Sunday, July 14, 2013

Distribution's Day - Why the Rise of the Growth Engineer (or Growth Hacker) is now

In the late 1990's when you wanted to build a startup, a good chunk of your first expenditures went to building the tech, including renting a cage, putting boxes and switches in it, software for databases, code, and content management systems, storage space, and all of the talent to architect, build out, and manage these systems, back ups, and load peaks.  Additionally, you were building all your code, front and back end, from pretty much scratch.  It was rare to even run into a problem that a commercial solution existed for, much less at a reasonable price with fast easy integration.  But today, we benefit from a ton of what used to be the overhead of a tech startup being commoditized, virtualized, and democratized.  For example, servers on AWS, database at Amazon on Red Shift, open source content management systems, open source front end libraries (ok, mostly jquery), hosting for API's at Engine Yard or Heroku, with low cost pre-built off the shelf modules for all of the above, vastly reduces operational overhead.  And you can leverage solutions to send SMS with Twilio, email with a bevy of providers, take payments with Stripe or half a dozen mobile payment providers. Even services to manage all these cloud tools have been virtualized by companies like Pager Duty and many others.  The time and cost to build a tech startup are both dramatically down (Moore's Law dramatic) and the quality has increased simultaneously as these scaled point solutions grow up.

Now I would never suggest that there is not still bust your tail hard tech work that differentiates companies.  And I have seen the right platform choices give companies significant advantages over competitors plenty of times too.  But what I am saying is that the relative landscape is changed.  I am seeing more and more companies with great tech products stalled on distribution than ever before.  With product and marketing being intertwined, and design being a big part of the fabric that binds that together, I have lumped the whole lot into the overarching label "distribution," and the merger of these areas is probably the subject of another blog post another time.  But customer acquisition, or growth, or quantitative marketing, and the speed of it, can make or break two companies competing now.  Company A starts before company B but does not have strong distribution talent.  Company B starts later, but with tech hull speed so high now, they won't be far behind.  And if company B engineers the magic growth button for the market, company B wins.  As I have said many times before, you don't need the best product to win, and you don't need to be first to market to win, you just need to be first as the market consolidates, and then by definition you are winning, and displacing you in that market which you now own will be expensive and difficult.  At that point, you might not have to outrun the bear, just be an unattractive enough market that tech talent will go elsewhere to make their mark rather than try to do battle with you.

Several smart tech leaders I have worked with predicted this time to me.  Rob Meyer at Washington Mutual, Sunil Bopardikar at, and John Malek at Practice Fusion all foreshadowed this pretty clearly in conversations we had.  And some of my NextCard friends like Dave Schwartz at Cold Creek Technology, Rebecca Lynn at Morganthaler, and others way back when even talked about the markets that had been ripped open by scalable distribution techniques like the ones we helped develop in the late 1990's, and the ones that hadn't YET.  I think we all believed it a foregone conclusion that one by one every market would roll eventually.  And so at last we have Agile Marketing (go to the Agile Marketing Meetup in San Francisco if you can), Growth Engineering or Growth Hacking depending on your flavor, and the rise of Quantitative Marketing all employing user experience design, behavioral design, virality, direct marketing, inbound marketing, and optimization to try to win the distribution battle first.

So as you are spinning up your tech, make sure you either have a co-founder with some solid distribution background, or get help fast from an adviser or investor that is a growth engineer.  And avoid being one of those companies wondering how that competitor just ran you over with a lesser product.

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