One of the greatest threats to long-term success is when companies aren’t vigilant enough about responding to the changes in their market—whether it’s by failing to spot product or channel fatigue, acknowledge new competition, make needed updates to products or marketing adjustments in a timely fashion, or embrace new technology coming online.
Editor’s Note: this piece is an excerpt from Hacking Growth. Get the book here.
How to Avoid “Growth Stalls”
Such lapses in strategic vision and product innovation often lead to a company experiencing what is called a growth stall, a phrase coined by Matthew Olson, Derek van Bever, and Seth Verry of CEB, a leadership advisory network.
Reporting in the Harvard Business Review on a major study of growth stalls they conducted, Olson and his colleagues cite the case of the iconic brand Levi Strauss, which hit a historic high mark of sales in 1995, reaching revenue of $7 billion, but then, starting in 1996, saw a decline in sales so precipitous that by 2000, revenue was down to $4.6 billion, a 35 percent drop.
Other major brands the authors identify as having suffered stalls include 3M, Apple, Banc One, Caterpillar, Daimler-Benz, Toys “R” Us, and Volvo.
Though one might think that such abrupt reversals must be due to some dramatic disruption in the market, the study showed that often stalls are not caused by the entrance of a bold new competitor or a disruptive innovation, like smartphones, but by chronic failures on the part of companies to closely monitor customer satisfaction and to zealously look for early warning signs of disaffection.
Often, erosion of customer loyalty has been going on for years but the company has failed to perceive it—until it’s too late.
Past Product: Lackluster Marketing Causes Growth Stalls, Too
These pitfalls are not limited to product development.
Complacency and failure to innovate in marketing efforts can also lead to massive slowdown in growth. One common growth stall occurs when companies become over reliant on particular channels, which may be losing their effectiveness.
As marketing channels that once brought in endless streams of new customers mature, those streams can quickly become mere trickles, as a result of anything from new competition, to changes in consumer behavior (often brought about by technology, like the shift to mobile), to new rules that govern the channel.
These brands suffer from an uneasy reliance on Facebook’s News Feed algorithm, which they use to drive a great deal of traffic to their sites. Each time Facebook chooses to tweak the rules for the stories they show to users, the publishers hold their collective breaths, as even a tiny modification to the News Feed algorithm could easily cause a huge drop in their readership – and thus advertising dollars.
Some companies have made the mistake of relying so heavily on the Facebook News Feed that such a change has been life-threatening.
For example Viddy, a video app that rose to a $370 million valuation, relied so much on Facebook for promotion and distribution to users that when Facebook tweaked the rules of its News Feed algorithm in a way that resulted in much lower visibility of the app on the site, Viddy saw a rapid drop from 50 million users per month to less than 500,000, and its developers ultimately shut down the app as a result.
Competitor Innovation and Market Disruption
While customer churn and loss of market share through one or several of these lapses is often quite avoidable, it’s also true that dramatic disruptions, whether due to competitor innovation or changes in market conditions, can blindside companies in ways that they have little or no control over.
With the pace of innovation increasing, and powerful new tools—such as cloud storage of big data sets and machine learning algorithms for mining that data—now affordable and accessible to even fledgling start-ups, even the most powerful incumbents, such as Walmart and Microsoft, must learn to be more agile in both product development and marketing.
Swimming with Sharks
Certain species of sharks must always keep moving to survive; if they stop swimming, they literally die.
Growth teams are like those sharks.
Teams that aren’t constantly innovating, that aren’t continuously diving into customer data and surveying, and that aren’t rapidly experimenting and producing results are not long for the world.
We know about the danger of taking the focus off growth all too well from our experience building GrowthHackers.com.
Don’t Underestimate the Power of Doubling Down
Brian Balfour and Andrew Chen describe the way teams should push more and more on levers they’ve had success with as being like the strategy for playing the board game Battleship.
When you have made a first “hit” in looking for the ships hidden on your opponent’s board, you become a heat-seeking missile in going after that ship, calling out more and more spaces in the same vicinity until you sink it. Growth teams want to be just as intense in pursuing their “hits” and pressing on to get the most out of every avenue of success.
At GrowthHackers, for example, the launch of our email newsletter, which highlights the top posts of every week, was an important early success in driving readership. We could see it in our analytics clear as day—each week we saw a flood of users come back to the site to read the articles.
Yet we didn’t declare victory and hang up our hats; we focused intensively on ways to make it an even more powerful driver of growth.
For example, we experimented with moving the sign-up form for the newsletter from the bottom of the landing page to the top, which drove a 700 percent increase in sign-ups, massively boosting the size of our email list, which would go on to pay dividends each and every week.
Then we asked ourselves how could we get even more from this optimization to really max out our email marketing opportunity. So we redesigned the process of creating a GrowthHackers.com user account, adding a step to get people to choose to opt in to the email newsletter.
