Last week, Greylock Partners hosted our fifth Growth Community event with speaker Andy Johns. Andy was on the early growth team at Facebook, Quora, Twitter and is now on the growth team at Wealthfront.

“Growth” — as a skillset and as a dedicated company function — is an emerging practice. As many companies experiment with different structures and tactics, we focused our attention to building sustainable growth models. Your company’s growth model is the cornerstone of building a growth organization within your company.

The Key Principles

Despite the size of your company, there are key principles to building a growth model:

• It should be simple and easy to explain your growth model to your company employees, your board of directors, and to people outside of your company.
• “Growth” is more than the acquisition channels, growth hacks, and growth tactics you use.
• Growth in the broadest sense is about understanding your company’s specific levers of growth and building an organization around this model.

The Foundational Growth Model

This was a model Andy learned from Chamath Palihapitiya, the former VP of Growth for Facebook.

A) Top of the funnel — the various mechanisms where you can drive traffic and conversions to your product (SEO, Paid Acquisition, SEM, Social, etc)

B) Magic Moment — the one compelling experience that creates an initial emotional response that your customers or users first experience when using your product.

For example at Facebook the growth team found that if you have 7 friends within 10 days, you were most likely to become a daily active user. Every company’s magic moment is different and here are a few tips to understand your products magic moment.

C) Core Product Value — the problem your product is solving for its customers — Is it important to the customer and is there a sizable market behind this problem?

For example for Wealthfront (Andy’s current company) the core product value is that it gives everyone access to low-cost, tax-efficient, diversified investment portfolios — the sort of long-term investment portfolio that only the ultra-wealthy used to have access to. Wealthfront offers a product that enables sophisticated investment management — delivered automatically, through technology. While still early, it’s proving to be an important and valuable service for many of their customers.

Worth noting — some firms create new, meaningful experiences, rather than solving an existing, painful problem. One could count Facebook, Twitter, Snapchat, and Instagram in this group.

The goal should be to understand your growth model and your levers of growth before jumping into tactics.

Most growth professionals come into a new company and start working on A) the top of the funnel right away. The problem with this is if you don't really understand B) and C) then you are fundamentally adding people into a leaky bucket. You can’t growth hack your way out of a crappy product. In simple terms, you can’t sustainably grow something that sucks.

Use Case: The Growth Model for Amazon

Let’s apply this simple growth model to a real world company — Amazon. Amazon is a bit more complicated than 3 factors but we can break down their growth into an easy to understand model.

A) Vertical Expansion — The more products Amazon offers, the more potential for growth for Amazon. It started off with books and have since moved into electronics, clothing, music, home and garden, etc.

B) Product inventory per vertical —The more inventory of items per vertical, the more potential for growth for Amazon. For example, if Amazon increased its inventory of books by three folds, the potential for growth would parallelly increase as well.

C) Traffic per product page —The amount of traffic Amazon gets on average on each of the individual product pages within their store affects growth. Growing the individual book pages views from one to two views per page per day would doubled their potential for growth in that category.

D) Conversion to purchase — This is the conversion rate of a user viewing a product page and going on to purchase that item. Two examples of product innovations that make it easier to purchase items are Amazon Prime and Amazon One Click.

E) Average purchase value — What is the average value of a consumer’s cart at checkout? Amazon could (and does) seek to increase this value by making it easier to buy bundles of items and similar items.

F) Repeat purchase behavior —How often does a customer come back and purchase again? Amazon makes it easier to increase purchase frequency with its Wish Lists and Amazon Subscribe and Save.

By understanding the levers within its company, Amazon could initiate its growth effort by implementing the following growth efforts:

• Have a growth team research promising new verticals to add into Amazon.
• Have a growth team which works to acquire more inventory per vertical (merchandising).
• Have a growth team optimize the traffic going to each product page (SEO, SEM, paid acquisition, search, tagging and discovery, etc)

To conclude — instead of jumping straight into growth tactics, it’s good to take a step back and understand your company’s full growth model. It may show you things you might not have otherwise considered — or at least help bring the whole company behind your Growth efforts.

If anyone decides to publish their growth model, we would love to take a look. Please tweet to me @mccannatron or leave a response below.

PS — A big thank you to Andy Johns, Noah Jessop, Jonathan Cheng, Ron Schneidermann, Adelyn Zhou (alumna), and all of the members of the Greylock Growth Community for sharing their insights and helping to contribute to our growth community.