How to Set Up, Hire, and Scale

a Growth Strategy and Team

Credit: Anu Hariharan with special contributions from Gustaf Alstromer

Here are the topics covered in this guide:

When to invest in growth

● Check your retention (+ examples)

● Good retention / bad retention

Building your growth team

● The most common makeup

● The ideal PM candidate
● The ideal engineer candidate
● The ideal data scientist candidate
● When to hire your initial growth team

To Do: Your growth team's first year

● Set an absolute goal and define key metrics (+ examples)

● Identify growth channels (+ examples)
● Establish systems & tools
● Establish user research
● Continue to iterate

Where should the growth team sit?

Growth in your DNA

When to Invest in Growth
A great way to waste money, resources, and jeopardize the future of your company is
to invest in a growth program before you've proven you can retain customers. In other
words, it's best not to hire a full-fledged growth team (defined in "Building Your
Growth Team" section) to put major ad dollars into growth until you've ensured you
don't have a "leaky bucket" problem. If you determine with the process outlined in
this section that you haven't yet nailed retention, you can apply a growth approach to
retention. For example, Stitch Fix hired a retention focused PM to run experiments to
improve retention before they invested in new customer acquisition.

CHECK YOUR RETENTION

Start with this retention checklist to help determine if you have good retention, which
you should be able to tackle with your core product team:

Retention Checklist
Metrics and Data You Need to See if You Have Good Retention

Pick the right set of metrics

Pick a leading indicator of revenue and repeat behavior. Don’t pick a vanity
metric (like app downloads). If it’s a marketplace with two sides you need to
have metrics for both the supply and the demand side.

Examples
(Airbnb)

Demand side metrics:

● “Rebook rate” - % of customers that rebook after the first booking

● “Nights booked per user” - # of nights booked per user over time

Supply side metrics:

● “Active hosts” - % of hosts that are active (i.e. have a booking)

● “Bookings per active host” - # of bookings per unique active host over time
across cohorts

(Uber)

Demand side metrics:

 ● Rider retention - % of riders that ride after the first transaction
● Trips per active rider - # of rides/active rider over time

Supply side metrics:

● Driver retention - % of drivers that drive after the first transaction

● Trips per active driver - # of rides/active driver over time

Pick the right period for your cohort

This will typically be a day, a week, or a month depending on the business
(shorter time periods typically make sense for younger businesses, and longer
ones for more mature businesses).
Examples
(Airbnb)

In Airbnb’s case given the velocity of use is low, and people don’t travel often, the
focus is on measuring retention on an annual basis

(Uber)

In Uber’s case, given the velocity of use is high and people use it often, the focus is
on measuring retention on a monthly and weekly basis

Identify an intial user action within Period 1

100% of the install base takes some action that is a leading indicator for
revenue.

Examples
(Airbnb)

For Airbnb, this is booking a room for at least one night (only a portion of the install
base “rebook” each year)

(Uber)

For Uber, this is equivalent to riding with Uber for the first time or driving with Uber
for the first time

Identify a follow-on user action in Period 2

Calculate the % of install base that is still engaging in that action at period 2
(the following day, week, month, or year)

Examples
(Airbnb)

In the case of Airbnb, % of the install base each year that rebooked since initial
action

(Uber)

In the case of Uber, % of riders that ride with Uber every month since initial action

GOOD RETENTION VS. BAD RETENTION

The biggest question to ask at this point is: Is your retention good?

To determine if your retention is good, run through these 3 steps:

1. Stable long-term retention: Long-term retention should be stable and parallel to

the x-axis (the y-axis represents the retention metric). It is common to see a dip after
the first period (e.g., month 2 for high-velocity1 products or year 2 for low-velocity2
products), but the most important thing is to make sure that the long-term retention
is stable and parallel to the x-axis (see this in the Cohort Analysis graph below).

2. Long-term retention in line with "average or median" benchmarks in your specific

vertical: It is important to benchmark your retention against companies in your
specific vertical. For example, stable long-term retention of 10% is poor if you are a
social network.

3. Newer cohorts should perform better: "Cohort" refers to the group of new
customers that started using your service that particular month. Determine whether
newer cohorts are performing progressively better than older cohorts. If the retention
of newer cohorts are better than older cohorts, it implies that you are improving your
product and value proposition.

Below is an example of how Airbnb has performed–which would qualify as great

retention. The graph below demonstrates stable long-term retention. Each new
cohort did better than the previous one. For example, year 2 and year 3 retention
rates are better than the year 1 retention rate. Airbnb's long-term retention rate is
better than the median retention from competitors in the same vertical.
It is important to benchmark your retention against companies in your specific
vertical. Below, we have included average long-term retention targets for 5 business
verticals.

