Multi-Office Scaleups: Where to Hire What Function?

People_Multi-office-Plan__t010_comic

Distributing or centralizing teams

Multi-office scaleups struggle to organize their teams efficiently. Once your scaleup has several offices, how do you organize your teams? Should each function have representatives in each location? Or should certain functions remain centralized in headquarters? And if so, which?

Many scaleups struggle with these decisions as they grow. This is why I have developed a one-page tool to plan resources across different locations. You can download it here if your scaleup is struggling with the same issue.

People_Multi-office-Plan__t010_dl

Multi-office scaleups Rule #1: accept the trade-off

The first thing to understand: centralized and decentralized models are a trade-off.

The more you decentralize resources, the more you optimize for local responsiveness:

  • sales and service people who are close to the customer;
  • people in international markets who speak the local language;
  • customers served only by specialists in their vertical.

Decentralization means you can fulfill customer desires better, but at a higher cost. It values effectiveness over efficiency.

The more you centralize resources, the more you optimize for economies of scale:

  • Easy reallocation of development teams to new projects;
  • Call center agents covering for each other while on breaks;
  • Stronger bargaining power from suppliers.

Centralization means you combine forces, but your customers get a more generic experience. It values efficiency over effectiveness.

The best scaleups thrive because they reconcile this dilemma. They reach both effectiveness and efficiency.

This is why the team allocation to different locations is such a difficult choice to make. You are facing a trade-off, even though you need to serve both sides of that trade-off.

Multi-office scaleups Rule #2: purpose by location

Do you face much tension around who should hire where? If so, have you defined what the purpose of each location is in your scaleup? For example…

  • Is your Chicago office a regional headquarters or a sales office?
  • Does the sales guy you hired in Singapore constitute a full office location?
  • Is each office managing its own profit and loss or would you rather manage those by region?
  • Is your headquarters a sales office in its own right or just supporting the frontline offices?

Providing clear purposes before creating the hiring plan will help avoid much tension. It also sets clear expectations how much of a career path people can expect in a certain location.

Multi-office scaleups Rule #3: differentiate by function

What is the key to reconciling efficiency with effectiveness? It is to make different decisions for each function or department. 

Some departments should be completely local, others should be completely central. Many end up in-between: skewing local (key locations) or skewing central (critical mass). 

Differentiating by function sets up the healthy tension that makes a scaleup successful. Local functions can take tactical decisions in their area without resorting to headquarters. Central functions gain buy-in for strategic decisions by creating momentum among local functions.

The key is to determine which functions to centralize and which to decentralize. This is what our one-page tool can help with.

Multi-office scaleups Rule #4: the success model

Each function has a “success model”: key deliverables and key success factors contributing.For example,

  • Sales will bring in new contracts. Key success contributors are good relations, responsive tenacity and flexibility.
  • Engineering builds reliable systems. Key success contributors are redundancy in systems, robust testing and a well-managed architecture.

A function’s success factors determine if decentralization or centralization makes most sense. For example,

  • Sales’ success factors point to a local bias. It is hard to maintain good relations from a distance, or to be responsive across several time zones.
  • But Engineering usually has a central bias. Redundant systems in each location with customers would be cost prohibitive. It is also easier to enforce robust processes when people are generally in the same location.

People_Multi-office-Plan__t010_dl

Using the Multi-Office Plan tool

  1. On the left, list your scaleup’s ten most important departments or functions.
  2. Then, think through each of these functions’ deliverables. Circle what their ideal success model is:
    Hyperlocal:
    in as many locations as possible. For example: sales of softdrink cans; coffee franchise; automatic teller machines.
    Key locations:
    only in the locations that matter. For example: consulting offices, car dealers, luxury goods, field sales force.
    Critical mass:
    when the function needs several people in one place to do well. For example: specialist support functions, knowledge leads, regional synergies. 
    HQ attendance:
    when the function must be near the top decision-makers. For example: corporate development, finance, general counsel.
  3. Then, list your key office locations in the columns, and outline the purpose of each office:
    • Start with headquarters: is its purpose omnifunctional or back-end only?
    • Add any regional offices you might have;
    • End with locations that have a single remote employee.
  4. Finally, write down the projected headcount numbers in the people column on the left. 
  5. Then split up these totals among the different offices you have identified.

