Source: Nir and Far If you’ve started a tech company to make a lot of money, chances are you’re bad at math—or simply delusional. Statistically spea
If you’ve started a tech company to make a lot of money, chances are you’re bad at math—or simply delusional. Statistically speaking, your odds of a big-time payday are somewhere between zero and almost zero.
Ninety-two percent of startups fail within three years. Only one percent of apps in the Apple App Store are financially successful. And even for the fortunate few companies that raise venture funding, seventy-five percent will fail to generate a return on investors’ capital.
Why do some companies scale to millions of users while others wallow in obscurity? What explains the runaway success of a company like Facebook while a startup like Viddy, a mobile app for video, attracted millions of users and millions of dollars in financing, only to lose both?
When it comes to startup success, there’s never a magic bullet. Yet as the British statistician George Box once wrote, “All models are wrong, but some are useful.”
Perhaps the hardest part about running a new business is knowing what to prioritize. There are hundreds of decisions to make, and keeping sight of what’s important and what’s not is a constant challenge. But when it comes to helping teams stay focused, I have found one model to be extremely useful: it’s called the GEM framework. The origin story of the framework is uncertain but I’ve heard a similar model was first used during the early days of LinkedIn.
A company’s job is to find a sustainable way to deliver value to customers, employees, and shareholders. To do this, the company must never lose sight of its GEM: its growth, engagement, and monetization.
Growth
Growth is all about how a company finds new users or customers. Fundamentally, it’s about getting the right message in front of people who need what you have. I call these messages “external triggers.” External triggers are delivered through various channels, including television commercials, salespeople, emails, or word of mouth.
Some external triggers, like one satisfied customer telling another about your product, cost you nothing. Others, like running ads on Google or buying billboards along the highway, can cost big bucks.
There’s nothing inherently better or worse about one external trigger versus another. What matters is whether the trigger fits your business. Viral growth is wonderful but difficult to engineer and sustain. Meanwhile, buying media can produce a steady stream of customer interest but can be expensive. The growth question to answer is: “Are we getting better at drawing the attention of people who need our product?” And quantifying the answer to that question means tracking the number of new users or customers over time as well as the cost of earning their attention.
It’s important to recognize that growth is a process and a practice, not an end state. Companies satisfied with their growth strategy are at risk of losing customers to their competitors. The Growth Hackers I know manically look for new channels and relentlessly test how many potential customers can be found and for what cost.
Growth question: “Are we getting better at drawing the attention of people who need our product?”
Growth metric: Number of new users or customers, and the…
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