Simone Cicero 

Hello everybody, and welcome back to the Boundaryless Conversations Podcast. In this podcast, we explore the future of business models, organisations, markets and society in our rapidly changing world. I’m joined today by an unusual co-host, my friend and all things growth expert and fractional executive Manfredi Sassoli de Bianchi. Hello Manfredi.

 

Manfredi 

Hi there, great to be here.

 

Simone Cicero 

My friend was, among other things, was the co-author of the Platform Design Toolkit Growth Guide. And with us today to kick off Season 7, we have, I would say, a true legend of the startup and growth world, Sean Ellis. Sean is an entrepreneur, an investor, and of course, the person who originally coined the term growth hacking. Sean. It’s incredible to have you with us.

 

Sean Ellis 

It’s great to be with you guys. Thank you for having me.

 

Simone Cicero 

Thank you. I don’t know how many times you have heard yourself being introduced as the person who originally coined the term growth hacking, I guess, many times, but we couldn’t avoid it. Right. So you’re probably best known for your role in driving early growth at very iconic companies like Dropbox, LogMeIn, and later, Eventbrite, and so on. 

 

And for developing an approach to growth hacking that has become a global playbook for early stage traction and product market fit and your widely read books, Hacking Growth and others, and also for being the host of your great Breakout Growth podcast. 

 

So what sparked the idea to invite you here, of course, more lately was your recent piece around growth systems, which is something we want to talk about. But maybe before jumping into that, I would love to offer you a way to frame a little bit the conversation. It’s been 15 years you substantially started this, let’s say, practice. And so it would be nice to hear how the discipline has changed in your perception and maybe a few tenets that you use when you think about the work you do with companies.

 

Sean Ellis

Sure. Yeah, most of my work, particularly prior to writing the book, Hacking Growth, has been with early stage companies. Kind of customer zero to traction to ultimately putting them on a track to become unicorns many times. And not always that outcome, but enough times that I was able to see some pretty cool patterns there. 

 

So I’ll start by saying that – When I first came up with the term “Growth Hacking” and put it out there, it was very much from the perspective of early-stage startups. The world you live in is kind of how you see the world. For me, the world I had lived in was these early-stage companies. So the main point of it at that point was really, you don’t have the luxury to do everything that shows up in a thick marketing textbook, for example, to try to grow your business. You need to really scrutinise every activity that you’re doing to make sure that it’s actually contributing to your traction and ultimately growth. So that was kind of the main point. Then ultimately to know if something contributes or not, you need to test and measure. So test and measure was an important part – Experimentation tells you the difference between, “Are you simply doing things that are correlated to success?” or “Are you doing things that actually cause that success?” 

 

So experimentation was an important tenant of it. But what I found is when I put that playbook out and I essentially said startups are at a huge disadvantage to entrenched companies. So they really have no other choice but to approach growth this way. 

 

But pretty quickly the big companies then started to pay attention and say, hey, we want to do that too. And so a lot of the evolution in my thinking has just been about how can this apply in a bigger company? And it’s not just my thinking. It’s been a lot of other people along the way have contributed their ideas to how this can apply in bigger companies. Clearly in a early stage startup, you have pretty dynamic people that do a lot of things and as you get bigger, you have more specialized people who have the ability to work as a team. 

 

And so a lot of the evolution is really around how can you apply this across a team? I’ll fast forward a little bit and then we can dig into any area that makes sense to you. But when we put the book out, Hacking Growth, it’s been almost 10 years since we published the book.

 

You know, the first company that bought thousands of copies was Microsoft. So one of the biggest tech companies in the world. And so it was already pretty clear that this appealed to bigger companies. And what I started to see across these bigger companies is that when they tried to apply it, they were failing. And so the biggest reason they were failing was because we really didn’t address very much in the book. I mean, if you were creative, you could maybe connect the dots, but we didn’t really connect the challenges of applying it cross-functionally. 

 

So when I was with Dropbox, for example, the team was only eight people. know, cross-functional challenges don’t really exist when it’s a tiny company. And so there’s not kind of the competing agendas and different kind of political factions that you might find in bigger companies. 

 

So a lot of the work that I have done with bigger companies since putting out the book has really been about how to drive cross-functional collaboration. And a lot of that comes down to a sheer metric, so like a North Star metric and just processes that involve the broader company. So that would be a lot of that evolution of the last 15 years was how do you take what works to drive traction in a super early stage company and and apply it in bigger companies. 

