What’s the best structure for Growth? Part 3
In the third and final part of this ‘What’s the best structure for Growth?’ series, Yara Paoli, founder of GROWTH OS, reveals how your organisation can optimise itself for growth.
In the first two parts of this series, we looked at the questions that you first had to ask your organisation in order to identify your opportunities for growth, both externally - i.e. from a customer perspective, and internally - i.e. from an employee perspective. If you answered both those questions, you should by now know which areas you can now prioritise in order to unlock business growth.
In this final part of my growth structure series, we’ll look at some different organisational set-ups and discuss which type might be best for your company, depending on the level of maturity of your business.
As we have already learned from parts 1 and 2, sadly - there is not a universal BEST organisational structure for growth. Because the best structure depends on various factors, including the size, maturity and culture of your company. But although there is no single magical org chart - the good news is that there is almost always a ‘better than before structure’ for your company.
Going back to the original goal - we are trying to find the best way to organise, lead and motivate your people, in order for them to be able to grow your key metrics and advance towards your North Star. So - we are aiming to create a company 'growth operating system’ that will allow your people to deliver measurable and sustainable growth.
When should startups start organising for growth?
At first, you might think that startups should aim for growth from day one. And in some ways they should; in terms of getting your product in front of as many users as possible, as cheaply as possible, and achieving Product Market Fit as quickly as possible. That is indeed a type of growth.
However, when we are talking about the bigger picture of organisational structure that is designed for growth, startups shouldn’t waste resources on this until they have achieved sufficient product market fit. Why? Because 74% of startups fail by scaling prematurely.
As we have learned from parts 1 and 2, changing the structure of your organisation is disruptive and time-consuming in the short term. Therefore - you should only explore this option, once you are sure there is a genuine and sufficient demand for your product. Before this stage, you should put all efforts into early experimentation and testing, to validate that your product actually offers value to users in the real world.
If you are at the stage where you have achieved a good degree of product market fit, and you are now looking to expand your user base - perhaps by moving into a new geographical market, or another vertical - then now is the time to think about your organisational structure, and how that could unlock growth efficiently in those new areas.
In reality, most companies start thinking about their org structure a little too late. The natural assumption made by most startups is to just continue increasing staff numbers and growing teams, without embedding a true growth operating system first.
This normally results in growth at first, but at some point after, the company sees an inflection point - a slow down, or even decline - in their growth, despite having hired additional people.
Don’t worry if you have already reached such a point in your company. It’s very normal, and thankfully, fixable, as long as you carry out the analysis of your user funnels and employee setup as discussed in my earlier growth articles (and further below).
Of course, it’s even better if you are proactive, and carry out such analysis before you hit any major slow down in your growth. By doing so, you should be able to avoid the inflections, and massively increase your chances of continued growth.
What is growth?
So, you’ve done the analysis, you know that you need to change your structure and you’re ready and willing to make it happen. But how exactly, should you organise your people in order to optimise for growth?
Firstly - you need to define growth. Because if you ask different people from different areas of your business, chances are, they will each have a different idea of what growth is to them.
So you must create a company-wide definition, where everyone agrees on exactly what growth is, and how it will be measured. This is the single most important step, because without everyone in your organisation understanding exactly what the goal is, everyone will be pulling in different, and possibly even competing, directions leading to slow or no growth at all.
It may sound simple and even obvious, but my work with many companies has revealed that often there is no single agreement on what goal everyone should be aiming for. So often I see a great divide between each discipline. For example, programmers concerned only with solving ‘hard’ engineering problems, designers who care only about how beautiful the product looks, marketeers focussing only on the acquisition of new users, and commercial teams who prioritise money above all else. Other important areas of growth, such as activation, retention or referrals, often have no clear owner, of course, and are thus left unharvested.
Whilst of course each function must focus upon their area of expertise, without zooming out and looking at the bigger picture, I find that often the functions are actually working against each other, with an action by one team causing a negative effect on another. This is of course nonsense. Everyone is working for the same company, and that should be the only concern. But this is not the fault of the individual teams; the underlying reason for such internal competition, is that each function is following their own metrics, which don’t necessarily contribute to the company’s ultimate North Star Metric and goal of sustainable growth. Hence why it is so important to define this, measure it, and ensure EVERYONE in the company is working to positively impact it.
Defining your North Star Metric
You must define your growth and your North Star Metric, and ensure everyone in your company understands it. You might think that the only metric you need to measure is revenue. But whilst revenue is of course extremely important for almost all companies, it’s not necessarily the best North Star Metric to use. This is because actions taken to increase revenue in the short term, can lead to slower growth, and even a loss of users (and therefore revenue), in the medium and longer term.
For example, if you plaster your product with adverts, or use your newsletter mailing list to send out masses of ‘sponsored marketing’ emails, you might initially see an increase in revenue due to money received from those advertisers. Your commercial teams will be delighted, because they have increased their Key Metrics, whilst your customer care teams perhaps less so, as they are seeing an increase in complaints.
If you overdo it, you’ll annoy your users, who may then stop using and recommending your product, and therefore in the longer term you’ll see a loss of customers, and ultimately a loss of revenue.
