Andy Johns is widely recognized as an expert in the data-driven, optimization-heavy style of growth popularized by Facebook, LinkedIn, and Twitter — all places where he worked. In a conversation with Pete Flint on the NFX podcast, Johns cautions teams against leaning too heavily on this style of growth.
To see why it’s dangerous to focus too heavily on optimization, teams first must understand that optimization isn’t the only game in town. Johns says that there’s a sense in which everyone in the organization can be thought of as working on growth. This makes sense when you divide the types of activities that can stimulate growth into two higher-level categories: innovation and optimization.
Innovation growth can come in two types:
- bringing deeper value to your existing customers, leading them to engage more deeply and refer more enthusiastically.
- addressing a new segment of the market that you haven’t previously addressed.
Innovation growth is more of a hit or miss kind of game. The nature of innovation is that you’re going out on a limb and betting that you can build something new and succeed in a way that you haven’t succeeded so far. If you think of your set of growth activities like an investment portfolio, innovation activities are your high-risk high-reward investments.
Optimization growth of the sort familiar from Facebook, LinkedIn, and Twitter teams, is very data-driven and optimization-oriented. These teams run lots of tests and are comfortable not swinging for the fences, but rather accumulating 5-20% lifts in their current rate of growth. The product improvements they ship are fundamentally optimizations of the product that they already have, and are not innovations to bring new value or appeal to new segments of the market.
So why is it dangerous to focus too heavily on optimization? The core problem is that the ceiling may be too low to meet your needs. Johns shares a story from his time at Facebook. The board had given the team aggressive goals: 300%+ growth in a year. The team looked at their current rate of growth and saw that it wouldn’t get them there. The team estimated the ceiling potential if they accelerated their work. They concluded that the product had its core mechanics in place, and that they would likely be able to achieve their goals through aggressive optimization. So that’s what they did.
But many founders fall prey to a kind of cargo cult thinking: Facebook et al had millions of users and they did optimization-heavy growth work, therefore if we want millions of users that’s what we have to do too. Maybe so, maybe not, says Johns. It’s a question of what you’re aiming for, and whether the ceiling on optimization is high enough to get you there.
Johns advises that founders treat their growth investments like a financial investment portfolio. You probably don’t want to be all high-risk instruments and you probably don’t want to be all low-risk instruments. You want a balance. The longer your timelines and the bigger your goals, more you’ll likely need to hit innovation wins to get there.
The general advice Johns gives, especially for companies that already have some traction, is that the way they got there was through innovating. So it’s probably not a good idea now to suddenly turn a blind eye to the method of innovative product development that got them there. Keep your innovation muscle strong.