 

But my true passion for what it’s worth still lies with the really early-stage companies. That’s where I get the most enjoyment and can feel the impact, and don’t get bogged down in some of the other challenges that exist in bigger companies.

 

Simone Cicero 

Is this something that has changed radically in the industry? Do you really see the big companies now having an extra boost when jumping into these markets? Because when I speak to investors and startups and entrepreneurs in general, I feel like there is a little bit of a cycles. There are little bit of cycles where people tell me maybe it’s the incumbent moment now and then it’s suddenly it’s a startup moment again. 

 

So what is your perception? How has this changed in last 15 years and how we get into a point where really, I don’t know, big companies are stronger than startups in capturing opportunities on the market?

 

Sean Ellis 

Yeah, I think that the process has actually helped all companies. And so that doesn’t necessarily change the competitive advantage that much if everybody improves. But there are always going to be advantages that big companies have, and there’s always going to be advantages that new startups have. 

 

Obviously the startups have a lot more agility. They can move into opportunities quickly. They’re not bogged down by kind of corporate bureaucracy – whereas larger companies obviously have more resources to leverage. They have an existing channel relationships. got a lot of things that ultimately help them. But what we’re also seeing is that some of the things like existing channel relationships, become less important over time as digital media has taken over. Essentially throughout my career, digital media has taken over to the point where most people, if they’re going to buy something, they don’t wait to see a billboard on the side of the highway or a television commercial. 

 

They’re going out and doing their own research, whether it’s for most of the last couple of decades with something like Google to now with AI, they’re going and becoming a lot more informed before they buy anything. 

 

And that means that means that like in the past, think the best product didn’t always win in the past. The best distribution tended to win in the past whereas today, if it’s not the best product, then there’s a good chance that the customer research or the prospective customer research is going to uncover that there’s a better product out there. Even if that better product doesn’t have great distribution the likelihood that they find that product is a lot higher. 

 

So I think it doesn’t mean that the big guys don’t survive. There’s going to be some people that just kind of take the, the more traditional approach to, to product discovery, but there’s enough people that are seeking out the best that are kind of taking matters into their own hands to find and adopt the best – that I think you can at least have startups surviving at a higher rate. 

 

If they have a truly good product, and that’s what comes down to product market fit, which is a super important concept in the world of startups that if the market actually has an unmet need or an undermet need by the incumbents and a startup comes in and fills that need, then again, 

they may not have great distribution, but there’s a good chance that they’re going to get some level of traction. 

 

But if they can combine great distribution, on top of that product market fit, then that’s really where the magic happens. And they can turn into a much faster growing business that ultimately starts to not just take away a bit of market share from the big guys, but actually starts to disrupt the big guys. I wouldn’t say that one has a huge advantage over the other. I just think that the process has gone from a competitive advantage to to a necessity to be successful in today’s marketplace.

 

Simone Cicero 

It’s interesting, it feels like your work has changed in the last 15 years in a way that the PM fit has become more important than the distribution, somehow.

 

Sean Ellis 

For sure, for sure. I think the distribution becomes the table stakes these days where the product market fit. In the past, great distribution could make up for weak product market fit where today, if you have weak product market fit, I think you don’t survive very long as a business.

 

Simone Cicero 

Okay.

 

Manfredi 

I mean, they used to say that distribution was actually more important, right? Because there’s lots of great products that didn’t have success and a lot of average products that were successful. So now the fact that this has completely changed is huge shift.

 

Sean Ellis 

Yeah. I mean, if you think about like just software where I spend most of my time in digital products, it used to be actually physical stores you went into to buy software products and getting into those channels was really hard for a lot of companies. Then it moved to more online stores or online places of discovery. 

 

And now it’s super disintermediated, where again, someone can have a website and good reviews and kind of from their existing customers enough enthusiasm that they get indexed by Google, they get picked up by generative AI platforms like ChatGPT and people start to discover them, which leads to more reviews, more word of mouth. 