Best is when each executive does this exercise individually first. Then compare notes as a team.

Keep Growing—Keep Your Culture!

Competitive Scale-up Positioning: Know your Sandbox

Are you sure you own your sandbox?

Strengthening the competitive positioning for your scale-up company is the key to reaching product-market-dominance. Using our free “sandbox” tool, you can quickly figure out your competitive focus in products, segments, geography and activities.

Are you growing in all directions?

Is your scaleup company seeing incredible growth? You may both be lucky—and set for disaster. Of course, growth is definitely what you want for your scaleup. But when it happens on all fronts, you may stretch yourself too thin. Does your approach feel too generic? More specialized competitors will be pitching to your juiciest customers already. 

Defining the sandbox(es) you play in

In my experience, the times when you could grow in any direction are the best times to be clear about your “sandbox(es)” you play in:

  • product offering(s)
  • customer segment(s)
  • geography/ies served
  • business activities performed in-house

Our competitive sandboxes tool (free download) helps you and your team define that very sandbox. Both for you and your closest competitors.

Towards product-market-dominance

Startup founders seek growth in any direction promising  product-market-fit. But scaleup leaders seek only growth that gets them closer to product-market-dominance. The #1 goal of a scale-up is to become the undisputed leader of a growing market segment. However narrow the definition of that segment may be. 

All about focus on the chosen market

Winning a chosen product-market-segment requires intense focus of resources. Are you nowhere near projectable leadership of your current markets? Then you’re not focusing enough. The solution is to define your market more narrowly. Not broader, in the hope that you may catch a few clients elsewhere.

The fewer sandboxes you have to play in, the more likely you are to dominate one. And once you have one under full control, it becomes much easier to expand into adjacent sandboxes one-by-one. Without risking control of your home base.

Verifying your sandboxes 

The competitive sandboxes tool helps you understand the sandboxes you serve. I recommend the executive team use the tool in a quarterly or annual planning session.

  1. Defining the sandboxes. List products sold, geographies (continents) covered, segments targeted and key activities performed in-house. In case of doubt, count only activities/products/segments/geographies with resources assigned. Do not count opportunistic forays without an owner.
  2. Now plot the number of products, segments, geographies and activities on the axes of the chart. E.g. if you sell three products, plot a dot on coordinate (0,-3). You should have a dot on each of the four axes. Connect the dots with a line. Mark the squares within the shape with a black (strong) or white (weak) circle. 
  3. Compare with your colleagues. Do you have the same shapes? Are they roughly the same size? Can you agree on a common shape and size?
  4. As a group, identify your top #3 competitors. Do the same exercise for each competitor. First as individuals, then compare results. 
  5. As a group, discuss which competitor is most and least successful. To what degree is their focus a driving factor of their success?
  6. How can you increase your own competitiveness? Would you be better off expanding your sandboxes or reducing them? In which direction would you first seek reduction or expansion?
  7. Write the desired areas of focus for the short, mid, and long-term into the table at the top right.
  8. Plot your short, mid and long-term sandbox positionings on the bottom right chart.
  9. As a group, derive the most urgent short-term action points. How can you move from the current state to the future state as fast as possible.

Download the Sandbox tool now

If you have questions about narrowing your target market, contact us today. If you are ready to take the next step, you can download our app, “Competitive Sandboxes”, here.

Quarterly Rock Ready? Set and Go with This Execution Plan

Starting to Move a Quarterly Rock

Effective Ownership of Quarterly Rocks

In their quarterly offsites, the executive team determines up to five quarterly rocks that are key in driving the business forward.

It is a high visibility opportunity to own one of these rocks on behalf of the company. But how do you make sure you deliver on its promise?

Our Quarterly Rock Execution Plan (free download) is your guide to setting and meeting your goals. Determine your priorities, assign project owners, and make sure you finish on time.

