In every entrepreneurial journey, finding the product-market fit is a great achievement that can propel the organisation to the next growth phase. The focus then shifts to meeting the rising needs of the customers and growing the teams. But behind these outward signs of success, serious challenges are awaiting.
It is not a surprise that two-thirds of the fastest growing companies fail during the scale-up phase. A common reason for a failure is premature scaling, when an organisation is trying to run ahead of itself. This immense enthusiasm for fast growth is understandable. However, to make the growth sustainable on long-term, establishing a sound foundation is necessary before scaling.
How to recognise the threat before it’s too late?
Every successful leader must have a good grasp of the organisation’s strengths and weaknesses and must be willing to adjust the steering wheel when necessary. What are the common symptoms that you are not moving in the right direction? Check the list below. If you observe some of these symptoms, it’s strongly recommended to reevaluate your current situation and your growth plans before you move forward.
You have limited insight in how the product is used by your customers.
You and/or your customers experience frequent delays in the product deliveries.
Your backlog is full of customer requests and has no room to accommodate improvements.
You always say ‘Yes’ to customer requests.
Your costs on IT increase and you don’t have an answer why.
Your product roadmap is driven by your gut feeling and not by data.
You don’t have an idea on how the product would operate at scale.
It is not fully clear who is owning the product strategy and roadmap.
The complexity of your organisation increases, roles and responsibilities are unclear.
The key components for successful growth
While the trial and error approach was perfectly suitable for the discovery or validation phase in a start-up, this approach does not fit anymore as the organisation grows. The new scaling phase requires a new type of discipline and a different mindset. It requires building standardised, well-documented procedures, which often means need for new skills that are currently not available in the organisation.
There is no magic bullet to make your growth painless and successful. Your organisation is unique and you need to find the approach that works for you and your people, and for the growth phase that you are in. Successful digital leaders however, have something in common. They have a full control on the four key areas: Product strategy, People, Process, Technology, and a mechanism in place to enable Continuous Improvement in each of these areas.
The product strategy is about the key choices you make to win on long term. Understanding your customers, yourself and your competitors is essential to develop an effective product strategy. Do you know well your end-customer? Why do they buy your product? Which product features are they using regularly? Why do they stop buying? Observe your customer to answer these questions. It’s a common mistake for organisations to stop with the product-market fit search after having found a few customers. Product-market fit is not a one-off activity. A continuous observation of your customers behaviour is necessary to understand the value of your product and how value changes over time.
In the scale-up phase, the complexity of an organisation grows and employees find themselves spending more time and energy on alignment, which they are not used to. Software teams find it unclear who has the end decision when selecting the features to build. As a result, they waste time on alignment, on rework due to changing requirements, and on building a product with no clear vision.
While having unclear rules and responsibilities works well in the start-up phase, the scale-up phase is the time to mature the governance structure. For an effective product development, establish a clear governance and a culture that stimulates transparency and continuous learning. Structure your software teams to minimise team dependencies and to allow fluid information flow. And importantly, connect your teams with your product and your customers.
To enable effective and efficient product development, organisations need to implement certain levels of rules, standardisation and automation, e.g. a process to collect customer feedback, rules when selecting a new technology, software quality standards, test automation process, security testing, automated deployment process, etc. Implementing a standardisation system removes a huge burden from your teams and leaves them space to focus on more valuable work.
The process maturity level depends on the growth phase. In a start-up phase, when a lot of time is rightfully spent on experimentation, basic unit testing could be sufficient, but if you expect to grow, it will become a necessity to ensure a mature test strategy with high test coverage or automated failure testing.
Having the best strategy, people and processes is not sufficient. The ability of a product organisation to scale successfully depends heavily on the quality of the product as well. When building functionality on top of a low-quality software product, software developers might find themselves fixing issues more than building new features.
In the scale-up phase, you need to evaluate if the product is sufficiently scalable: 1) Is the software modular and maintainable to allow efficient functional extension? 2) Would it perform efficiently under high load? 3) Can it handle efficiently high amount of data? Investing in the most advanced scalable software is not necessary if you don’t expect load increase, but if you plan to onboard new customers, make sure your product is ready for this.
What works well now would probably not be the best approach in a while. Perhaps the most important component is Continuous Improvement. If growth is your ambition, create a learning organisation, stimulate transparency between teams, establish a system to measure the performance of your organisation and work towards continuous improvement.
This is the first post in the series “Successful digital product growth”. The upcoming posts will cover each of the aforementioned topics in more detail. The next post from this series will be about “Common pitfalls of a product strategy”.