 

So even without great execution on the distribution side, it’s possible to have some level of organic growth. And again, there’s no reason not to have great distribution. So the real magic is great distribution plus great product market fit. Then it’s not just when we say distribution, most people think of it simply as getting the word out, but from a systems perspective, great distribution is about getting the word out, making it very easy to come in and get the value of that product. So that’s kind of the speed, the value, the onboarding, messaging it in such a way that it builds momentum so that there’s more desire to it. 

 

You’re reducing a lot of that friction that stops adoption, and that ultimately you’re thinking about everything from engagement and referral and basically a system that builds momentum over time as you take some interested prospects and turn them into really happy customers.

 

Simone Cicero 

Maffred, I don’t know if you want to jump in, but I was thinking that you were speaking, for example, about the first value and elements that are becoming more important in the growth of a product. 

 

Another question that I had in mind is, basically, a lot of the market now is shifting towards B2B, right? Because of B2C, sometimes we believe it’s saturated. Sometimes we have hopes that there are new categories we can unlock. But certainly, maybe 15 years ago, this culture was born around mainly digital products, consumer-oriented, with maybe, I don’t want to say, business models that were also quite optimistic, I would say sometimes, monetizing later or things like that, advertising based monetization. 

 

So now that the market has shifted more into, as you said, delivering value B2B, you said you work a lot with digital companies, but increasingly also known digital or semi-digital companies are looking into this. So how is this really changing? 

 

Do you often have interactions with companies that have more complex products, more complex customer needs, that look, for example, into things like net revenue retention, increasing the ARPU of a single product with multiple products? So I’m curious to hear how this changed your work as well.

 

Sean Ellis 

Yeah, I mean, for me, I am looking for relatively high-velocity business models where you can use data and experimentation more effectively. So if a company has a few hundred potential customers and it’s millions of dollars in average revenue per customer, that’s probably not my sweet spot and where my kind of approach works really well. 

 

But I think if you can have a product that is relatively accessible on the pricing side to onboard someone into that product or a business into that product. And then you’re thinking about expansion across the prospective customer base inside of a company, as well as getting more people engaged on that product inside a company, as well as existing people who are engaged on the core product engaged in, in whether it’s additional features and functionality or cross-selling additional products. I think that just, it essentially becomes a whole new channel. And in some senses, the it’s, it’s less about consumer versus business and more about thinking of business in a consumer-like way. 

 

Simone Cicero

It’s more like an interaction type of intention.

 

Sean Ellis 

Yeah, people, whether they’re a consumer or they’re a business user, most of the time they’re approaching it with a combination of hope and skepticism. What drives adoption is going to be kind of similar. In a business, you may have more stakeholders, might have a buyer persona and a user persona or different types of groups that you need to get on board. 

 

But ultimately, I think where it breaks down is if you’re in the past, you used to be able to get away with kind of shelf wear before SaaS, where you convinced the economic buyer to adopt something and they didn’t really have much of a feedback loop on if it’s being used or not. And so you get the big contract and that’s okay. Today, most of them are able to see – Are people internally actually using it? And that’s part of the shift to SaaS. 

 

And so I think once you saw that shift to SaaS, it really comes down to user adoption. And user adoption is pretty similar between consumer and business in that case, that people are going to have fears and motivations. And you have to tap into those motivations and address those fears to ultimately get trial and usage and engagement and measuring that is really similar on the consumer versus the B2B side. So I think you do start to see a lot of people with consumer backgrounds that then start to thrive in business. I think the Slack team is a great example there. Most of those people had a background in games initially and then launched a corporate kind of communication platform.

 

But even, even my team at LogMeIn, we, all built games before. And, uh, and so, yeah, we, we ultimately were serving small businesses initially with Log Me In, but over time, yeah, some of our biggest customers were IBM and Best Buy and some, some, some much bigger corporates. 

 

In the past, there was not a lot of pressure to make your product really easy to use when you were selling into corporations, but it makes no sense to not focus on making your product not just easy to use, but a delight to use. And a consumer background really helps in that skill set that makes that happen.

 

Manfredi 

So earlier you said how the focus more and more is on product rather than distribution. And so I guess when you first started working on growth, there was more marketing work and now more product. So does it require a different skill set? And is experimentation different there?