Download Slide Template | Quarterly Rock Execution Plan

A Plan for Any Rock

We’ve designed this tool to help you cover any possible rock the executive team may have set. We have seen it work effectively for rocks as diverse as:

  • Launching a major sales initiative;
  • Reducing your error rate;
  • Creating transparent accountability practices;
  • Setting another step towards product-market-dominance
  • Enhancing your delivery speed;
  • Refining your planning process;
  • Lowering costs;
  • Developing a lean workflow.

This one-page tool is designed to help you ask the right questions of your sponsor, and then to have your team build the best answers. Just follow this simple step-by-step process.

Basic rock definition

  1. Give your rock a name, if the name you got from the executive team wasn’t clear enough yet. Issue a unique name that defines your project. It should be clear and speak directly to your goal. But that doesn’t mean you have to be boring – feel free to have fun and get creative!

  2. Appoint a sponsoring executive team member to the Rock. Who will lead the rock’s effort? Who’s in charge of making sure the assignment finishes successfully? You want to empower your team with project ownership. Write the name of your sponsoring executive in Box 2.

  3. Assign team members to the rock. Who will support the efforts of the project? What workforce will your project leader have at his/her disposal? This is the team that will make your goals into accomplishments. Recognize your labor. Appreciate the people that get it done.

  4. Define your overall deliverable. What is the goal of the rock? What are you producing? What product, service, benefit, and/or improvement will result from the project’s completion? To define your overall deliverable, try finishing this sentence: “Sponsor considers this rock done when _.” Delineate your overall deliverable into just a sentence or two. You can elaborate during the next step.

Go one level deeper

  1. Set requirements for the rock’s success. What’s needed to make sure your project is fulfilled? What tasks need to be complete? Here’s where you get into the specifics. Outline any and all requirements related to the rock’s success. Some things you might consider include project budget, resources needed, and the amount of time the rock will take to finish.

  2. Breakdown the overall deliverable into key milestones. How will you know if your rock is succeeding? How can you measure this success? Step 6 is where you breakdown your overall deliverable into specific phases and milestones. This isn’t exactly a schedule – but rather a map to your vision’s completion. Figure out what needs to happen and in what order. Decide who will be in charge of these phases. Set deadlines for the fulfillment of these milestones.

Risk assessments and delegation

  1. Identify risks to the rock’s success. What challenges must be surmounted? What might make your rock fail? Figure out potential hazards you may face in the future. Then, plan in the present. We suggest you ask your sponsor to help your identify potential problems and solutions.

  2. Delegate the next steps. Now that you have your personal, schedule and resources organized, it’s time to hit the ground running. Identify the immediate actions that kick off this momentum. Assign these tasks and decide when they are due. The planning is complete—now the real work starts!

Download the Quarterly Rock Execution Plan now.

Prepare for successful project execution with the Quarterly Rock Execution Plan. Download it here:

Download Slide Template | Quarterly Rock Execution Plan

Hire More A-Players for your ScaleUp (with free toolkit)

Hire More A-Players for your ScaleUp (with free toolkit)

How Can You Hire Only A-Players

How can you hire only A-players? What if you knew there was a tool that could help you zero in on them whenever you recruit someone new? Look no further. Our “Preparing to Hire an A-player incorporates the teachings of Brad Smart (“Topgrading”) and especially his son Geoff Smart (“Who”) so that you can apply best practices right away. Download it here to make hiring A-players a reality.

How we define A-players

A-players are not just “people you like” or “people who always perform to expectations”. In a scale-up, the standards are higher. A-Players in a scale-up are people who both:

  • Have a 90% chance of delivering the 10% best performance in their role—for the salary you can pay them. 
  • Live all the core values of the company. And this is whether you like the person or not. And it is also—especially important in times of diversity—whether they look like you or not! 

A-players live your core values

The core values are an image of the personality of your organization. A strong personality is essential to your success because it reinforces how you work together. When hiring new talent, you want to ensure they integrate with the company culture. A-players quickly integrate with the business culture and live all its core values. 

