5, 10, 20% lifts in their current rate of growth and getting there through these these, sometimes clever optimizations of the products that they already have today.
And so when I take step back, I say growth can come from both. And if your objective is growth as a company, you've got to figure out the balance between optimization and innovation, and what is appropriate your type of business right now. And what the decision that you make on that today, it may actually change in a year or 2 where you decide you need to shift the balance between all optimization and innovation.
And so the general guidance I give, especially for the earlier stage companies, that have some amount of traction in Flint off, I remind them that the reason they got there was through innovating to begin with. And just because they had some traction, they got up off the ground to not all of a sudden, turn a blind eye to the method of innovative product development that got them there. And going out on a limb was was some new ideas some suspicion that this thing may work.
And then as a result, they're all hands on deck just doing this optimize based approach to growth. And so they end up skewing from being an innovative early startup to, Hey, everyone. Let's just run AB tests all day. And that may stimulate some additional growth, but I've seen it over and over and over again. And I was actually just on the board, board meeting this Morgan. With a company that has been 2 to 3 years into optimization Morgan, and their their growth is completely flatlined.
And they're sitting there shaking their head thinking like you must not be running the right experiments when the thing I'm trying to pound into them is if optimization is not going to do it for you right now, and you gotta go back to the drawing board of knowing how to build really compelling that helps you unlock different parts of the market that you're not appealing to today, or then enable your existing customers to engage with you much more deeply than they we are.
Yeah. It makes it makes total sense. I know from my own experience, there was, a a a truly and I, you know, came from a sort of we didn't call it growth then, but it was it was kind of growth back in web 1.0 era. So I was like scaling a travel business and then I I kind of took that online real estate. And we were doing sort of terrific growth stuff in 2008 here. And we kind of went from this kind of innovation mode to like a risk averse mode.
And so like innovation kind of slowed down and optimization was the kind of like flavor of the day, and it, and it, it sort of gets you it didn't get you out of the whole achieved and local optimum. Local Maxima. And, I guess, I guess, as you as you've seen the companies you work with, how do you you find this right balance between innovation and optimization? Cause there's all this kind of, often there's low hanging fruit until it's being picked off.
And and companies, I mean, you Pete big companies that they're devoid of innovation. And if you lose that muscle and super hard back. How do you how do you find the balance in the right time? So I I start by trying to give them a couple simple ways of thinking about it.
So the the analogy I tend to use with them so that they have language that they can use internally when having these strategic discussions is they need to think of their their team and their road map, almost like an investment portfolio. Right? In an investment portfolio, you want some diversity of stocks, and you want some bonds. Mhmm. Stocks are higher higher return, and you're really aiming for the long term trajectory that it puts you on.
And that's the reason why younger investors, someone like myself who's 36, but not retired until I'm seventy, it it makes sense for me to have a lot of stocks in my portfolio because I'm aiming for an objective that is well off into the future. And it requires that my portfolio assumes a higher level of risk to get there. And then the bonds are at the lower risk, the lower return.
And the way I map that to, a growth team or a growth mentality versus core product development is a growth team tends to be your bonds because they're running lower risk experiments. They're lower risk because you turn on the experiment it sucks. It's 30% worse than the than the control. Just turn it off. It's very low risk. And then core product development and innovation. Those are your stocks. And so I start by giving equity more risk. That's right.
It's been a surprise that you spent with the last few years, and, for that purposes. That's right. Investing is occupied for the last 5 years. And it turns out that it actually offers the fundamentals of good investing, offers a lot of philosophical insight to the fundamentals that we're in company building. And and so I give them that language and say, your job is to figure out that right balance.
And that balance is at least important dependent on what is this multiyear goal that you've set out in front of you? And can you draw a line to that goal based on some bad between the 2. So for example, at at facebook, this was we exited 2008, with just over a 100,000,000 monthly active users. The the management team and the board got together and they set the goal for the company in 2009, which was to exit the year at 300 1,000,000 monthly active users.