 

Sean Ellis

Experimentation is definitely different. I mean, the further down the funnel you go, the lesser numbers you have. It’s just the nature. At the top of the funnel, there’s a lot more people. You can learn faster. You can run more experiments. You get deeper. You have to be more selective about the experiments that you run because you have a smaller audience. But I actually think that the, yeah, in some senses, most of us kind of think about there’s the market and then there’s the product and it’s two different worlds. I think product led growth takes us into, takes us more into, it’s all marketing. It’s, you know, that you’re essentially, as you get into your product, you essentially have a, perfect context for marketing your next feature, your next product, your premium product against your free product, whatever that may be. 

 

But you, you almost have a monopoly and the perfect, the perfect context for marketing that next thing that you want to get someone to, but it’s the same levers. It’s, you know, increase desire and reduce friction to get them to take that next step. So the way that you’re running, or not necessarily the way you’re running the test, but the test learn process is very similar to what you would do with a Facebook ad or a Google ad, but you’re now doing it with maybe a, you know, how you merchandise a feature, how you, how you prompt, you know, Dropbox is a classic example there. What we learned with Dropbox was, yeah, and this is, this is normal for, for most companies and engineering team, a product team, they build a great product and it’s got a lot of features and they want to talk about all of them because they spent a lot of time on them. They know people who are using all of them and it’s in, and they get a lot of value from it.

 

So they want to put that out there. But what I’ve learned through my career and what a lot of people have discovered is that the biggest barrier to adoption in technology tends to be complexity. So even if you have a free product, if it seems complex, that’s scarier than pulling out your wallet and paying for something with a very clear value proposition. 

 

So with Dropbox, what we learned was we could not or we rarely marketed the entire product when someone was coming in to discover it. We generally marketed one piece of the product that was most appealing, depending on the path they’re coming in. So if they came through a shared file, then we positioned it as a file sharing product, share your own files. And then once we converted them on that use case, we thought what’s the next most logical use case. 

 

So that’s where maybe folder collaboration would make more sense to then, you know, synchronize your files across devices. Cause that’s a big leap from sharing a file to synchronizing, but collaboration for a folder of shared files is not a very big leap. So it was very easy. But what we learned was that when someone ultimately was using all of the features or most of the features of the product, is the question that I’ve become pretty well known for now, – a lot of people call it the Sean Ellis question or Sean Ellis test or score –  is when you ask “How would you feel if you could no longer use this product?”

 

 And what we found was that some of the use cases, if they were only on one of them, it might’ve been an average of 30% of the people saying they would be very disappointed without the product. But once they were using all of the use cases, it went up to about 70 – 80, or even 90% of the people saying that they would be very disappointed if they could no longer use Dropbox. 

 

So their perceived value went up significantly, but too early pushing the full value proposition scared people away. So that becomes really the art of the next thing to market.

 

Manfredi 

Right. And so say you have an idea, right? So for example, file sharing, right? And you want to test that. Now, everybody likes experimentation in theory, in practice is difficult, right? And so for example, how do you know when that you launched a feature if people like it or don’t like it and also how do you avoid for example a false negative whereby maybe the execution isn’t quite right or you’ve named it incorrectly that people don’t get how? When do call a test off basically?

 

Sean Ellis 

Well, so there’s a few things. Obviously you can run A-B tests inside the product, but I think the initial thing you want to try to do is ultimately treat a new feature the same way that you would treat a new product. So you’re essentially looking for product market fit of that feature. So that can sound a little bit confusing, but I think if I explain that further, it’ll make sense that if they try the feature, and they don’t come back and use the feature again, that’s a sign that you don’t really have product market fit for that feature or, or feature need fit, however you want to position that. 

 

And so if no one’s trying the feature, that’s a merchandising issue. You’re not, you’re not promoting that feature well enough, but if they’re trying it and not coming back and using it, then it’s likely kind of a product market fit for that feature. And you probably shouldn’t be promoting it but it might also be the complexity of the feature or they don’t understand the real value of that feature. They’re using that feature in the wrong way. 

 

And so you’re approaching getting that feature right the same way that you would approach getting a new product right, where you get a handful of people trying that feature and a few of them saying, my God, I can’t live without that feature. That’s great. And you dig into the why you figure out what makes that feature a must have.

 

And now you start to position that feature around that must have benefit. Now you’re setting the right expectations for all new people who come in and try that feature that to actually seek out the benefit that that feature is truly great at delivering. And they’re much more likely to value that feature afterwards. But at the same time, the way that you would optimize a funnel for a product, the same thing with the feature, you may need to experiment to make that feature a little easier to use, a little more accessible. 

