Source | LinkedIn : By Sean Ellis
By simple, I don’t mean easy. While the elements that generate growth are simple, effectively driving growth for most companies has proven very difficult. I’ll outline below how growth actually works and what prevents most companies from coming close to reaching their full growth potential. I’ll also provide recommendations for what your company can start doing today to greatly accelerate growth.
Why growth is simple
Simple refers to how growth actually works. It boils down to just a few factors.
- First you need to know your North Star Metric. This requires understanding the value that your customers receive from your product and measuring the expansion of this value across your growing customer base. This concept is confusing for many companies, so you can learn more about North Star Metric here. If you’re still struggling to identify your NSM, my team can help (see end of linked article).
- Test to find ways to grow your North Star Metric. If your product has strong product market fit, there will be some natural organic word-of-mouth growth. But the right testing program will accelerate word-of-mouth growth and add many new sources of valuable customers. The right program requires testing across all of the potential levers of growth.
- Execute proven tactics until they stop working. When you find something that works for growing your business, it’s important to document how it works and to invest resources to continue
Four reasons why businesses fail reach their growth potential
The overwhelming majority of companies fall well short of their growth potential, which is a function of product/market fit. Without product/market fit, your growth potential is very low. But assuming you do have product/market fit, then growth potential is defined by the market for the product that you have created. The less aggressive you are about capturing this market, the more likely that competitors will emerge to fill the void.
There are four main reasons why companies fall short of their growth potential.
- Lack of a clear North Star Metric. Without a single success metric for your company to focus on, functional teams will be in conflict about what’s important for driving growth. One group may focus on improving registrations while another focuses on average usage time. Still, others may not even have a success metric. Sustainable growth requires a shared metric that reflects expanding value across a growing user base. Every other important metric is a submetric of this North Star Metric.
- Not testing enough. Testing is required to figure out how to grow your North Star Metric. The more tests you run, the more you’ll learn about what works and what doesn’t work for expanding your North Star Metric. Someone on the team should be accountable for the number of tests being launched each month. Otherwise it’s too easy to skip testing altogether. One of the biggest benefits of a growth team with a growth master is that they are ultimately responsible for finding ways to increase the testing throughput.