So we had to go from 100,000,000 to 300,000,000, and that just seemed like a preposterous idea. It was a stretch goal, huge stretch goal. But they dangled a big carrot in front of a bunch of people there that if we get that, we would be rewarded for it. And so we went into into thinking about, at least within the growth team, and we said, okay. How do we close that gap? Classic sort of gap analysis between, like, I'm here. I'm gonna get there. How do I bridge it?
And we were growing our active users at 1 a half percent week over week. And we did the math, and we said, well, if we just grow 1 a half percent week over week over the next year, we're gonna come up short of 300,000,000,000. We somewhere in the ballpark of 22,201,000,000. They said, Beller, that's not gonna Pete us there. But what if we grow at 2% week? And it turned out math is pretty straight. If we grow 2%. We Beller week for 52 sustained weeks.
We would exit the year at right around 300,000,000. So within the gross team, we said, is it possible for us to optimize our way towards 2% weekly growth from 1 a half percent weekly growth. And with a couple of days of sort of road planning at work and some some rough napkin math. We said, okay, this is achievable because we thought there was enough low hanging fruit that through experimentation, we can increase the sign up Pete, and we could increase reactivation James.
And we could lower churn rates by these 10, 20% amounts such we could get to that 2% weekly growth rate. That's effectively what we did. And at that time, in the business. And for the goal that was set, that was the appropriate mechanism to get us there. And so there was a rather significant investment in the growth team. And that was just really just breaking down the flow.
So this is the user journey, picking it apart and saying, well, if I can sort of like you know, small percentage James, the compound impact of that. That's right. As this kind of like top line impact in terms of the daily active users let's say you're an earlier stage startup, and your seed stage, you're doing a 1,000,000 a year of annual as revenue, and it's growing at a moderate pace.
But you know that if you wanna go from, you know, seed to series a to be that you're gonna have throw into 10 x in the next couple of years, somewhere in there. And if you just optimize the existing product you have today, in the vast majority of cases unless the rate of growth is already exceptional. And the vast majority of those cases, you're not gonna be able to produce that 10 x. So gotta be some some balance of growth coming from new product innovation.
So it's really stage dependent and goal dependent and the magnitude a gap to that goal. That's why I said earlier on, this balance of of growth coming from an optimization approach versus an innovation approach it's gonna shift during certain periods in in the company's history.
And, that's where I think as a management team or founders of the company, giving them that language, and that mental model associate, when they look at the org chart, they're like, well, about 70 percent of our people are actually working on building new products. About 30% are working on this growth team and given our goals and objectives and how we need to swing for the fence to go from as a to series b, it actually seems about right.
Yeah. I'd say that that's usually how I guide them towards that. There can be an exception to rule. There usually is. I think the exception is when it comes to businesses that that, and effects is uniquely focused on which are network effective businesses because let's say I'm I'm at Facebook or I'm at Twitter at linkedin, I'm working on the growth team, and I've figured out a way through which I can optimize the rate at which somebody adds a friend or a follower makes a connection by 2030%.
Mhmm. That behavior is the underlying driver of the network effect itself. That has compounding effects on the overall growth of the business. So if I can optimize that underlying driver of the network effect itself, that, that can be And maybe I don't need to go into product innovation mode. And when I ended up at Twitter, the the argument that I was making in 2010 was, hey, we're at, you know, 40, 50,000,000 monthly active users.
There's actually a clear path to get to 500,000,000 monthly active users in a handful of years or less if we take this optimization based approach, because I believe that the product goes good enough and had most of the mechanics of what it needed to be able to operate at that at that scale. So long as we really dialed in those underlying drivers.
Yes. So and not just look at the flows and sort of squeezing whatever's in there, but finding the trigger metrics or finding the sort of density and there's, you know, in network for businesses, it's it's getting Flint that critical mass in certain kind of use behavior. Also, by side or demand side that starts to kind of trick in this increase of returns, and you're and if you're instrumenting of your systems well enough, you'll see that in the data.
