As opposed to structurally setting a company in peaks and lows, an inherent structure that allows rapid growth is the key
In the past six years we have been privileged to be part of a new era of business expansion. An era where companies are able to expand very rapidly, exponentially, what has never yet been done prior to that.
Since 2007, over 40 companies reached the billion dollar valuations within a few years or less, some even within a year (here is a good list, though not complete). These companies’ valuations are based on the ability to reach the hands of the masses with their products. This ability to reach the masses with a short time lies within a specific predefined modus operandi, an operational structure that allowed rapid expansion. This structure is different from the old school version of how we were taught to expand our business.
The old school version of growth:
In past economics and business classes we were taught to focus on outweighing the competition. In essence, once an innovative idea translates to a product or a service and reaches the hands of customers, we were taught that it must always be ahead of its competition, via various tools and means and at all times, with the emphasis on “all times.” One of the techniques that we were provided to work with in order to be ahead of the competition is a term called: a unique sales proposition or USP. The USP is a differentiator that can be manifested through a lower price, new technology, simpler design and so forth. USP however, tends to fluctuate over time, because once the competition meets the company’s USP, then that company would necessarily need to re-invent its USP.
For example, Company A can come up with an innovative product called AntiVirus. It is a great success until a competitive company will bring a similar or better product to the market. Company A‘s sales will then drop. To reach higher sales again, Company A will respond with either lowering the price of their product or releasing a new product, such as an updated AntiVirus.
Another technique that we are taught is called “positioning,” which is usually defined as a marketing strategy to differentiate a certain brand from its competitors. Since “positioning” is focused on the difference in the meaning of products, it helped us market different products, rather than better products. While this is a good mechanism, structurally “positioning” is often applied externally, when the entire company operations are often not geared to support it.
An example is Yahoo! a search engine that initially embraced Google and later competed with it via offering a different position. More than a decade ago it was positioned as the top market updates and information in various topics – delivered easily and upfront. The search engine supported its offering.
We were all checking Yahoo first. Through time, other companies caught up. Yahoo! shifted its direction, abandoning its operational support that emphasized its uniqueness. Just in the past 2 years Yahoo! acquired companies that ranged from flight rewards management, blogging, online games, video photography, video conferencing, video sharing, on demand music playing, technical recruiting. The list goes on. It attempted to keep its place at the top via different strategies, though there was not one clear rooted differentiator to help us understand what is it about Yahoo! that is very different from the rest of news sites.
The root of the problem with the old school version is the focus on “outweighing the competition.” The reason is that once the company’s focus is on the comparison to the competition, a company will always find itself in constant comparison to others and in constant response to market conditions. Working according to this methodology means that a company will generate different “answers” in response to the competition; it will require great amounts of energy (time and money) to steer or pivot away with the product in order to reach another life cycle peak. Thus, strategically, this type of modus operandi will necessarily continue to position the company or the product, in peaks and lows, a mechanism that is defensive and responsive.
In essence, the flaw in the old school’s version of competitive analysis is that it focused on how you as a company should be better than the competition – a statement that by definition cannot last for a lifetime because 1) being “better than” is subjective and 2) in non-subjective cases, a competitor will always catch up.
The new billion dollar club works differently – A new modus operandi – creating spiral growth from within:
As opposed to structurally setting a company in peaks and lows, an inherent structure that allows rapid growth is the key.
The fastest form of growth is spiral growth. It occurs when energy is focused on one center point, creating a vortex that drives the energy outwards; like a windmill. Spiral growth therefore is produced from a firm starting point.
In business, that center point is the company’s DNA. I define company DNA as the one core value that is different from the competitors and that is responsible to encode the company’s operations.
Once the company DNA is identified, every future product, feature within a product, and even its business development should serve the company’s DNA , that is in order to achieve spiral growth.
The unicorn club was able to achieve billion dollar marks in a very short time because its entire operational focus lay with its one very specific core value that was different from the rest of the competition.
Here are some examples:
In its early stage Twitter released a product for users to answer the question “what are you doing right now?” The company then quickly realized that “right now” or “real time” is their DNA. Every feature they worked was developed to support that. Josh Elman, then Twitter’s product man was telling a story how the company followed its users, tweets and how the media perceives them. One of the media statements that they looked at was how “Conan O’Brain tickets ran out with his one tweet.” Elman then says that the company wanted to be perceived differently: how you can get first access to the tickets if you checked your twitter. It is a very interesting lecture; you can find it here.