That experiment added another 22 percent to our email sign-ups. But we weren’t done; we knew the results were too good to abandon this line of experimentation just yet.
We suspected that the email sign-up form wasn’t as alluring as it could be and hypothesized that even more users might sign up if they were told how popular the newsletter was (a perfect example of the principle of social proof you read about in the last chapter).
So we designed a new sign-up bar with a more prominent call to action, encouraging users to sign up with the line: “Join more than 60,000 growth professionals from Twitter, Facebook, Google, Uber, and more who get our best content each week.”
That experiment resulted in an additional 44 percent increase in sign-ups.
Mining Deeper for Data Gold
Growth teams may also come to (incorrectly) think they’ve reached the limit of results they can generate from a certain lever when they have tapped out the potential of the pool of data they have access to.
In such cases, teams must consider investing the time and money into creating a more comprehensive data bank by ramping up on their analytics capabilities.
Recall that after nearly a year of operation, the Facebook growth team ceased all experimentation and for a full month, January of 2009, invested in improving their analytics tracking, which allowed them to perform more refined and powerful data analyses. That was done in specific response to the dwindling number of ideas the team was coming up with for driving growth.
The new data unearthed a rich new vein of potential experiments for the team to try, fueling growth that propelled the company ever higher.
Where to Start Digging?
To determine where to dig deeper for data, growth teams should review each of the major tasks and pathways customers and users take to reach the aha moment of the product.
Within each of these key tasks and experiences, the growth team should identify gaps in their data or areas where it is thinner or less granular than in other places and work to fortify it.
Beyond patching data gaps about product use and customer behavior, the team should also ask if it has the requisite analysis skills to make the most of the data at hand.
If the growth team has been working without a dedicated data analyst or data scientist, the company should consider hiring or moving one over to work with the team full-time.
Dive into New Channels
Focusing on one or two channels for acquiring new customers is optimal at the beginning of the process of driving growth, but over time, teams should experiment with adding new channels.
This can be both a powerful way not only to reach even higher levels of growth, but also to escape the danger of growth stalls that can occur when a channel suddenly changes the rules of the game, as we’ve said can happen with Facebook or Google.
If teams have reached an impasse where additional ideas are hard to come by within existing channels, this is a sign that experimenting with new channels is a good move to try.
For example, for a company that has been reliant solely on paid acquisition the growth team should experiment with developing organic channels such as search engine optimization, content marketing, or social media marketing to complement the paid efforts.
Open Up the Ideation Process
Often the best remedy for a growth team that has stalled or is coming up short on ideas is bringing in a fresh perspective.
Teams can seek such cross-fertilization of ideas in many ways. Ankur Patel, principal growth hacking lead at Microsoft, regularly brings together product managers, engineers, and designers from different teams at Microsoft to share new thinking and insights to spur bursts of new ideas for his team to test.
At Science, a start-up incubator where Morgan worked, information about winning experiments that one start-up had tried were shared so others could also consider them.
One of the biggest challenges for companies in continuing to pursue growth is breaking out of the bounds of currently successful ways of operating; the “if it ain’t broke, don’t fix it” mentality.
A good place to start is by testing significant redesigns of features or of the company’s marketing or products that have been successful, to see if they might not be substantially reenvisioned.
Teams can start relatively small, by challenging whether features or screens that seem to have been optimized might not be even more effective if overhauled. Think of this as the principle of pushing past the plateau of a local maximum.
A local maximum is defined as the highest value in a current set of points, but not the highest point overall. For example, running experiments on the same pricing page over the course of a year can lead you to a local maximum for the performance of that pricing page. But for even higher performance, the team should eventually experiment with a whole new style of pricing page.
Getting beyond such local maximums is essential to continuing to unlock new growth.
A growth team should regularly schedule experiments that go beyond optimizing to innovating bigger changes. These moonshot bets are a company’s best defense against the incremental thinking about innovation that so often leads to growth stalls.
Of course these larger efforts generally take longer to prepare. The best approach is to slate big swings in between incremental optimizations.
Such bold experimenting on a regular basis is vital. In tandem with continual optimization efforts, these bigger bets can lead to huge leaps forward.
We believe that growth hacking is so much more than a business strategy, or even an ongoing process. It’s a philosophy, a way of thinking, and it’s one that can be adopted in any team or company, big or small. Hopefully this post has inspired you to make it yours.
We wish you many wins along your way to unstoppable growth.
Reprinted (or Adapted) from Hacking Growth: How Today’s Fastest Growing Companies Drive Breakout Success Copyright © 2017 by Sean Ellis and Morgan Brown. Published by Crown Business, an imprint of Penguin Random House LLC.