 

And so you can A-B test within those. think that where the A-B testing starts to be really helpful is how do I merchandise that feature within my product? You can do some probably pretty good A-B testing there, but just like with a product, you don’t want to do a ton of A-B testing to drive acquisition of a new product if you find out that most people who try that product don’t actually care about it. So again, that comes down to product market fit first, then distribution where AB testing starts to matter a lot. And so the same thing with the feature, dial the feature in first to make that feature a must have, then start to think about more aggressively merchandising that and doing it in a way where it’s highlighting what makes that feature a must have.

 

Manfredi 

To me what becomes very clear based on what you say is that you constantly need a qualitative and a quantitative feedback. Maybe not at the same time, right? But like you certainly need both at different times, right? And the ability to collect those. And do you find that companies do that well generally? Is it easy? Do you have tips or how to do that?

 

Sean Ellis 

I think it, it’s hard for me to answer if it’s easy because obviously, you know, all, all products are going to be a little bit different. If it’s, if it’s a fully web-based product, it’s going to be relatively easy. If it’s an application, becomes harder. But what I have found is that it’s not an insurmountable challenge to any company. The only place where it might be more of an insurmountable challenge would be where I said if it’s a if it’s a product that has a very small market, a very high, you know, cost to that product, you don’t have a lot of volume to experiment on. So that’s where you’re probably going to lean more toward the qualitative side of, of, know, trying to at least make, make it to the point where people say, okay, “I understand that sounds valuable”. And so it’s, it’s a little bit more kind of interview driven. but the higher volume that you get, the more that you can lean on that qualitative and quantitative. 

 

And so I’ll say with the qualitative and quantitative where they tend to come into play is that ultimately qualitative will never tell you what works best. Quantitative tells you what works best. So quantitative is when you run an A-B test, but quantitative never tells you why something works. It just tells you that something works better. 

 

So in my experience, I used to be a purely like quant guy for what it’s worth. I even had an investor one time tell me, when was the last time you talked to a customer? And I told him, I don’t talk to customers. I test on customers. I care what they do, not what they say. And he said, I need you to talk to customers. Sort of like, I put $10 million into the business, go talk to customers. And I said, OK, I’ll go talk to customers. And really went through the motions for him. 

 

But what I discovered was, the more I talked to customers, the more I surveyed customers, the better experiments I ran, I started to understand the context of the customer. And those insights led me to those kind of breakthrough experiments that led to much better results. So that’s where the qualitative will ultimately help drive the right experiments. But the experiments and the quantitative analysis of those experiments tells you what actually works and what doesn’t work.

 

Manfredi 

What I wanted to ask you next is a challenge you said initially was potentially how in larger corporations, things are just tricky, harder to make it happen. And so this takes us on the kind of structural org questions. Everyone in the company wants to make the company grow and is in some way responsible for that. How do you structure a growth team so that it’s as effective as possible?

 

Sean Ellis 

Yeah, let’s first talk about that, problem a little bit, and then, and then the solution of structuring the team. So most of the problem is when, when a great result happens, everyone takes credit for it. Sales team says, we started doing this different. The marketing team says, we just launched this campaign and everyone, and that, and that’s, and they’re all right from a correlation perspective. They did things, results improved. 

 

And so, but, but ultimately again, you don’t know causation until you run things as experiments. So marketing has become more experiment-driven. Marketing has always been pretty experiment-driven. Products are becoming more experiment-driven. Sales teams, just because they’re generally driven by humans through lots of conversations, it’s harder for them to do really controlled experiments that aren’t really anecdotal feedback of different things I tried.

 

And so I think part of it starts with, I’ll actually take you through the process that I follow and then people can borrow from that. So when I go in a lot of the work that I do when I’m trying to help a company work more cross-functionally on growth, starts with a workshop. And in that workshop, the very first thing I do is try to get everyone on the same page about something they can agree on. And usually it’s not that hard to get them to agree on what makes our product a must have. 

 

And if they don’t agree on it, usually I run some research and I share that research and we come back, you know, our 10 most valuable customers are all focused on this. Do we agree that this is the most valuable thing? And people will say, okay, yeah, I agree. So we get them on the same page around that. Then there’s a little bit of education about how growth works. And growth is about kind of the more value you deliver to people, the more likely they’re to come back and want more.