Once you've passed these checks and know that you have good retention, you can
take the first steps to build your formal growth team, which we cover in the next
section.
Building Your Growth Team
In the early days at a company, pretty much everyone is responsible for growth as
they are solidifying product market fit, and some companies treat this as a shared
responsibility even past product market fit. The reason a company forms a dedicated
growth team is to pour gasoline into product market fit by launching structured
experiments to drive a desired behavior/action.If you have proven sustainable
retention, you can focus on building a dedicated team to improve retention even
further while acquiring and activating and retaining incremental new users.

Here's the most common makeup of an initial, Year 1

Growth Team:

Year 1 Growth Team = 1 Growth-focused PM + 2-3 Growth Engineers + 1-2 Growth Data
Scientists

WHEN TO HIRE YOUR INITIAL GROWTH TEAM:

1. Most companies made their first hire when they had about 15 engineers on the
team working on product.
2. If you have strong retention, then the Growth PM (your first growth hire) is
likely to be the 3rd or 4th PM on the team. The most common mistake CEOs
make is waiting too long before they hire a growth-focused PM.

The trend is moving toward investing in building a growth team earlier on, with many
starting to invest as soon as they have strong product market fit and retention.
Additionally, there is considerable evidence supporting the argument that a formal
growth team created at the right time accelerates the growth trajectory of a product.

A good growth team can also play the role of "defense" really well. Launch of new
features and enhancements can often go sideways and impact usage. The growth
team has the ability to understand the root cause within minutes (not days) and
course correct the problem and thereby limit the negative impact. Facebook's growth
team is considered one of the best at defense and this has consistently helped them
differentiate from competition since the early days.

Your first hires are critical as the initial team members will establish your company's
experiment framework and growth culture. 100% of growth experts refer to the first
few hires as "magnets" for hiring and scaling the team. It's no accident that many
accomplished data scientists work at Stitch Fix as they are motivated to work and
learn from the leadership of Eric Colson (former VP of data science and engineering
from Netflix and one of the early hires Stitch Fix made).

While success cannot be attributed to the growth team alone, having a growth team
in place early on helps accelerate the overall growth trajectory of the company.

Typically, the first growth team hire is a Product Manager (PM). We found some strong
trends in PMs, Engineers and Data Scientist traits highlighted by growth experts who
built successful growth teams:

THE IDEAL GROWTH PM CANDIDATE

1. Data-oriented: The ideal candidate is intensely data-driven and inquisitive. All

of the experts we spoke with said this is a must-have. You want someone in
this role who will constantly ask "Why?" - even when growth numbers are up.
One of the experts we spoke to said, "The scariest day is when numbers are
down, the second scariest day is when numbers are up and you don't know
why."
2. Prior growth experience: It's important that the PM has experience at a
company focused on driving growth in a competitive space (e.g., e-commerce,
dating apps, gaming apps, social networks). This means that you won't be
recruiting out of a company like Google or Apple, as those teams didn't scale
based on competitive growth strategies. More than 90% of the experts
mentioned that prior growth experience is an important characteristic for the
team lead to have.
3. Former startup founder (bonus) : Interestingly, 60% of growth experts in our
interviews were former founders. Why are they great PMs? Because people
who've started companies tend to be able to think independently, are
 comfortable with taking risks, and have high levels of perseverance. This is
important as many experiments will fail.
4. Existing PM (bonus): If an existing PM has the above characteristics, then you
might have the opportunity to appoint them as the Growth PM (as Facebook
and Slack did). The growth team has to work with all stakeholders within the
company and having someone who has already built up social capital within
the company can accelerate the team's progress. This is great, but not a must
have. 40% of the growth leads we spoke with were already PMs at the company
prior to leading the growth team. Others, like Airbnb and Uber, hired a Growth
PM especially for this function.

The Ideal Growth Engineer Candidate

1. Self-starter: Since a big chunk of the work involves running experiments to

determine what really works, the engineer should be proactive about coming
up with their own hypotheses and experiments and iterating. Similar to the
growth PM, they should have infinite curiosity and constantly ask “Why?” to
uncover hidden insights.
2. Doesn’t cry over lost code: This is someone who should be very comfortable
with experimentation, knowing that a large amount of work won’t make it into
the final product.
3. OK doing things that don’t scale: Many of the tests will be small and without
much impact-- so an engineer who is fairly new - just 2-4 years of experience
- might fit better with this mentality vs. one with many years of experience
that may train toward rigid requirements and roadmaps.
4. Great communicator: Growth engineers should be particularly comfortable
working with teams with several functions
● design, copywriting, data, etc.
The Ideal Data Scientist Candidate

Lastly, a data scientist is a vital hire for a well-rounded growth team. Data scientists
are in such demand that Airbnb announced recently that they have an internal
university dedicated to training up data scientists.