A-players get the job done

When you’re pressed with deadlines or up against a challenging task, A-players will be there to bring you through. They are tenacious and resourceful. No job is too difficult for them to tackle and come out on top. When you need to get the hard job, the long job, or the job no one else wants to do done, call on an A-player and it’s as good as done.

Free two-page tool: “Preparing to Hire an A-Player”

How can you hire only A-players? What if you knew there was a tool that could help you zero in on them whenever you recruit someone new? Look no further. Our “Preparing to Hire an A-player incorporates the teachings of Brad Smart (“Topgrading”) and especially his son Geoff Smart (“Who”) so that you can apply best practices right away. Download it here to make hiring A-players a reality.
Cashflow Acceleration: Improving the Four Success Formulas

Cashflow Acceleration: Improving the Four Success Formulas

Improving your Success Formulas (free worksheet)

Does your company seem to get less efficient as it grows? Are you constantly playing arbiter between the heads of your different functions? Then it may be time to identify key cross-functional processes and improve your four success formulas. Our free “Cash Acceleration” worksheet will enable you to reap the cash hidden in inefficiencies, while avoiding big-bureaucracy process redesign.

From filling functional gaps…

An entrepreneur in the middle of scaling up your business, it is sometimes difficult to see the forest for the trees. In most cases, businesses are started by people who have a particular expertise or knowledge base that opens a market for their business idea. It is also true that these entrepreneurs have gaps in their knowledge of starting and running a business. These gaps may pertain to administering the business, finance, human resources, engineering, or any number of areas that require particular expertise.

…to establishing cross-functional flow

It is natural to seek to fill these gaps by hiring experts to fill roles in the company and manage various aspects of the business. Over time and as the company grows, organizations will develop functional silos under these subject matter experts. As you scale up, you must be aware of these silos and be ready to consider how these individual functions in your company must come together to serve your customer. Otherwise, you may lose sight of the holistic, end-to-end process in your company and unintentionally complicate your customers’ interaction with your company.

Determining your key success processes

If this silo effect is affecting your operations, you will need to improve your day-to-day operations in terms of cost, quality, and flow by integrating functional areas to work smoothly together. The key to reorienting toward this more holistic approach is to introduce more process-based thinking. One way to do this is to have an executing brainstorming session to delineate and agree on key success processes for your business. This will help you to generate a common understanding of these key processes and assign accountability for implementation and improvement.

Best Practice Success Formulas for Tech Scaleups


● Product Development Cycle: Innovation Machine
● Marketing and Sales Cycle: Customer Attraction Machine
● Customer Success Cycle: Value Delivery Machine
● Billing and Optimization Cycle: Profit Protection Machine

How to get started

To start improving your success formulas, in your next executive offsite, first determine which 3-5 cross-functional processes are absolutely key for long-term competitiveness (or take the four we propose if they seem to reflect your busienss model. Then agree on what to define as the input and the output of each process. Finally, assign one executive each as a cross-functional owner of each of the success formulas, accountable for ever decreasing cycle time, cost and error rates.

How to ensure continuous improvement

In a next quarterly offsite, dig deeper to quantify the success formulas with tools such as our Cash Acceleration/Improving Your Success Formulas worksheet. These types of tools provide a scorecard to benchmark your current status and measure improvements on a quarterly basis as you continue to scale up. All with the goal of integrating your operations to enhance your customer’s experience with your company.  

The More You Focus, The Better You Scale–Zentrick’s Pieter Mees

The More You Focus, The Better You Scale–Zentrick’s Pieter Mees

Fewer Markets, Bigger Profits

Video interactivity provider Zentrick

The story of Zentrick illustrates the impact that focusing on the core can have.

Zentrick is a New York-based scaleup with roots in Belgium. They sell a video interactivity layer to advertising technology platforms (DSPs and SSPs). The product provides market-standard video measurability and interactivity without  in-house development.

CTO Pieter Mees told me about the turnaround Zentrick has accomplished in the last two years.

Hedging Bets on Several Market Segments

“As a startup four years ago, we were eager to find traction for our video interactivity solution. So we tried as many market segments as possible. From platforms to brands and from agencies to measurability providers.