 

And so sustainable growth is, is really comes down to units of value being delivered. So I can get the same amount of value per customer and just add a lot more customers. That’s going to increase my footprint of value. That’s good. Or I can have the same amount of customers and double the value per customer. And that also increases the amount of value I’m delivering, or I can do both, which is really what we want to shoot for is more people getting more value. So units of value are ultimately what drives sustainable growth, but that’s, pretty like conceptual. how do you, how do you boil that down to something that is actually controllable and measurable? That’s when you, when you figure out a metric that quantifies how much value you’re delivering. And that’s the idea of a North star metric. So once we agree on what the value is, then I’m getting the team to agree on what a North star metric is. 

 

And of course I can just come in and say, here’s the right North star metric for your business, or here’s a pretty good North star metric, or I can. Maybe even just talk to the CEO and they tell them, but when a cross-functional team all debates it and comes down to, know, and of course they could debate it for months if I didn’t like give them some guide rails. So that’s where I, basically say, you know, it, we’ve got 30 minutes to decide here’s why we’re doing this. Here’s the insights we have to make this decision. And now they hone in on the North star metric. Now they all have the shared metric cross-functionally that they’re trying to grow. 

 

That now becomes a company-wide metric of value being delivered. And everyone starts to understand what is my role in driving that. So again, on the marketing side, maybe it is about bringing more people in who experience a piece of that value. The product side might be, how do I get existing people to experience it more or even…

 

How do get those interested prospects to actually experience that value more quickly? That’s that speed to value side. Sales, depending on the product may have a role in, that as well. But now you’re essentially, once you have a cross-functional metric, getting the team to cross-functionally work together becomes much easier. And then most of the rest of the time, I’m just focused on teaching experimentation and, and how running experiments across what you identify as the best opportunities, those high leverage opportunities for improvement ultimately leads to sustainable impactful growth. 

 

So it can get into brainstorming and then I’ll go more toward, what is the process for running those experiments? And I like to do kind of a weekly agile process there, but in one day, I can get a team at least with the knowledge and kickstarting the process for effective cross-functional growth, but it’s still then they’re going to have the inertia of old habits and old ways of working, pulling them backwards. so it’ll still take a lot of effort to build the habit and kind of change the way they work. But I think it’s impossible. 

 

And I tried to do in the past kind of one function at a time and, without that workshop format and, that failed all the time where now for some companies, I’ll actually go in and do like a longer term hands-on engagement with them, but I would never do that longer term hands-on engagement without that, that upfront workshop to essentially kickstart the process.

 

Simone Cicero 

I have so many questions, but we don’t have much time. So I think I wanted to ask you first of all, a very small piece on top of the conversation we just had. And then maybe have a last question on the growth systems. But how much in your experience, these coordination and coherence that you seek across different multifunction functional teams, how much is that typically a top-down process with someone that holds this together and tells everybody more or less, I don’t want to say what to do, but what to optimize for and sets, let’s say, the expectations for the teams and how much of this can be really a cooperative, collaborative process.

 

Sean Ellis 

So I think it doesn’t happen without top-down support. So it generally starts with, you know, a division leader or, you know, if it’s a mid-size startup, maybe even the CEO needs to kind of be the sponsor that makes it happen, but they themselves can’t do the whole thing. That’s where they’re essentially setting up that workshop. And a lot of times in a workshop type format, I’m actually asking them, to participate briefly or in the beginning to say, this is what we’re trying to do. And in the end, maybe summarize some of the key pieces, but let it happen organically across the team so that people actually feel like they own the results rather than they’re just echoing what that top level leader is saying. 

 

I do think it has to be more bottoms up in how it happens. Or not necessarily bottoms up, but you know entire organization as opposed to being something that gets pushed down.

 

Simone Cicero 

Right. Because silos and dependencies and continuous escalations are a crazy problem in my experience with also not just early stage startups, but also in the execution of growth. It’s very much of a problem.

 

Sean Ellis 

And I think, and I think that’s, it is a huge challenge for, for bigger companies and the bigger the company, the bigger the challenge is there. And that’s why I am so drawn to work with early stage startups. So the place where, where it’s best. Yeah, absolutely. The place where it’s best. mean, the challenge in early stage startups is often false positives for product market fit, but

 

Simone Cicero

You seem to avoid the problem as much as possible.

