3 Steps to Make Your Company as Successful as Facebook
A great idea is just the start to a thriving business. Guest author and Carnegie Mellon Professor Sean Ammirati, author of The Science of Growth, shares three tips to ensure your business achieves success instead of falling flat.
Take a moment and think about all the ways the world we live in today is a better and more magical place than the one our parents and grandparents lived in. As one example, just look down at your cell phone. How often do you use it as a phone versus a computer that can make a meal show up magically without having to utter a word or search the world’s repository of information? Of course, our parents and grandparents could have pointed to similar things including the mass adoption of automobiles, televisions, radios, telephones, and even electricity.
It’s because of passionate entrepreneurs that each of these improvements exists. I like to explain that entrepreneurs see things that are broken in our everyday lives and create the world they think we ought to live in by commercializing innovation.
It’s no small thing to come up with that innovative idea. However, that “a-ha moment” where you envision the future is followed by years of hard work to commercialize that idea.
At Carnegie Mellon, for the last five years, I have taught a graduate courses on entrepreneurship titled, “Lean Entrepreneurship,” where I help students learn best practices for the early phases of that commercialization. Specifically, in that course we focus on the best processes and techniques that can turn an idea into a product that solves a real problem in a good market (a startup goal often called “product-market fit”).
After the last class one semester a few years ago, a student challenged me with the following question:
“What happens after you find product-market fit?”
He explained that, for many students, this is a much more relevant and important question.
Beyond a crucial question for my students, the more I thought about it, the more profound it actually seemed. It’s certainly true that plenty of companies have ultimately failed because they never built a product that solved a real problem, at least not for a large enough market to build a viable business.
But there were plenty of other companies that did build a product that solved a real problem for customers yet never achieved the scale their founders envisioned. For every success story, like Facebook, there are thousands of stories of companies that started strong and then faded. In fact, the night that student and I chatted, Facebook had just released another strong set of earnings results, and was exploding in aftermarket activity.
Yet, as most people older than 35 can remember, Facebook was predated by a number of competing social networks—including Friendster—that ultimately stalled out.
As my mind started racing, I wondered, Why do some companies stall out while others scale up? Are there best practices and techniques, similar to those I had taught in my Lean Entrepreneurship course, that could help at this stage of hypergrowth?
Facebook Versus Friendster
Over the next few years, I worked with grad students to build out case studies of ten pairs of companies including Facebook versus Friendster trying to flush out these points of what they did differently.
For example, Facebook’s team—whether by intellect, luck, or good advisors—focused on the right things at each stage of growth. For example, early in it’s development they excelled at deeply understanding the problem that they were solving for their end users and ignoring other issues which even if important were secondary to that primary mission. They also excelled at using the right blend of quantitative data and business expertise to drive decisions (or “being data informed but not data driven.”)
While there is no one simple thing to point to because each pair of company studied was different, there emerged a common set of principles that can guide a company at each stage of development. We abstracted these recommendations into three phases of growth.
The Three Phases
Step 1: First, there is a series of prerequisites that a startup should satisfy before moving onto to scaling up. Just like you can’t take calculus before algebra, you can’t scale before you satisfy these prerequisites. While part of these prerequisites go back to the best practices talked about in the lean startup methodology to find product-market fit, we also emphasize the importance of founder alignment at the beginning and creating an excellent first experience before exiting the prerequisites.
Step 2: Next, you need to focus on dramatically increasing the awareness of your product or service. Again, entrepreneurs see the world the way it ought to be, but it often takes the world some time to catch up. We review four types of catalyzing events that can quickly increase awareness of your product.
Step 3: Finally, we reveal the five best practices organizations needed to maintain this new exponential rate of growth.