Technology Scales, Go-to-Market Does Not.

“We are all engineers and computer scientists. In class we learn that the bigger you scale your technology, the more efficient you become. But they forget to tell you in engineering school that the go-to-market doesn’t scale.

“We were trying to build market positions in three different segments at the same time. Without a chance of reaching a dominant position in any single one of them.

Disrupters Focus on Market Power

“Any startup, angel and VC wants to see more growth than profit in the short term. But it is also crucial to keep your eye on building  market power over time. So that you reach your aim of real market disruption. And can at least project outsized profits at a future horizon.

“Comparing our different customers’ needs, pain points and willingness-to-pay was eye-opening. It became obvious that advertising technology platforms should be our first core customer.

Making up for Lost Revenue

“Foregoing revenue potential in the other segments was hard. But  we stuck to focusing our go-to-market completely on these technology platforms.

“And you know what happened? We were able to focus our product value more on this core customer.  This made the product more attractive to them. So our pricing power increased.

“Within a year, we almost made it back to our previous sales number. But now from only one segment where we were finding increasing market power.

Key to Reaching Profitability

“Even more surprising, we made those sales with only half the people we used to have. This turned Zentrick profitable even while we are still on our A round funding. We are well on track now to reach product-market-domination.

More Attractive to Investors

“We are still a growth company and of course we want to grow much further. But now we have the luxury to attract funding at a much higher valuation.

“Or we can decide to forego funding altogether for now. And increase our market power in an organic way.

Stop Pivoting After Product-Market-Fit

“We learned from this episode that product-market-fit in one segment is all you need. After you find it, your focus has to move to product-market-domination.

“Stop pivoting or trying to find product-market-fit in other segments. Or attacking all these attractive revenue opportunities at once. All you will do is dilute your efforts. You build up lots of extra cost without a corresponding increase in revenue.

Strong Core as Base for Further Growth

“I do see Zentrick grow beyond just advertising technology platforms of course. But now we can do that from a position of strength. And that is so much better then trying to conquer three markets from a position of nothing.”

A Focused Fortress

Focusing—not Hedging

The first step in restoring growth momentum in a scaleup company is to focus the energy. Focus on the one product-market that the company has the biggest chance of dominating.

This focus is not self-explanatory. Most scaleups have entered five to ten markets, but have only obtained a weak position in any single one of them. This dissipates growth momentum, energy and traction.

Restoring growth potential to a scaleup is all about rebuilding market power. Leadership needs to focus on building one big, defensible stronghold. This means divesting from all other areas, except those that vitally protect the primary franchise.

Hedging is for Established Enterprises

Many CEOs and scaleup executives are reluctance to place all their eggs in one basket. They would prefer to be active in several markets at the same time. This allows them to the hedge future growth potential and feel less exposed to risk. This mindset is especially common with executives that have come from large companies.

In large established enterprises, hedging is the name of the game. Unlike in scaleups, the strong franchise at the basis of all cashflow is already given. Most management attention goes to market and product expansion.

The established enterprise needs to be present everywhere. Whether for growth potential or to prevent others from building up new strongholds. But you can only find success in so many  markets in parallel with a vast number of people at your disposal. As we said before, the technology may scale, but the go-to-market doesn’t. So only giant enterprises like Oracle, Microsoft, SalesForce and IBM can afford to be present in many different markets. And manage a portfolio of several business units that each have their own peculiar go-to-market and products.

For Scaleups, Hedging is Too Risky

Trying to mimic this hedging structure in a scaleup company is  folly. Geoffrey Moore explained that in a scaleup company, hedging is far riskier than putting all your eggs in one basket. This is because a scaleup’s speed and agility are the only ways it can compete with large enterprises. Speed and agility are a direct function of how simple the decision structures are. The more complexity it embraces, the faster it will lose its competitive advantage. Different go-to-markets, channels, products, geographies etc. etc. all add to this complexity.

So the more the scaleup tries to mimic a large enterprise, the faster it will lose. After all, every scaleup still has factors fewer people than the large competitors in their field. Some founders will challenge this with the superstar quality of their hires. But these superstars are unlikely to thrive when their work adopts as much complexity and bureaucracy as corporates have.