And that, and that, and I think if you've got companies that are instrumenting, they they can it's easier for them either kind of intuitively or through data to kind of see where that kind of optimizations are kind of hitting out. So here's a general rule of thumb that that I use and share with the companies that reach out. If it is a network effect business.
If it's a a Facebook, a new thing sort of thing or if it's a 2 sided marketplace or a 3 the marketplace, deciding to implement a growth team to tactically wise those drivers Currier, I'm I'm usually okay with that. I'm like, yeah, go ahead and do that. If it's not a a natural monopoly type of business. It's not one of those network network effect businesses. The way in which you win your market can be drastically different.
So I did this exercise early on with the some of the at, at, wealthfront. I said, okay. We wanna build the next Charles Schwab, like, one of the great financial institutions. Schwab has, I don't know, about 4,000,000,000,000 of assets that have been masked over 50, 60 years. Are we gonna get to a trillion of assets under management by just having a more optimized sign up flow? Yes. So that one's self evident. I was like, no. It's not actually that easy.
We actually need to be on the lead from a financial products for affected where we build financial products and services that are much more delightful for the customer and that are superior relative to what those large financial institutions can side. And as a result, we will amass significant assets over time through classic product innovation.
And so if it's not a national monopoly type of business, Generally speaking with most of the early stage startups and that are reaching out to me thinking about building a growth team, I very quickly talked on. Yeah. And I guess it, you know, as we were talking about, it requires the whole organizational focus.
So you're not just often in growth James, you have, the DNA can often be highly quantitative highly quantitative, highly analytical, and you need that kind of like innovation from from other parts of the organization. So where does that Like, where do you see this kind of prototype coming from in in in these spaces? To be honest with you, the, I'm really not too keen on the the focus of product development and consumer tech companies over the last, call it 7 years.
So for example, when I interview product managers, in the vast majority of cases, they can write SQL queries and describe the the the basics of AB testing methodology. But the vast majority of them have no clue how to actually talk to a customer and derive key insights and and how to, like, the art and the science of having great customer conversations through the classic art and customer development. Like, no one knows about Steve Blank, right? But, everyone knows about growth hacking.
Yeah. And that is a disaster from my perspective. I the the thing I want to talk about more, more publicly and write about is there needs to be this correction away everyone writes SQL queries and stare at at metric dashboards, and there needs to be a significant push in the direction of Pete out of the building and learn how to talk to people and know how to run a really well designed product development process that spits out high quality product at a fast pace.
And the vast majority of companies don't know how to do that Beller, and the overwhelming percentage of of product managers that I've worked with or that I interviewed, or that founders are looking for. They have no clue how to view it. It's a classic kind of innovative dilemma. Companies scale up and they become resistant to kind of innovation because things are working Beller.
And I imagine there's a lot of like the highly innovative product managers are kind of selling their own startups and sort of exactly and doing their own thing and getting out of the kind of the complicated politics that can exist in some of these these these big organizations. The Pete as the CEO, you know, the CEO of the product, which as it's that that terminology has a bit of a legacy there.
Like, it is a dying breed of Pete who can actually be the CEO and have that fuel for the product and for the customer because that's what a CEO has. And and you're totally right. That's what they end up doing. The ones who are graded, they just go start a company. So what so as you think about so so we talked about this this dearth of, innovation and product innovation and growth and great James. What are some of the other mistakes that startups make in This is this is a fun one.
Right at that point in which they raise the first meaningful financing of, call it, you know, 10,000,000 bucks. Where they can take a team from, you know, 5 to 10 people and maybe scale it up to say 30. They're in a position to be able to do multiple things at once for the first time. And then in that that enthusiasm, to be able to walk and chew gum at the same time, so to speak. They stepped out an org chart, a new one. They're like, this is the new org chart.
This is what's gonna set us up to receive this infusion of capital, which will then use to hire more people, and we'll swap these people into this newly designed order chart so we can do multiple things at the time. And they make 2 classic mistakes. The first is they designed this Morgan that's sent a mile wide in an inch deep. So I I was meeting with the company recently right in this position.