 

Sean Ellis 

If you can really be confident that you validated product market fit and you’re working with essentially the raw ingredients to build the organization right in the first place. Then I think that’s the easiest time and the ideal time. Again, that’s why I’m drawn. Plus the other benefit of early stage is that I do a lot of that work for equity and that’s the most that’s the equity with the most potential for appreciation because they don’t have a growth curve yet, which is where the venture capitalists start marking up the value, but they’re past the hardest risk, which is have they actually created something that people want and need? 

 

If they’re past that risk, but before the value markup, if I can come in and help them at the stage where I really enjoy that stage and they have the most potential and it’s not that hard, then that’s why I’ve done so many cycles there and why I continue to go back to it.

 

Simone Cicero 

So, I mean, if I can recap before just the last question, I feel like you’re pushing towards considering product market fit as paramount in these organizations and trying to, when you say, for example, features need to be discovered, it’s a way for you to nudge towards continuously creating spaces in the organization for discovering new value and potentially distributing also a little bit of autonomy into this discover value, to avoid too many, too big silos or too high, let’s say, architectures in the organization.

 

Sean Ellis 

Right. If you think of features as mini products and how it was presented to me, I didn’t come up with that idea. The person who presented it to me was a guy, Oleg Yakubenkov, who I partner with on a learning program called gopractice.io. 

 

The way he initially presented it was, in a sense, apps on the iPhone, they’re just a feature of the iPhone. You wouldn’t think like if Apple had to run all of those businesses, it would be a huge bureaucracy, but they’re all running these tight little agile businesses. That’s where, yeah, if you start to think of your product as a platform and each feature as a mini product in itself, and again, like in the case of Dropbox, I mentioned, every feature they ultimately started to use enriched the core product experience to the point where it became more of a must have.

 

And ultimately, Dropbox at the time, reached a billion dollars in recurring revenue, reached it faster than any other SaaS company had previously reached it. And a lot of that was based on essentially revenue expansion. There was not churn, which is like the opposite of what you want. In a SaaS business, churn is the killer. Eventually start to offset any growth you have. Dropbox actually had negative churn across its installed user base, plus a great referral program. So you add those two pieces together, you get really fast growth and you do it in a cashflow positive way. 

 

And so that was kind of the beauty of that business where, you know, it didn’t need to rely on some external driver of growth like paid search. It was the base of customers fed the business and then once they were on the product, they got a richer experience with the product and then stored more and more things with Dropbox, which then caused them to pay more to Dropbox. And that’s when I talk about kind of architecting a growth system. 

 

That’s what you’re trying to do. You’re trying to figure that out.

 

Simone Cicero 

Exactly. That was the point that I wanted to ask you. Is this the growth system at the end of the day?

 

Sean Ellis 

This is the growth system at the end of the day. And so while some companies have a relatively vanilla growth system of like really good conversion and monetization and maybe paid search and it’s just like looking at the levers in more of a generic way. Long-term, I don’t think a business is going to have that breakout kind of unicorn result off of that unless they have really, really good product market fit.

 

And, but in that case, they’re probably going to get a lot of competitors coming in and, and, sucking away at that product market fit. So you may need to initially start with more of a vanilla growth engine, but you want to, you want to think about what are the unique advantages we have in this business that allow us to build something that’s a unique system that organically grows over time. 

 

And, and, that’s every business that I’ve been a part of that reached those billion dollar plus valuations. ultimately had organic growth was their biggest driver. And there were lots of different things that fed that organic growth.

 

Simone Cicero 

And there is also this inner engine to this growth, right? So this idea to, let’s say, make new pieces of the product, the merchant only interaction from the customer in a continuous search for new product market fit.

 

Sean Ellis 

For sure. Like with LogMeIn, our system was, we were one of the first businesses to ever have a free version of our product. Sounds so normal today, but we really were a pioneer in the freemium space. I think maybe Zone Alarms might’ve been one of the only ones before us, a couple of companies in the security space, and that ultimately our free product became the platform for lots of premium upsells. 