Taking the First Steps to Focusing

So what is a scaleup founder to do? The first step is for the executive team to commit to focusing on one stronghold. That means stepping away from the hedging strategy. And from all the sales or product “tries” that have taken the company into new territories.

It means defining the core purpose of the scaleup company. The core customer that it wants to serve. And the core value proposition the scaleup will compete with. How to do that will be the subject of the next post.

Following the Wrong Theory of Growth

Following the Wrong Theory of Growth

The Right Theory of Growth

Many of the ScaleUps I start working with are scrambling to reach former rates of growth. But are they using the right methods? More often than not, I suspect they apply what Chris Zook calls “The Wrong Theory of Growth”

Situation-dependent

The first thing to realize is that there are several root causes for stalling growth. So restoring growth momentum requires different solutions depending on the problem. Dealing with a growth stall is situational, there is no one-size-fits-all. It is one thing if you are trying to respark growth on the basis of low and shrinking market share. This would suggest that customers are not very happy with your product. You should increase your Net Promoter Score. But if you have reached domination and your share is growing, expansion into a new category is solid.

Small market share

The large majority of scaleups I work with have a small market share, at least when we get started. It does not worry me as it is a normal starting position for all startups. What worries me is scaleups expanding beyond their core before dominating that core. Many scaleups are building footholds in several markets, while dominating none. The technology may scale, but the go-to-markets never do. It is very simple. When your marketshare is small, your job is to make your market share bigger. In fact, to make it dominant. Startups who invest in an adjacent field before dominating their core market commit a serious strategic mistake.

Large market share

When your market share is already large, i.e. you are one of the top three players in your given product-market, you are in a more comfortable position. When you aren number two or number three, your job is still to become number one and a lot of the advise off the previous action still holds for you. But when you are already number one, your strategic options change. If you are the leader and your market share is shrinking, that is catastrophic. Most likely, some competitor has found a way to appeal to a customer needs that you haven’t discovered yet. You need to neutralize this as soon as possible to maintain your dominant position. I usually recommend a deep dive into your the net promoter score system. This helps you figure out how customers are disliking your product compared to competitors’. Only if your market share is large and it is still growing, shoulld you start expanding into a new product or category. It is notable how few of these that self action on this slide actually lead to this new product or category. A new product or new category is the intuitive solution to many startup problems, but often not the right one.

Market share unclear

I will bet you cannot imagine how often clients tell me that they do not know their market share. Or that they are active in so many markets, that it all depends what markets we are talking about. In both cases, I suppress a massive frown. Not knowing your market share, or not even being able to estimated, betrays a naïve approach to growth that always leads to failure. Making a growth company successful is or about building a large market share, or building market power in other words. If you cannot even measure the degree of power you are building, then that betrays undisciplined growth projections. You can be sure that you are applying the wrong theory of growth. Even worse is when you are active in several markets and you do not know the market share of any of them. Or, you tell me that the market shares are so different from market to market that it is impossible to draw generalized conclusions. I guess it is already clear that I do not hold this argument in high regard. The job of the scaleup is to build extraordinary market power in an attractive segment. If you have no data on how well you are doing, then you’re not doing your job.

When Startup Growth Stalls

When Startup Growth Stalls

Dealing with Stalling Growth

Sustaining growth is crucial

Startup life does not get easier after Product-Market-Fit. To reach product-market-domination before competitors, your startup has to maintain ever increasing growth. Until far into the market majority.

Stalling growth may not be such a problem if you rely on internal funds. But if you need venture capital, stalling growth is a death knell. On a tricycle you can stop and sit still, but on a bicycle you need to keep moving not to fall over.

Have you raised venture capital? You have no doubt told investors about amazing growth potential in a massive market. As soon as your growth rate slow down, investors worry about losing that potential. It will not be long before they suggest new management might do a better job than the founders.

Growth is not Automatic

But sustained growth is not automatic. Founding myths often suggest growth exploded as soon as the company reached Product-Market-Fit.

