20VC with Harry Stebbings - George Bonaci, VP of Growth @Ramp: How Ramp Became the Fastest Growing SaaS Company Ever |E1264
The conversation highlights the importance of experimentation in growth strategies, comparing it to scientific methods where hypotheses are tested through various experiments. The speaker emphasizes the need for a balanced approach, combining high-risk, high-reward experiments with smaller, incremental improvements. They stress the importance of learning from both successes and failures, using post-mortems to analyze outcomes and improve future strategies. The discussion also touches on the significance of hiring for potential, particularly in early-stage companies, suggesting that generalists with logical thinking and problem-solving skills are more valuable than specialists with specific experience. The speaker advises against over-reliance on past playbooks, advocating for a fresh perspective and adaptability in growth roles. Additionally, the conversation explores the role of AI in growth, suggesting it can enhance both creative and analytical processes but may not replace the need for human intuition and innovation.
Key Points:
- Experimentation is crucial for growth; balance high-risk and incremental improvements.
- Hire for potential, not just experience; generalists with problem-solving skills are valuable.
- Use post-mortems to learn from failures and successes; adapt strategies accordingly.
- AI can enhance growth strategies but won't replace human intuition and creativity.
- Avoid over-reliance on past playbooks; adapt and innovate for unique business contexts.
Details:
1. 📈 Crafting Alpha: Unique Growth Strategies
- Leverage unique strategies that are unknown to others or deemed unworkable to find Alpha, ensuring a competitive edge.
- Effective leadership involves understanding each team member's role without needing to excel personally, highlighting the importance of understanding over expertise.
- When building a team, prioritize hiring individuals with high potential, especially in the early stages of a business, rather than focusing solely on current skills.
- Approach growth like a scientific experiment by understanding and measuring inputs and outputs, and recognizing that each business context is unique and requires bespoke strategies.
- Focus on top-of-funnel strategies to boost leads and identify growth channels that are repeatable and predictable.
- Adapt past successful strategies to align with the unique context and needs of the business, rather than replicating them blindly.
2. 🔍 Growth as a Science: Experimentation and Hypotheses
- Experimentation is crucial for business growth, demanding a hypothesis-driven approach and readiness for unexpected outcomes.
- Not all experiments yield expected results, emphasizing the importance of testing and adaptability.
- Marketers often neglect experimentation, preferring known strategies, which limits potential growth insights.
- Adopting a scientific or engineering mindset is more effective for experimentation than traditional creative approaches.
- Defining clear hypotheses and measuring outcomes is essential for successful experimentation, requiring skills distinct from those in creative fields.
- Growth can be driven by small performance improvements across multiple areas or by significant changes in specific areas.
- For example, a company increased revenue by 20% by experimenting with AI-driven marketing strategies, leading to better customer segmentation.
- Another case saw product development cycles reduced from 12 weeks to 8 weeks through iterative testing and feedback loops.
3. ⚖️ Balancing Big Bets with Incremental Gains
- Companies should diversify their initiatives across different time horizons, including high-risk, high-reward big bets and smaller, more certain gains to achieve steady growth.
- Strategic allocation of resources should involve collaboration with finance and leadership to align with company goals.
- It's advisable to assume that most experimental bets may fail, thus velocity in trying new things becomes more important than perfection.
- The approach to experimentation should balance between running numerous quick experiments and conducting well-controlled studies, with a preference for the former to maintain momentum and adaptability.
- For example, a tech company might allocate 70% of its R&D budget to improving existing products for immediate returns, 20% to developing new technologies with moderate risk, and 10% to moonshot projects that could redefine the industry.
- Case Study: A retail company increased its market share by 25% in two years by strategically balancing investments in digital transformation and traditional retail improvements.
4. 🚀 Speed vs. Precision: The Experiment Dilemma
4.1. Velocity vs. Precision Tradeoff
4.2. Experimentation Approach
4.3. Time Horizon for Results
4.4. Setting and Measuring Metrics
4.5. Scaling Successful Experiments
4.6. Customer Acquisition Costs (CAC)
4.7. LTV Considerations for Early Stage
4.8. Cultural Aspects of Experimentation
5. 🔎 Learning from Experiments: Premortems and Postmortems
- Premortems involve identifying potential failure modes and estimating their probabilities. For high-probability, high-confidence experiments, premortems can predict failures with over 90% accuracy, providing a crucial foresight tool.
- Postmortems are essential for analyzing experiment failures due to unforeseen reasons, particularly in high-risk scenarios where unexpected issues (Black Swan events) occur. This reflection is key to understanding and mitigating future risks.
- The responsibility of writing postmortems lies with the experiment lead, ensuring a thorough analysis of execution quality and the nature of the failure—whether it was avoidable or not.
- Insights gained from experiments should be applied across different business functions to maximize learning. Engaging cross-functional stakeholders ensures the insights are integrated into broader business strategies.
