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Growth stages of companies and products
As I’ve mentioned last week, I like frameworks because they help me organize my thoughts. Today I want to share a set of frameworks that explain different growth phases of companies or products. I think these are useful to help understand the goals and priorities of companies or product managers at different stages. However, for me the more useful aspect of these frameworks is helping me to understand what stage I am best suited for.
My go-to framework for stages of a product or company is Kent Beck’s 3X - Explore, Expand, and Extract. The Explore phase is geared at overcoming disinterest and trying many small experiments. Jim Collins would probably refer to this as the bullets then cannonballs phase. The Expand phase has the goal of overcoming bottlenecks to scaling and easing the limitations of the next rate-limiting resource. For tech startups I think of this as the hockey stick growth phase where the traffic, sales, subscriptions, and/or revenue, when plotted, look like a hockey stick. The third phase is the Extract where the goal is to sustain growth and continually increase profitability while you finish growing. The company is extracting all the value possible out of their product or service offering as it nears the end of usable life because of commoditization, loss of patent protection, or technological advancements.
Another framework for thinking about the stages of growth of a product is PST by Simon Wardley - Pioneer, Settler, and Town Planner. These all relate to different attitudes within an organization and are designed around the idea of constant change flowing through the company. I should note that these frameworks are fractal in nature, in that the company itself can exist at one stage while products within that company are each at different stages.
Pioneers are those folks that explore never before discovered concepts. Much of the time their ideas and projects don’t work out but their work is core research and lays the groundwork for future successes. Settlers turn those half baked ideas into something more useful. They turn the prototype into a product and make the possible future actually happen. Town Planners take something and industrialize it taking advantage of economies of scale. They optimize and find ways to make things faster, better, and more efficient.
The third framework that I want to overlay on this model of growth stages of products and companies is zero to one or 0 -> 1 as I prefer to write it. We’ll give credit for this to Peter Thiel since the concept comes from his book Zero to One but we’ll extend it a bit. The first phase is the 0->1 where you are going from nothing to something and hopefully finding product market fit along the way. The next phase is scaling up or 1->n. This is a horizontal process where you copy things that work. The idea is that you build a prototype or minimum viable product in the first phase and now you are replicating that and refining it for not just one person or group but thousands or tens of thousands or more. The last phase, that I will add on to this framework, is post-scaling or sustaining the business for the long term.
As I mentioned, these are all interesting to help organize our thoughts about what stage a particular product or company is at. Once we’ve identified that, we can then develop a strategy for working in that stage. As an example, let’s take Meta. That company is arguably in the Extract, Town Planner, or Post-scaling phase. However a new feature like Reels is probably in the Expand, Settler, or 1->n phase. It would be an interesting study for how well products perform that are at different stages from there parent company. Nevertheless, while Meta is focused on cost cutting even last summer Zuckerberg had warned that Meta would “steadily reduce headcount growth,” and that “many teams are going to shrink so we can shift energy to other areas,” with priorities that included Reels. So headcount allocation is one area that can be impacted by the phase of growth of a product. Others include marketing spend and sales focus.
However, the way I’ve been thinking about these frameworks is where do I best fit? At what stage of growth do I do my best work? While I’ve been part of companies that were squarely in the Explore phase, I’ve made my career on scaling. I derive the most satisfaction and feel most comfortable scaling something that has already found some product market fit. I like the challenges that come with scaling engineering organizations by thinking about (wait for it, here comes another framework) people, processes, and technologies. Scaling is so frequently on my mind that when I talk to an entrepreneur whether it’s someone running an ice cream shop or someone starting a robotics company, I’m thinking about how they can have 20 ice cream shops or sell robots to different industries. My mind immediately goes to how the entrepreneur can offload tasks to team members so they can scale themselves. This way of thinking can really be a curse. :)
You might already know at what stage of growth where you do your best work or what stage excites you. If you do, that’s great but if not you might want to spend some time considering this. As much as scaling during the expansion/settler/1->n phase excites me, the challenges that leaders face during the extract/town planner/post-scale phase are stifling to me. There are people who are excellent during that phase and I know enough to hand the reins to them as that approaches. Knowing where you fit the best will help you find the perfect next role.
P.S. If you like frameworks, I highly recommend the monograph Turning the Flywheel by Jim Collins, especially the appendix which provides a very quick overview of most of the frameworks that he and his team developed over decades of research. You can also find a list of them here on his site.