Ultimately the “real time” difference is the main mindset difference that separated twitting from posting on Facebook. There is a fable about early investors asking Twitter founders “why should I use twitter if I can post the same status on FB?” The answer is: responsiveness time. In FB it is ok to get feedback on your posts within 2 days, what will be considered old news with Twitter. And this is exactly what the company sought to achieve. Twitter continued to focus on its real time aspect, by positioning tweets as news and acquiring companies that are in the business of “real time” TV/ data/ video.
In just 4 years of its operation, in 2010, Twitter was valued at $3.7 billion, four years later it surpassed the 30$ Billion valuation.
Another example is AirBnb. The company’s DNA is their professional photography. During its initial stages, the founders experimented with driving more users into their offered serviced. What they discovered is that professional photography of houses brought more users to rent homes/rooms of others. The founders then made it their core agenda to focus on professional photography of houses. In their amazing 68 page presentation the team shows how they rapidly expanded their business in every geographic location by hiring professional photographers first. That’s what separated them from the rest of the competitors and provided them with a core value. Up until today AirBnB sends photographers for free to professionally photograph your home. Founded in 2008, AirBnB’s recent valuation surpassed the 10 Billion USD mark.
A non-digital example is Starbucks. It’s DNA, as appears in its messaging is: “in the people business serving coffee.” The subject is people. Focusing on this core value allowed the company to build a business in serving people. The employees are trained to pay attention to customers and even the bathrooms are always available to the public. Back in the days when Wi-Fi in the big city was quite expensive, the company was the first to provide free Wi-Fi to people, who did not even have to be customers. It was all about serving people, their DNA, and it drew people in. That same year when Starbucks introduced that new “feature”, their sales skyrocketed.
Working from a DNA perspective is to focus on how you as a company are different from the competition right from the start and gearing the entire company’s operations to support that. The quicker the company works on establishing its differentiation in the market, the quicker it will dominate that segment.
Discovering your own DNA – For early stage companies building one product:
The gist of discovering your DNA is to further yourself in mindset as early as possible. I found that the next step will help structure it.
Before releasing a new product to the world, map out the existing competition in terms of the consciousness level that they occupy. Then set up your product to occupy a mindset that is not taken yet.
For example: suppose I developed a new and revolutionary method to teach beginners how to cook and cook well (I wish). I am then designing a new digital product for those who don’t cook to help them with the first stages of cooking. My market is cooking beginners. If I map out the competition, I will see that teaching beginners how to cook, easy recipes, X minute recipes, and tips for beginner cooking, are occupied territories. They all appeal to different consciousness levels of beginners who WANT to know how to start cooking and are searching for it. In order to find unoccupied territories, it sometimes helps to break down my initial premise “beginners who want to cook.”
I can break it down to:
Beginners who want to cook but are afraid to do so;
Beginners who want to learn how to cook but don’t have the time to do so
Beginners who want to impress with their cooking
And so forth.
Conduct a market analysis for each of the broken down premises in terms of consciousness level in order to check how many products or solutions are out there for each such segment.
After the analysis, I find for example that the first niche Beginners who want to cook but are afraid to do so is less dense and that most products are either easy recipes or books.
Decide on a direction of the product that approaches the chosen territory from one specific vector. For example, if my methodology is based on the secret of learning how to combine a few products that will always yield a good meal, I can choose to design a simple product in a way that is called: see what you can do with water, eggs and flour. In the future, the product may evolve to include more complex products/recipes and methods, though the DNA of all can be: water eggs and flour. Alternatively, I can choose a different DNA: only 3 elements to a great meal. Than in the future, all complex developments must surround 3 elements.
For developed companies that have a few products in the market:
I found the following technique to work:
Conduct a very short customer survey asking the following questions:
Describe in one word only why did you choose to use this product.
Describe in one word only what is the main benefit that you got out of working with this product.
Describe in one word only what you like best in this product.
When asking a number of customers to answer these questions you will most probably find a pattern in their answers. That pattern can lead you to finding what makes your product stand out or different from the rest.
There is no right or wrong formula here for the approach that you choose. The steps are designed to help you separate your approach and be as different as possible from what exists today.
Photo Credit: Shutterstock/ Composite image of thoughtful young businessman looking at dna spiral on green matrix background
Photo Credit: Shutterstock/ Traditional Dutch windmills with vibrant tulips in the foreground, The Netherlands