AI forces Scaleups back into Startup Mode
And it's not pretty.
The answer to our current Product-Market Fit disruption might lie with the most unlikely ones to deal with: Growth teams.
It’s easy to lose sight of what’s currently happening independently from each other in Tech:
AI is developing at an unprecedented speed throwing disruption left and right.
Looming recession fears are still present, we have to become efficient and optimize. Cut the slack.
Acquisition focussed functions like marketing, and sales are in a pressure cooker because they became hyperefficient almost overnight. Also thanks to AI
All three of these factors ask for solutions that don’t go well together:
The AI revolution screams for innovation and moonshots, with cash that is simply not around anymore.
The rough funding environment demands cutbacks, layoffs, and optimization for long enough runways. There seems to be no room for any innovation and research-heavy projects with no clear ROI
Since marketing and sales are becoming automated away you need to reallocate your budget to product-related functions to solve that LTV problem you have. Those are notoriously long-term in developing any top-of-the-funnel impact and are hard to get right. Good luck if you’re sales-led.
We warned companies for years that this will happen, while AI was hard to anticipate at this speed it was clear that buyer behavior was shifting in the direction of B2C behavior.
Customers have a choice. They don’t want to talk to sales. Product-led Growth (self-serve) is becoming a necessity. Hyper commoditizing markets accelerate this trend and put pressure on pricing on top.
Creating a great product when you perfected acquisition for years is difficult. From goals, and incentives, to company structure. The priority was always to build something that sells, not retains.
The Agile trap. We spent a decade figuring out how to ship. Communication frameworks, shipping frameworks, daily standups, retros, and burndown charts. We created a monster that tried to tame the problems of human misalignment. Now we are stuck with a kitchen that can produce a lot of food quickly but…
…what should we put on the menu?
If you’re looking at these 3 problems and what they force you to do:
Shipping the right thing
No money for anything
Complete reorganization
The structure of a Startup is the only form I’m aware of that has a chance of dealing with this. If you’re already in full scale-up mode or already have a mature sales-led organization you may be forced to get there now:
Implementing rigorous A/B experimentation to know whether what you build has a measurable impact. If you’re in a hyper-niche segment you may be forced to move downmarket to have access to enough customers to experiment on anything.
You might also have to have a self-serve version of your product to expand this quantitative data availability further. Even in B2B if you assume that your conversion rates range from 10-20% from trial to closed contract. This means a self-serve product has 5-10% more data to work with.
Reducing the cost to serve drastically. Any product-led growth company has the chance to go into historical data sets and learn from its users dramatically by talking to them and analyzing their data set. For this, the data needs to be available and recorded.
How does this affect your cost to serve? Any company that is only living “In the moment” and relies on qualitative research from typical sales research and marketing research struggles with seeing bigger market shifts. It’s good enough to see what’s happening now but not where velocity is moving in 1-2 years.
Winning product strategies design products for future markets when they come out, not for today. In order to predict future behaviour we need to understand the past just as well as the present
Focussing on retention, aka great products starts in your organization. You need to pivot fast and potentially revamp your strategy every 3 months. Long-term might mean “next month”. Changing the direction and throwing away things is substantially more difficult the bigger a company is.
It starts with budget allocation processes, and standard procedures that are in place like alignment meetings, OKR planning, and roadmap hack sessions. All of this is not in favor of pivoting fast.
You can slice and dice it in any way you want but…
…the number 1 enemy of Innovation is efficiency
Let me explain. If you ever scaled or have been part of a company scaling you know that our natural process is to find product market fit and then scale what we know works. This efficiency segments processes into smaller substeps and puts specialists in place.
Sales: Monetization
Marketing: Acquisition
Product: Retention, Self-serve monetization
Whereas before this was done by a jumbled-up mess led by founders and whatever task force teams they came up with. We made it work somehow.
All of these functions are much more efficient than their generalist counterparts but when you have to hyperfocus on Innovation so drastically they actually fail.
You cannot assume anymore that your problem lies in one of the 3 buckets. It could be practical that a problem manifests in monetization-related functions and they don’t see them because they’re not used to spot product problems.
The inverse applies equally, maybe usage data is starting to suggest that we have a massive monetization problem but it would take a sales specialist to see it… more often than not they don’t even have access to these data sets.
This is a well-known effect of over-relying on efficiency. What’s different is that we only have suboptimal tools to deal with it.
So…? Growth Teams, to deal with PMF problems?
Growth teams as additional support to classical silo functions have always been a patchwork solution anyways. They see a new dawn now, maybe we have to treat product, marketing, and sales as a support function to them and not the inverse.
If you have to go back to proving what makes your product great (acquiring, retaining, and monetizing) you need to have teams that see all of it. If you are already too big to truly scale down your company then let’s “repurpose” the teams that at least have the conditions for it.
Growth teams get the task to reestablish and support product-market fit. Let them come up with what it means to find retention, everything else is right now secondary.
Otherwise, you are left standing with a piece of meat in hand in front of a crowd of vegans.