They brought in a significant amount of money in the series a they could scale to 30 or 40 people right away. And then they stubbed out 6, 7 teams, and this hypothetical Morgan chart. And, I asked them to indicate the the number of engineers for allocated free of those James. And, 2 of the teams had half an engineer. And so I asked them the question. I was like, if I put half a basketball player on the court to have ball team.
Mhmm. And he says, no. And I said, well, you've got half a basketball player on this team. And so that's not a team. I need you to consolidate this because you're fooling yourself into believing that you can do all 6 of these things in parallel. You might be able to do 3 that's probably a stretch, but 6 is is unrealistic. So they need to consolidate, so they're not a mile wide and inch deep.
And then the second problem they make or a mistake they make goes back to the stuff I've been saying, which is then they stub out these teams that through the the language of the name of the team itself, through the metric goals that they pick, it's clear that they're optimizing solely for the benefit of the business. Mhmm. And they're not thinking about how do I build a great product for the customer?
So an example would be if it's a subscription company, which this one was, They had a team, and the name of the team was lifetime value. Because, of course, they wanna increase the lifetime value. Finance people. They wanna increase lifetime value because that meant they make more money and, you know, everything keeps growing.
Yeah. But think about the junior product manager who's now working on this team who doesn't have enough experience and judgment yet to understand the pitfalls associated with calling a team the lifetime value team because as as James actually like to say is, you know, language is product. And the same is true. It's like, your org chart, the language you use, it massively influences is how people think about what to build within their teams.
And so you have this junior product manager who says, okay, I'm on the lifetime value team. My core metric is to improve lifetime value. Therefore, I'm going to load my roadmap with things that improve lifetime value for the business. And I look at the roadmap, and it's got things like AB tests around, the subscription pricing, and other sort of incremental optimizations.
And that's totally fair and reasonable, you should experiment with those things because there's likely to be a nice lever in there. But then I asked him, and I was like, of these teams are where on this roadmap are you building great new products or determining what great new products to build so that your customer when we're deeply engaged with you because you solve the meaningful problem for them, which then in turn increases lifetime value. So they're not okay. A core customer needs.
Bolting products to sort of fill this customer in the easy that kind of stated explicitly or kind of infer by other active in it. That's that's the co activity. They build that into the language of the org chart. Yep. And then all of a sudden, the permission to innovate. That's right. And then all of a sudden, they're 2 years into it.
They're like, wait, we've just been running AB tests and and fiddling with little dials and jobs the whole time, and lo and behold, we're not track for our big 10 x. Yeah. So those are the that Morgan chart disaster. And I can't blame them because where do you go to school for that? Yeah. You don't learn that anywhere. And you think and your board member has been saying to you, like, we need to update the lifetime Beller.
We need to get that and right and and sort of thinking with product customer mindset from the outset, but how you orientate that through the organization. So startups need to really incorporate their customer needs and the external product experience into their internal organizational chart and orientate the the the organization and align it with automate a customer needs, rather than some financial metrics or kind of or product execution goals. That's right.
Because that there the the notion of shipping the org chart, which a couple of very successful operators, well before our time in in technology in the valley they identified this a long time ago. They said there's this immutable law that the org you design makes its way into your product hence shipping your chart And so, for example, if I set up a growth team and one of the primary functions is to run experiments, lo and behold, months later, I have a bunch Morgan test running in my product.
We we went through that exercise and said, well, we need to help people with their investing, and we need to be exceptional from that standpoint. But we also need to help them, with their financial planning. Because if you have this amazing financial plan, the things you invest in and how should invest James sense in the context of your financial plan. And then there's this third thing that we need to do, which I'm not gonna fill the beans on Pete. That's coming out shortly.