But in reality, most startups experience a premature flattening of their growth curve. Often more than once in their journey.

Not only is it possible to overcome a growth stall. It is also necessary that founders prepare to deal with one.

Response time too slow

For most founders I work with, the first challenge is to shorten the time it takes to respond to a growth stall. See t(r) in the chart.

It is obvious that, the longer the startup takes to respond to the growth stall, the bigger the gap they must bridge. So why is founders’ response time so long?

Undiluted Kool-Aid

The problem is the Kool Aid factor. In the early startup stage, it is crucial to assemble a team of “true believers”. Following the Founder’s vision and drinking the Kool-Aid is the mark of a loyal cofounder.

When the startup finally reaches Product-Market-Fit, the vision is completely vindicated. New funds flow in and the team doubles down on Kool-Aid expectations. Soon, the organization develops cognitive dissonance and blind spots occur.

A growth stall indicates that the vision needs adjusting. It requires admitting you have a problem that Kool-Aid alone will not solve. Only founders who work hard to create a culture of debate and dissonance avoid this fate. That is why it is crucial, in the scaleup stage, to mix one part Kool-Aid with one part reality.

Waiting out the Setback?

Teams with undiluted Kool-Aid often fail to respond to the growth stall altogether. Even after the numbers have become obvious and investors get worried.

Management teams tend to explain away disappointing numbers as temporary setbacks. Waiting out the setback seems easier than making changes.

Launching a New Feature?

Tech companies, in particular, often blame the growth stall on a missing feature:

  • An important prospect has been asking for something the product does not support.
  • A key competitor already offers a feature that is still on our roadmap.
  • But most often, the founder imagines that a key feature from the product vision will spark new growth.

Launching a New Product or Pivoting?

Some teams interpret a growth stall as a failure in Product-Market-Fit:

  • We declared Product-Market-Fit too early.
  • The market that the product fits in is far smaller than we projected to investors.
  • Or the product we have serves a less attractive side of the (much larger potential) market.

In these situations, teams often focus on building or buying a new product. Sometimes they even step back to Lean Startup frameworks to pivot away. With the hope of finding new Product-Market-Fit.

Jumping to a Solution

So what is the right solution to dealing with a growth stall? It starts with finding out what is the root cause of the stalling growth…

[to be continued]

32.6X the Opportunity

32.6X the Opportunity

Fit at just 2.5% of the market

The Startup phase obsesses with Product-Market-Fit, the Scaleup phase obsesses with Product-Market-Domination. The most important reason for this shift in attention is the sheer size of the opportunity.

Product-Market-Fit represents the cusp between Early Innovators and Early Adopters. Early Innovators are those excited about the new technology in itself. They often hack together solutions or serve as Alpha or Beta users.

Early Adopters are the first group ready to buy and use the product as sold. They are beyond hacking together their own solutions. But they still experience enough excitement to be able to live with early sales or service shortcomings.

Theory estimates this cusp between Early Innovators and Early Adopters at just 2.5% of the ultimate market.

Domination established at 84%

Product-Market-Fit represents the moment when the S-curve starts rising. So the business starts feeling real growth.

Founders experience a strong growth stretch. Often they find it inconceivable that this stretch represents just 1-2% of the overall market. But if you have found great Product-Market-Fit, the size of the ultimate market is factors larger than the market you can currently serve.

Theory suggests that the battle for Product-Market-Domination takes until 84% diffusion. This is when the market reaches the laggards.

Giant Fight over 81.5%

So 81.5% of the market lies between the Product-Market-Fit and Product-Market-Domination milestones. That is indeed many factors larger than the initial established market: 32.6 times as large, to be precise.

In virtually all tech subindustries, that is a very large market. Large competitors are sanguine about Early Innovator roll-outs. Precisely because they only represent 2.5% of the market. But move beyond that, and you will find existing competitors are determined not to let your startup become a success.

Competitors’ products may represent inferior technology compared to yours. But their sales, customer service, processes and other complimentary assets are all vastly better. How do you compete with that to reach for Product-Market-Domination?