1. Fluency with experimental design and interpretation: Since growth is about

running a lot of experiments -- more so than other data science roles -- it is
important to test for this during the interview process. You can pose questions
like, "Under a particular scenario, roughly how large of a sample size would you
need?" and "How would you correct for multiple comparisons in this case?" You
can also pull together a sample data set and run through the analysis live in a
pair coding interview.
2. Coding Ability: More so than other data science roles, growth requires more
work to get & prepare data. This is simply because growth is often dealing with
new data sets, and new data logging. Some suggested testing for this in an
interview by doing live coding on cleaning up a data set together in Python or
R.
3. Great Communication Skills: The two most important elements of
communication are (a) Communicating the results of experiments -- especially
what can and what cannot be validly deduced from an experiment and (b)
articulating the persuasive case for investing in certain growth initiatives.
Someone with a strong business background and a strong familiarity with
causal inference (econometric and experimental backgrounds are ideal).

To Do: Your Growth Team's First Year

Once you have a team, there are five key initiatives you (and the team) will need to
tackle in the first year. Here they are with additional detail on each below.
1. SET AN ABSOLUTE GOAL AND DEFINE KEY METRICS
The most important thing is to identify your absolute goal and drive every aspect of
the funnel toward improving your goal. Casey Winters, former Growth Product Lead at
Pinterest, wrote an excellent post about this. What we mean by absolute is that goals
cannot be percentage changes or rate changes (for example, you should not have a
goal like "improve conversion rates by 10%"). The goal needs to be an absolute
number. (For example, "achieve 5M first-time room nights this year"). Note that this is
an absolute milestone the entire team needs to hit.

An important next step is to break down an absolute goal into subgoals – for
example, if Airbnb's goal is 15M incremental room nights per year, it would need to
achieve sub-goals with an absolute number of bookings from both new users and
existing users. Jonathan Hsu, Partner at Social Capital (also part of Facebook's early
growth team), has shared his growth accounting equation -- here's how Airbnb's
equation would break down:

[x] Room Nights = [A] Room nights from new users + [B] Room nights from existing
users

Similarly, Facebook's absolute goal of monthly active users (MAU) incorporates both
new and existing users. Here's Facebook's growth accounting equation:

[x] Monthly Active Users = [A] New monthly active users + [B] Retained monthly active
users + [C] Resurrected monthly active users

For marketplaces, the companies would have absolute goals (and sub-goals) for both
the supply and demand sides, and sometimes companies will have separate teams
working on each side. For example, in the case of Airbnb the supply side metrics
would include Host Activation, Quality and retention.

At times, teams make the goal too unrealistic or set it in such a way that it is too
easy to achieve. The most common advice from growth experts is to set a goal that is
halfway between "Sandbagging" and "Too hard to achieve". You want to set something
that is a stretch, but at the same time motivate the team such that it is realistic to
achieve.

100% of the growth experts said that the CEO must be aligned when setting and
defining the absolute goal. The goal also needs to be communicated with the entire
company so all teams are aware what the company plans to accomplish that year.
Often CEOs wait too long or don't fully endorse the goal and as a result, aligning
teams within the company takes too long. This could severely hinder the growth
team's progress in the first year.

2. IDENTIFY GROWTH CHANNELS

Once an absolute goal and subgoals have been defined, the next step is for the team
to identify channels for their first few experiments. The most common framework
growth experts use to identify channels is based on existing user behavior. The two
key questions to ask are the following:

1. How do customers find solutions / solve this issue today?

2. How do your best users use your product today? Can you do something to get
more such users to discover the product quickly?

The below behaviors were highlighted by Linkedin's Aatif Awan, and we share some
examples of companies that used those channels.

Not every channel is relevant for all companies. Most products find 1-2 relevant
channels early on that really work for them. ~70% of experts mentioned that referrals
were the top channel within the first year. Over time (as brand awareness increased)
other online advertising channels were more fruitful.

There are some exceptions to this rule were referrals do not work as well. For
example - you can't offer a $20 discount and expect team members to persuade
other team members to join Slack.
3. ESTABLISH SYSTEMS & TOOLS
The 4 most important elements you need to kick off a growth team are the following:

● Clean data set to track key metrics and goals

● Segmentation tools to be able to understand and segment the customer and
activity at a granular level
● Rigorous experiment dashboard to analyze the experiment results and the
statistical significance behind them
● Peer review process to discuss and analyze findings

It is critical for teams to have the right systems and tools in place to run experiments
at scale. Especially key in the first year is the experiment dashboard. Experiment
dashboards are essentially a single destination to track experiments/results, and
allow for easy analysis by lots of people at the company. Dashboards contain:

● Experiment group metrics

● Control group metrics
● A set of metrics defined to track and measure statistical significance

The dashboard helps the team to run various experiments and test the results before
proposing every single idea to be added to the product. As the growth team scales,
the number of engineers increase and it becomes unwieldy without an experiment
dashboard. A company at scale typically runs 1 experiment per growth engineer per
week. With that future state in mind, it's vital to start early with a solid growth
experiment dashboard. The dashboard also becomes an invaluable archive of past
experiments that is also immensely helpful when adding new team members or
iterating on past experiments.