So - getting your North Star Metric right is very important.
Remember: your North Star Metric is the single best metric that captures the core value your product delivers to your users.
How do you go about defining your North Star Metric? Well, there will likely be many potential metrics you could use and choosing one which works will require detailed analysis.
Here are some North Star Metrics used by some well-known companies:
Airbnb - total number of nights booked
Facebook - monthly active users
Quora - number of questions answered
Whatsapp - number of messages sent
Spotify - time spent listening
Uber - rides per week
What we see from all the NSMs of these successful companies, is that all of them relate to the value that the user receives from the product - not the amount of the revenue that company is making (although that comes as a consequence in a cleverly monetised business).
In other words, successful companies optimise for making their product useful to their customers; the revenue then follows.
An Example from the Real World
Here is a real example of how we defined the NSM and organised for growth of a language learning platform.
We defined our NSM as ‘bi-weekly classes taken with a 5 star rating’. We chose this NSM because it captured well the core value that our learning app was creating for students: they could easily find and book a language class with a range of qualified tutors.
It also encompassed a measure of quality that we wanted our students to experience so we aimed at getting 5 star ratings, rather than just 3 or 4 star ratings.
Last but not least we baked in a measure of ideal frequency as we wanted to make sure students took at least 2 classes a week, as this is an optimal frequency for the core learning goals that our app covered.
We broke down all the KPIs and drivers that contributed to impact our NSM. As you can see - there are many areas that feed into the NSM and this part of the process needs to be carried out in meticulous detail. The below is a simplified view to give you a good enough understanding of the process.
Once we had all KPIs and drivers mapped, we then carried out funnel analysis across our pirate metrics and core growth drivers identified here.
For example, below I picked the funnel analysis of activation, following the journey of my student from first landing, to experiencing core product value for the first time, until forming a habit with my product.
I repeated this exercise across other growth funnels to identify clearly and numerically my biggest constraints to further growth and therefore my key opportunities.
You can see here two steps highlighted for students registering and booking their first class.
Where possible it is helpful to have competitors or industry benchmarks to gather an idea of my potential growth gap to fill. I also want to speak with my customers to understand the ‘why’ behind certain dysfunctional behaviour that is impeding my growth rates.
Only by carrying out detailed analysis in this way were we able to map out a quantitative and qualitative way to achieve 10x type growth opportunities.
*Benchmarks below are just examples.
The result of this process should look something like this, where you are now able to visualize your prioritised growth opportunities.
In this case I had identified 10x opportunities in activation optimization, 3x in referrals and 5x in revenue, in particular working on conversion to first booking and class pricing.
Once I have my North Star Metric org chart mapped out and my greatest growth constraints called out, I can start planning and building the best possible growth structure for my company at this point in time.
It is important to build an adaptive organization that can discover and work on new sources of growth consistently and that minimizes the impact of change, as change can be costly.
So the resulting structure for growth teams, probably the best for your company at this point in time, is the one that is prioritised by opportunity, is sharply focused on growth funnels optimisation and is built for speed of experimentation and adaptability to new growth opportunities to minimize the disruption of change while maximising the impact on your NSM.
Key Take Aways: Your Growth OS is bigger than your growth team
Structuring for growth ≠ embedding growth hackers in your org
Growth ≠ a team and is not one team’s responsibility, however the earlier you embed a “growth team” the easier it will be to replicate that growth DNA across the future org
The re-org for growth process requires the right mindset and leadership and a data driven approach
Alignment on the definition of growth is a pre-condition: the best way to do this is to define your NSM; then identify your biggest growth opportunities to increase that and structure flexibly around them
The right mindset and culture are the other essential components of a sustainable-growth oriented operating system that fully support your people on the execution of growth
The (Never Ending) End Goal
Ultimately, we are aiming to create a company where every individual and every team is able to positively impact your North Star Metric. If you truly achieve this, then your company will grow. Remember, growth is a never-ending journey. If you are truly growing, then you’ll need to constantly adjust and fine-tune along the way to ensure that everyone is still aligned, and that all your Key Metrics still positively impact your North Star Metric (and the NSM itself might change over time).
And this is no easy task in itself. There will always be new challenges, new areas of opportunity and new problems to solve. But I hope you now see why there is no single structure for growth, and that instead, growth is actually a mindset and ‘operating system that you must embed at company ‘DNA’ level.
And if you need help making that happen for your business - please get in touch.
About Yara Paoli
Yara is currently Chief Growth Scientist for Growth OS, a validated framework for sustainable long term growth, and she is board director and growth advisor for Kolonial.no, the leading Norwegian online grocery retailer.
She is also a growth mentor for the cross-border accelerators ChinaAccelerator and MOX (operated by the venture fund SOSV, which has $700M+ AUM and operates 5 global accelerators) and Singapore She1k, enabling dozens of start ups and innovating companies across the world to implement the best growth science and culture to build their own growth operating system.
Prior to this, she was the global VP of Growth at Skyscanner, where she was part of the company’s explosive growth success story, going from a 32-employee tech start-up, to a 1.4 Billion GBP acquired company with over 1000 staff.