 

We essentially, understood by really researching our free users and breaking out use cases and understanding what the users didn’t like about the free product for serving that use case, we were then able to launch a premium product that served that use case so much better that they were willing to pay for it. And one of those being a product called LogMeInRescue that in the first, I think it was maybe first 60 days, we reached a million dollars in new bookings on the product just based on selling to that installed base of people who were attracted to a product that better served their unique use case.

 

Simone Cicero 

Great. mean, that was extremely insightful, think. Worth re-listening a couple of times, at least. before we close, Sean, maybe if you, of course, we suggest our listeners to go read your books, go check your podcast. But what is Sean reading or listening to or wants to suggest to our audience these days?

 

Sean Ellis

So my must listen to is Lenny’s podcast. anytime a new episode comes up, I jump into that and I think he does a great job with it. I don’t have as much time for reading, unfortunately, mostly because I’m writing, but I do occasionally have audible books that I put in between podcasts. I think the knowledge – The Knowledge Project podcast is another one that I really like Shane Parrish, I think is his name. I especially like the biographies of successful people. I’ve always been a reader of biographies of successful people, just to kind of, again, sort of understand the systems behind their success. But he basically in a 90 minute session will break down. So I just started listening to Fred Smith, the guy who started FedEx and his story for starting FedEx. 

 

So I find those to be really valuable. But a lot of the things that I actually listen to are more self-care kind of things on Audible. So I love the Surrender Project is a really good one. The Untethered Soul, I forget what the author’s name is, but he’s the same guy who wrote both of those. So I do a lot of meditation and multiple times a week with a personal trainer and all the things that help me physically and mentally stay strong will put me in a position to be more effective when I’m focused on a company. 

 

So yeah, those are the, I’m really selective about the things I’m listening to on the work side and Lenny’s podcast tends to be great for that. 

 

Simone Cicero 

Right. With Lenny is becoming like IBM. You don’t, cannot be wrong by suggesting people listening to Lenny’s podcasts like using IBM. 

 

Sean Ellis 

Absolutely. And I’m a subscriber to his newsletter as well, but I’ll be honest, I don’t read that as much as I listen to his podcast.

 

Simone Cicero 

And of course, we suggest everybody to go and watch the episode where you were with Lenny, I think like a months ago, if I’m not wrong. And yeah, thank you for the suggestion. I mean, I think reminding people that there needs to be a balance to the hype and speed of the work we do with being present with yourself, meditate, take care of your body – I think that’s always a great breadcrumb to share with people. So thank you so much.

 

Sean Ellis 

Absolutely. One other thing I’d say is that I went for a pretty long period of time where I was not that inspired to write, but I am writing quite a bit these days on my Substack. So I know you’ll probably link to it in show notes, but Seanellis.substack.com is where I’m doing a lot of my writing.

 

Simone Cicero 

Yes, and it’s where you wrote recently about the growth systems that caught our attention. So I really suggest people to, I’ve seen that you have accelerated a bit the content there. So go there and check it out.

 

Yeah, I just put out one today on AI as the ultimate mentor for new marketing grads. If you combine them with a growth system architect, that’s like the ultimate lean traction team for a startup. So hopefully people can check that out as well.

 

Simone Cicero 

I think we have been doing a good job that we spoke about AI just marginally today. I don’t know how much, but we just mentioned a couple of times the ChatGPT, but we didn’t have this typical question, how is AI changing the rules of the game? 

 

So I think that’s a very big win for today. Thank you so much. It was fantastic to have you, really a gift. I hope you also enjoyed the conversation.

 

Sean Ellis

Yeah, I did. I really enjoyed it. And it was a good primer, as I mentioned at the beginning of our call, that I’m going to Italy. So nice to spend an hour with a couple of Italians to get my excitement for meeting many more when I’m there in a few weeks.

 

Simone Cicero

Yeah. And you now have a contact when you need questions for your trip. So please go ahead and use it. And, Manfredi, thank you so much also for joining today. Thank you so much for your great questions, as always.

 

Manfredi 

Thanks, it’s been a pleasure.

 

Simone Cicero 

Thanks, everybody. So when it comes to the listeners, please go ahead and check out the Boundaryless.io/resources/podcast. This episode will be on the homepage of the podcast. You will find the show notes, the links to all the fantastic things that Sean mentioned. And until we speak again, remember to think Boundaryless.