Taking (responsible) risks as a growth-stage company
I work with on growth for a handful of growth-stage companies every year.
Recent ones include InsideTracker and Concierge Auctions. These are companies that have found product-market fit and raised a Series B or C round of funding.
They tend to run into similar issues.
They’ve grown tremendously thanks to one or two channels/tactics. But at some point, the returns of said channels dry up 👀
They reach a plateau and need help to unlock further growth. Usually, this requires re-thinking the status quo.
Of course, as an established company re-inventing things comes with risk(s):
⇒ Taking away resources from a channel that’s still performing
⇒ Innovating too much and breaking the channel forever
These companies often run into a problem knowing they want to take risks to grow, without destroying what’s gotten them to this point.
We can’t expect incumbents or growth stage companies to behave like startups. But that doesn’t mean they should eliminate risk-taking altogether.
So, what can they do?
Pulling the right risk levers
They need to contain where creativity and risk-taking happens. They should not take risks where the possible negative outcomes are too big to come back from (i.e. destroying the best-performing channel).
In his interview with
, Jorge Mazal (former CPO of Duolingo) describes how they wanted to maximise the impact of push notifications to spark growth. Alongside gamification, the use of push notifications is a growth strategy Duolingo has become well-known for.Jorge knew there was more to gain from their push notifications.
But remembered to look at Groupon for a cautionary tale. For the longest time, Groupon sent only one email notification per day. They made the mistake of increasing the email cadence. A risky lever to pull on a valuable channel like email.
“Over time, the accumulation of Groupon’s aggressive email tests had basically destroyed their channel.”
Jorge, aware of the risks involved with increasing the cadence of notifications, had one rule:
“For our push notifications, we established one foundational rule: protect the channel.”
Before taking any risks or making changes, they set parameters. A sandbox to play in, if you will.
“We decided to give the team a lot of freedom to optimize on dimensions like timing, templates, images, copy, localization, etc., but they could not increase the quantity of notifications without strong justification and CEO approval.”
That last bit tells how seriously they took the possibly disastrous outcome of breaking the push notifications channel.
"Never cross a river that is on average four feet deep"
This metaphor is often used by author, Nassim Taleb. It underscores the idea that even if a risk seems manageable on average, the potential for catastrophic outcomes (like deeper parts of the river) can’t be ignored.
The metaphor tells us we shouldn’t underestimate severity of possible negative outcomes of change. Some examples of ‘catastrophic’ outcomes:
Abruptly changing branding and alienating loyal customers (let’s not forget the famous Tropicana rebrand leading to 20% decrease in sales)
Increasing the cadence of emails, making people unsubscribe
Changing the entire UI of a product that people have come to love, causing user migration to competitors
Final thoughts
This is not to say companies need to stop taking risks to spark further growth and innovation.
In fact, they need to innovate or else they’ll die.
To take risks responsibly, teams simply become aware of which levers are most risky to pull. And let those be ‘off-limits’ until further notice.
Are you currently working at a growth-stage company and not sure how to take responsible risks? Maybe I can help. Feel free to reach out via LinkedIn or email for a chat.