Role of Growth function in Enterprise businesses

‘Growth’ seems to be the most in-thing currently. How many times over the last couple of years have you heard of ‘Growth hacking’ or ‘Growth leaders’, ‘Growth product teams’ in organizations? The concept isn’t new, but it seems to be in the news lately.

I have a lot of conversations with startups and large organizations and if there’s one thing they tell me as a key area of focus, it's growth! I have wanted to write this article for a while now. This is probably my seventh iteration now because every time I write this article, I learn something new by talking to customers and change my preconceived notion of growth, and I go back and make edits.

Growth is a delightful mix of product and marketing. In a two-sided business like a marketplace, it's essentially growing the demand side or the supply side. In my personal experience, more often than not, it is the demand side. For this article, my focus will be mostly on the B2B space (though you’ll probably hear a lot more about growth in the B2C side). Growth 'hacking' by the very term itself suggests you are 'hacking' your way through something and aren't inherently scalable. I would rather look at growth as a function than as a 'hack' that you implement as a one-off fix.

For most startups (and even some large enterprises), it's probably their first time hiring for a growth function and even the founders don’t seem to have a great idea of what to expect. I fall into the bucket as well. My notion was Monthly Active Users, or Active Developers, but over the last few months, I have changed my opinions (several times) about what Growth should be and what metrics fits/does not fit.

Growth as a function is about connecting people to the value that the business has already created (either through product or via services). It's not always about building additional features. Once an organization confirms that there is a product market fit (This is an important element), then the job of growth function is to figure out how to do the best job in connecting as many developers (or users) to the product. Remember that getting the product market fit is the most important aspect before any organization dives into building a growth function. I have seen several startups fail in this space and they end up going back to the drawing board or worse, putting more pressure on the growth function to force fit a solution in a space where they don’t yet have product market fit. The most important functions of a growth leader or a growth team are to 1/ Figure out how the business actually grows, 2/ Understand the current constraints for growth and 3/ Build mechanisms to alleviate these constraints. To boil it down to a single sentence, the core focus of growth teams should be about making it easier for developers or users to find the value of the product or service.

There are some areas that the Growth team cannot do on their own. This is especially true with building new product functionality or building new value prop. This is where a close collaboration with the product organization becomes critical. In many organizations, Business Development teams are the ones responsible for growth. If this is the case, then it's even more critical that the BD teams align closely with product teams and stay in lockstep with each other as they build out the growth plans. There are some companies that build out a dedicated growth function or team. While there are some risks associated with it, I have seen that this works more in organizations that have a close alignment between product, engineering and organizations that can quickly iterate and have more of a product growth mentality.

Where does sales come into picture in all of this (Especially in an enterprise B2B space). I recently listened to a podcast with Casey Winters who is the CPO at Eventbrite about growth where he talks about Kindle vs. Fire strategy and it seems to resonate with me. Companies sometimes tend to think of sales as the kindle to the fire. What I mean by that is that they expect sales to go out and get new lines of businesses for the product. This is something that is just primed for failure. This is the function of the growth function within the business development organization. Kindle is all about getting one off strategic or lighthouse deals that sets an example for the rest of the teams. Fire strategy happens after you get the product market fit (i.e. get the kindle of fire going). It is the job of the BD function to enable the broader teams to execute the fire strategy. Fire growth strategy can be achieved by a few ways 1/ Scaling the business via sales (use the learnings from the kindle), 2/ Sale via content loop (mostly applicable in the developer ecosystem) or 3/ Scale via Performance marketing (This is something that every marketing person knows how to execute - Note: I said how to execute, NOT how to effectively execute).

Growth is about running experiments and, more importantly, about connecting and talking to end customers. If the Business Development team that is focused on growth or the Growth Product Manager isn’t talking to customers, then I would argue that they are not doing their jobs. Also, if a Business Development or Growth PM isn’t experimenting and iterating, I would also argue that they are not doing their jobs. You need teams and owners who can understand how to isolate the variables, find the appropriate data sets and instrument for the next set of experiments.

Growth can fall into 3 broad categories: 1/ Product Driven growth, 2/ Performance Marketing or scale via kindle vs. fire strategy, and 3/ Brand Marketing. You can think of this as a pyramid.

At the bottom of the pyramid, you have Product Driven growth. This, I would argue, is ‘Truly Scalable’ growth. It's measurable, and it's also scalable. It's a simple measure of scaling with the engineering and product teams. It's about identifying the right set of features to build for your product that most (or all) customers want and building that so that the customers choose your product instead of the next best product. Pricing also plays a big role here as it's closely linked to Product Driven growth. The second part of the pillar is Performance Marketing (paid channels), scaling via sales and business development, and also via partners. This is where the kindle vs. fire strategy comes into picture. This, I would argue, is measurable as well, though I have seen several startups fail in putting the right set of metrics. This also requires a lot of experimentation as the growth function varies from company to company or even product to product. The last part of the pillar is brand marketing. I won’t even make an attempt here to describe it as I am not an expert in that area, nor do I understand the nuances of brand marketing and brand building. For a startup or a new product, I would say that brand marketing is the last area they should invest in and instead focus on product driven growth and performance/BD driven growth.

I have found that the biggest mistakes companies and product teams tend to make is focusing on the wrong set of metrics for growth. Sometimes, they may have the right metrics but are overly focused on it as well. I would argue that there needs to be a healthy mix between metrics vs. learning from experimentation. Is there a way that we are continually measuring how developers use your product (via regular interviews, surveys, etc.). The metrics that the service or product should choose should be an activity metric that best correlates to the value being experienced at an appropriate level of frequency. Companies tend to over index on Active Developers, Active user count or Monthly Active Users, etc. I found this article to be really helpful in deciding on the best type of metrics to choose https://www.appcues.com/blog/product-led-growth-metrics

To conclude, I would say that the growth function needs to be executed immediately after the product market fit is found (and NOT before). The day that growth teams say they are successful and start building out plans for the next 3 years is the day that growth function dies. Over Focusing on performance metric isn’t growth either. It may yield results in the short term, but over the long run, because teams gloat over the success, they fail to deliver on product led growth. The learning for a growth team or BD teams focused on growth never stops and the one north star metric that every team should have is around measuring the experimentations, hypothesis and the results of the experimentation. Not every company (especially seed stage or early series startups) can afford to do this; but I would argue that where they can, they absolutely should and that is what will get them true ‘growth’.

Note: Additional Edits made on Oct-13-2021