100% of the experts we spoke with emphasized their decision to build their own
internal tools at scale. Initially, you can use tools like Mixpanel, Optimizely, Superset
and Chartio to track your experiments.

Here's a screenshot of Airbnb's internal experiment dashboard:

It can take several iterations to formalize the experiment dashboard. For example -
one of the experts cited that the experiment dashboard was formalized after several
iterations only after they had ~25 to 30 growth engineers on the team.

Peer review & Individual Experimentation

Teams often set up an internal experiment review process on a biweekly basis. Team
members present their hypothesis and share the results of the experiment they ran
to test the hypothesis. Peers ask a lot of questions to decide whether they agree or
disagree with the findings. Growth teams that run 100+ experiments per year cite that
only a third of their experiments turn out to be positive.

Though the success rate is only 20% to 30%, the point of this exercise is to encourage
engineers to take more risks.

A common contention is whether engineers are allowed to run experiments

independently. Companies in their early stages often encourage engineers to run
growth experiments on their own. However some of them require PM oversight as
they scale, especially as they get more rigid with quality standards.

Another important element is to make sure you set heuristics for the growth team.
Growth teams are constantly testing hypotheses and running experiments. One of the
most common heuristic experts use is: "Don't test things you wouldn't ship to
everybody"
4. ESTABLISH USER RESEARCH
Data alone cannot answer all the questions. It is equally important to have user
researchers in place to really understand what is happening behind the numbers.

Your first 100M users will look a lot different from the second 100M users. Therefore it
is important to do the following:

● Solicit real time feedback from users

● Use tools like Inspectlet to track UX
● Meet users outside of San Francisco, especially if it was your first core market.
Other markets will look a lot different from SF
● Pay attention to how users use the product internationally. There may be
cultural nuances in addition to language gaps (for example, people in Japan do
not like to post photos of people without their permission and products may
need to adapt to local taste).
● Document every single use case. What is perfectly normal for one group can be
very different for another group of users.
● As you scale it is important to add dedicated user researchers to the growth
team

5. CONTINUE TO ITERATE
While the above roadmap items will help set the foundation for a strong growth
program, a lot of the tools, processes and systems will evolve at scale.
Where Should the Growth Team Sit?

This has been the biggest source of debate among companies. Facebook pioneered
the concept of a separate growth team (meaning: Growth is essentially a department
within the company). The rationale behind it was if they didn't assign sole
responsibility for growth of MAUs, then no one would own it. This has worked very
well for Facebook, which recently hit 2 billion MAUs (the only social network in the
world to have achieved this). Facebook was also really good at clarifying
responsibilities across various teams. Advocates of separate growth teams cite that it
is important for the Head of Growth to report directly to the CEO.
However other companies like Uber, Airbnb and Slack, started with separate growth
teams but later merged them with product team. Growth is not about just looking at
data to drive insight. The growth team also experiments and makes subtle changes to
the product to fuel growth, and this becomes increasingly important at scale.
Therefore, advocates of this approach cite that it is crucial that the product and
growth teams are within the same org. In these cases the Head of Growth reports to
Head of Product.

Traditionally, a company's marketing team has been responsible for driving user
acquisition (and the associated budget), so this is sometimes a default department in
which to house a growth team. Often this evolves from prior functions that have lived
in the marketing department (like performance marketing and user acquisition). In
these cases, the Head of Growth would report to the Head of Marketing. The general
sentiment about this approach is that the line of reporting is a bit rooted in the past,
and most growth experts cited this as the least-favorable option.

The commonality, regardless of their department, is that the growth team can be
more than 100 cross-functional people. It is roughly composed of the following:

● 10% Product Managers

● 50% Engineers,
● 10%-15% Data Scientists,
● 10% Product Marketing,
● 10%-15% Designers
● ~5% Researchers

The End Goal: Growth is in the Company's DNA

Hopefully, when you're ready to create a scalable growth program, this will be helpful.
This is the newest frontier in the cross-section of marketing and product, so it's still
evolving. When done right, an amazing growth program will permeate the entire
organization, making an evidence-based mindset part of the company's DNA.