- A practical example is a homepage AB test where a red button generally performed better but underperformed in the Enterprise segment. This highlights the necessity of segment-specific analysis to avoid broad misapplications of findings.
6. 🌐 Growth Team Dynamics: Independence and Integration
- Growth teams should focus on business growth beyond just marketing and product, indicating a need for independence in their function.
- Direct reporting to high-level executives, such as co-founders, enhances growth teams' effectiveness by providing strategic oversight and authority.
- Companies like Dropbox have Chief Growth Officers or SWAT-like growth teams that operate across various business areas, highlighting the flexibility and adaptability required in growth roles.
- For example, Airbnb's growth team operates independently with a mandate to drive user acquisition and retention, demonstrating the effectiveness of a focused growth strategy.
- Investing in cross-functional training can improve the integration of growth teams with other departments, fostering collaboration and innovation.
7. 🔍 Exploring Alpha: Unconventional Growth Tactics
7.1. Identifying Unconventional Growth Opportunities
7.2. Experimenting with Dismissed Strategies
7.3. Learning from Various Sources
7.4. Adapting Old Playbooks
7.5. Influencer Marketing in B2B
7.6. Balancing Brand and Direct Marketing
7.7. Managing Growth Portfolio Concentration
7.8. Communicating Growth Goals
7.9. Hiring for Growth Roles
8. 🧑💼 Hiring for Growth: Skills and Potential
- Implement a backchanneling and testing approach in the first interview to provide high-value, high-signal insights. This method leverages referrals and introductions to gather initial information, forming the basis of candidate evaluation.
- Utilize references and physical or take-home tests to evaluate candidates, especially in early-stage startups, to assess their problem-solving abilities and potential fit.
- For Series A startups, use referrals and warm introductions due to low brand recognition, ensuring candidates are pre-sold on the company and role.
- Start the interview process with backchannel information from the referrer, then introduce a case study or take-home test after initial discussions to further assess problem-solving skills.
- The first call should focus on selling the candidate on the company and role, supported by strong referrals, to attract high-quality talent despite brand limitations.
9. 📊 Onboarding and Achieving Early Wins
9.1. Candidate Evaluation and Real-World Data Handling
9.2. Successful Onboarding and Achieving Early Wins
10. 🔄 Fit for Growth: Adapting to Company Stages
- Hiring generalists can lead to challenges as they may discover they dislike the role after starting, highlighting the importance of transparency in the hiring process.
- It's important to communicate clearly about the opportunity and assessment methods, and to acknowledge that job mismatches can occur, which is acceptable.
- Individuals are often better suited to specific company stages based on their experience, such as those with a history in startups thriving in early-stage companies.
- Flexibility and the ability to adapt are crucial, as personal preferences and career stages may evolve over time.
- To improve hiring success, companies should assess candidates specifically for stage-specific roles, ensuring alignment with the company's current phase.
- An example is a startup that hired specialists for scalability, which improved efficiency as the company grew.
11. 📚 Investing in Management: Learning and Development
- Many companies support management development in theory but fail to implement effective programs due to lack of commitment and resources. Comprehensive management development requires dedication from top leadership.
- Samsara's structured leadership program provides managers with a curated selection of 15 business books monthly, fostering practical learning through book discussions and applications.
- Despite evolving business channels, fundamental management skills like bottleneck identification remain essential. At Ramp, the main constraint is the velocity of experimentation, hindered by limited resources.
- Effective management involves understanding team roles to ask insightful questions without micromanaging, highlighting the importance of hiring skilled individuals.
- Structured onboarding is crucial, with the first 30 days dedicated to understanding the business and role, leading to tangible contributions by 90 days. This approach ensures fair evaluation and long-term success.
- Early successes during onboarding validate skills and fit but must be coupled with an understanding of deeper role challenges for sustained growth.
- Hiring challenges often stem from misalignment between role requirements and evolving business needs. Precise job descriptions and criteria are essential to avoid common hiring pitfalls.
12. 🤖 AI's Role in Growth: Present and Future
12.1. AI's Impact on Growth Roles
12.2. AI in Creative Processes
12.3. AI in Analytical Processes
12.4. Competing in Competitive Markets
13. 💡 Reflections and Insights: Growth Lessons and Strategies
- Avoid the common mistake of hiring solely based on experience. Instead, evaluate potential hires on their ability to define and understand what 'good' looks like in their role.
- Leverage influencers as a key growth channel, particularly in B2B. Treat influencer engagement like an outbound sales funnel to scale effectively.
- Consider paid search cautiously, as it can quickly saturate and become a 'tax' to Google, offering limited inspiring growth.
- Be strategic with event sponsorships at early stages; they can be wasteful without a clear, differentiated approach or larger integrated strategies.
- Explore underutilized channels such as direct mailing, gifting, and display advertising, which are currently cost-effective.
- Invest in brand development even if it seems unmeasurable; companies like Gong have shown this can boost inbound growth significantly.
- Explore non-traditional channels like cold calling and door-to-door sales, especially as more businesses return to physical office settings.