That if if we help the customer with those 3 things, Beller, then we have an amazing product. And we're willing to take the leap of faith that if we execute well on those 3 things, it'll put us on this longer term mark to get there. And, it it was a really transformational moment for the for the company. And now the product is really rich from an estimate product standpoint.
It's got this amazing financial planning experience built into it, and customers are engaging in that with a, at a high rate. And then there's this third arc that's coming out Morgan we suspect the same thing will happen. And then there's a little bit of optimization that happens on the side. Fascinating how these how these kind of unexpected consequences of organizational design, which defines how you allocate resources and how you incent activity, which which has this downstream behavior.
So so 2019, like, you know, feels like growth has been around for or the sort of term growth that's been around for more than a decade, like, what what do you Pete? Like, you know, some things stay the same fun, some things what do you see like the top, companies and top practitioners doing perhaps in 2019 that they this kind of new and noble and innovative that that they weren't they weren't doing before? Well, that's a good question.
If you go to one of my favorite tools, Google Trends, And you enter in the keyword growth hacking, which is, you know, that's been the the monkey of, kind of this activity. Of the moment. Yeah. And it kinda took on a life of its own, and you look at the search trends on that. At a global perspective, it's still kind of left Flint the right. But it if you unpack it a little bit, you start looking at a country by country basis in the US, it's it's declining asymptotic towards 0. Right?
It's it's started its descent in the UK, the same thing. These are a few of the markets that picked up on that belief system Currier. And if you look at a few other countries in in Asia, Europe, Latin America, it's it's still at the earlier stage of growth hacking as taking a life there and and growing, and they haven't necessarily started its descent, but I expect it, give it another year or 2 for that belief system to mostly die down.
Now if you contrast that with with and is that because growth is basically integral to a product manager's Morgan? And so it's no longer a discrete thing, or or is it? I think it's a lagging indicator that a bunch of startups then try to hire growth hackers, try to build growth teams, and they didn't succeed despite getting that. And so the proof is in the pudding. It's like, guess what? Just hiring this growth hacker or building a growth team isn't the silver Beller.
And, and so I think that the search trends is just the lagging indicator of the realization that has been happening over the last couple of years. Now, if contrast that with search query volume for product market fit. There's a couple things that stand out is it's getting traction, and you I I would say product market fit is demonstrating product market fit in terms of of the search query volume.
And the intent there and I hope that that continues because it's it's almost like looking at the graphs of my space versus Facebook in 2008 Mhmm. Where They were then starting to change their trajectories, and one's gonna quickly eclipse the other. And, I'm I'm actually working on a blog post on this right now, and I'm looking forward to putting it out, but I expect that to happen. And so, do I have any specific details? I mean, that's a great thing, right?
It's like finally Pete are not kind of like squeezing the kind of lemon. There's no juice left in it and they're not hacking That's right. Doing the the good stuff. Now I don't want us to throw the baby out of the bathwater. There are very, very good growth operators and practitioners. Brian Balfour running the Reforge series, and a handful of other growth folks who have now actually gone into the investing Flint. Andrew Channette, Andrews, and Horowitz.
There are people who are very good at understanding growth, whole a lot with the things that I mentioned. And the the things that they've learned and the curriculums and the teachings that they provide, I think that stuff is still legitimate today. And will be into the future. For example, how to think about, retention and activation.
And those are useful frameworks but I do think it's gonna be supplanted by much more rigorous focus or hopefully on people going back to the basic of how to establish product market fit, which is identifying the target customer, really understanding and doing that through this iterative qualitative process that's very hard and labor intensive.
And then building a product that ultimately delivers enough value for that customer such that they're so Pete and they're delighted by the experience that they can't help but tell somebody else about it. Yeah. And that is the wind and the James of organic growth that if you establish that, it is really hard to compete against that.
And so I don't have any specific predictions around 2019, but a Morgan broad prediction 2019 beyond, which I think is gonna be predicated on Let's get back to being innovative. Super. Awesome. Well, thanks, Andy. Yeah. Is it awesome conversation insights? Yeah. Thank you for adding. Appreciate it.