The Law of Diffusion of Innovations shows that mass-market success starts with just 2.5% of "innovators", followed by 13.5% of "early adopters." These people are willing to try new things first based on a gut feeling, even if not everything is perfect.
What unites early adopters is that they share your beliefs and see the world the way you see it. They get the WHY behind what you do, and that belief is enough for them to take a chance on you before you've got all the details figured out.
Great leaders don't try to convince the majority first. They find those early adopters who believe what they believe. Once those early adopters are on board with your WHY, they become powerful evangelists to bring others along and spread your message. That's what creates the tipping point for mass-market success.
Section: 3, Chapter: 7
Consider an advertising message from Apple if they started with their WHAT: "We make great computers. They're user friendly, beautifully designed, and easy to use. Want to buy one?" It's not very compelling.
But Apple actually communicates from the inside out, starting with their WHY: "With everything we do, we aim to challenge the status quo. We aim to think differently. Our products are user friendly, beautifully designed, and easy to use. We just happen to make great computers. Want to buy one?"
The second version is more compelling because it starts with WHY - a purpose or belief. The products (WHAT Apple makes) serve as tangible proof of the WHY. For people who share those beliefs, Apple products become a symbol of their own values and desires.
Section: 1, Chapter: 3
One of the biggest traps for companies of one is getting stuck in a cycle of endless preparation and perfectionism. You tinker away in isolation, waiting for your offering to be flawless before releasing it to the world. But the truth is, you learn more from one real customer interaction than countless hours of solitary strategizing.
The antidote is what LinkedIn founder Reid Hoffman calls the "embarrassment test":
"If you're not embarrassed by the first version of your product, you've launched too late... The feedback you get from releasing your 'embarrassing' product is the most valuable feedback you'll get in your life."
You'll never achieve perfection, only progress.
Section: 3, Chapter: 11
Many companies are obsessed with acquiring new customers at all costs. But the data shows that retaining existing customers is far more profitable:
- Acquiring a new customer costs 5-25X more than retaining an existing one
- Increasing retention rates by 5% boosts profits by 25-95%
- Loyal customers spend 67% more than new customers
The lesson for companies of one is to prioritize delivering exceptional experiences for the customers you already have. Some ways to boost retention:
- Proactively gather feedback and quickly address issues
- Personalize your communications and offerings
- Thank loyal customers with exclusive perks and recognition
- Create communities for customers to connect with each other
Section: 2, Chapter: 7
The central argument of "Company of One" is that staying small is a viable alternative to the standard "go big or go home" approach to entrepreneurship. Technology has made it easier than ever to automate and outsource aspects of running a business, so a small team or even a solo founder can have huge impact and reach. Some key advantages:
- Resilience - The ability to recover from difficulties and adapt to change. Having multiple skills and not relying on a single customer.
- Autonomy - The freedom and control to make your own choices. Mastering a valuable skill set to work independently.
- Speed - The agility to change course quickly if needed. Using constraints creatively. Avoiding bureaucracy.
- Simplicity - Focusing on core essentials, avoiding unnecessary complexity. Iterating to make things simpler over time.
Section: 1, Chapter: 1
Many companies are afraid to share their "secret sauce" and hard-earned expertise. But in practice, teaching is often the most powerful way to attract loyal customers. Benefits:
- Positions you as a trusted authority and go-to resource in your niche
- Makes people feel they know, like and trust you before ever buying
- Attracts inbound leads and referrals from people who love your content
- Lets you test demand for and iterate on paid offerings risk-free
Don't think you have to give everything away for free. The goal is provide enough value to be truly helpful, while still having premium training and support to sell. Basically, your free content is the "what" and "why", your paid offerings are the "how" with hands-on guidance.
The more you share, the more people will want to learn from you. And the more they'll trust you with their money for the full experience. Teaching is a long-term play that keeps on giving in loyal fans.
Section: 2, Chapter: 9
Truly caring about your customers as human beings, not just walking wallets, is the foundation of great service. Empathy means putting yourself in your customers' shoes to understand their needs, frustrations, and desires. Then shaping your offering to best serve them.
When customers feel understood and cared for, price becomes a secondary concern. They know you have their best interests at heart. Empathy inspires loyalty that lasts.
Section: 2, Chapter: 7
In a traditional corporate career path, "success" means managing more and more people over time. Your scope of responsibility grows, but you often get further away from the craft you love. Companies of one need an alternate model for advancement that doesn't require endless team expansion.
Buffer has pioneered a clever framework for progression without direct reports:
- Scope of Influence - Master your core skill at increasing levels of impact, from individual work to team-wide to company-wide to industry-wide contribution.
- Ownership - Take on more responsibility and strategic importance over your domain. Progress from executing tasks to owning projects to shaping entire functions.
The takeaway is to redefine advancement in terms of mastery, impact and ownership - not raw headcount. You can evolve in your role and compensation without the added overhead.
Section: 1, Chapter: 4
As the author's freelance business gained traction, he faced a common crossroads - scale up or stay solo? He had more inquiries than he could handle and it was tempting to hire a team and go after bigger clients. But something about that path didn't feel right.
Saying no to "good" opportunities gave him the space to say yes to truly great ones - those that aligned with his values, played to his strengths, and moved him. closer to my goals. It wasn't always easy watching peers scale faster and do flashier work. But he knew he was optimizing for quality of life over quantity of revenue.
Section: 3, Chapter: 13
the digital age, trust has become the most valuable currency in business. With infinite options and information at their fingertips, customers gravitate toward companies they believe in on a personal level. Trust is built through:
- Transparency - Being open and honest about your processes, policies, and performance
- Consistency - Reliably delivering on your brand promises across all touchpoints
- Authenticity - Staying true to your values and principles, even when no one's watching
- Empathy - Demonstrating genuine care and concern for your customers' well-being
Examples of high-trust companies:
- Patagonia - Radically transparent about its environmental impact and supply chain
- Zappos - Empowered employees to "wow" customers, even if it meant taking a short-term loss
Section: 3, Chapter: 10
"Profit, not revenue, is what matters. Revenue is often thought of as the top line, the "gross sales" a company has made in a year, yet what really matters is how much of that money is left after all the bills are paid—that's profit... Focusing on profit from day one sets you up for long-term stability."
Section: 1, Chapter: 4
In a crowded market, your company's unique personality is a powerful differentiator. Customers connect with brands that feel authentic and relatable. So don't be afraid to let your quirks and style shine through your company's:
- Visual branding and design sensibility
- Voice and tone in your copy and content
- Internal culture and communication norms
Some ways to cultivate a strong company personality:
- Audit your current touchpoints and look for opportunities to humanize
- Lean into your own founder story, passions, and perspectives
- Hire people who embody your target personality traits authentically
The goal is make people feel like they're interacting with a person, not a faceless corporation. It's okay to not appeal to everyone. Attracting the right customers is better than bland mass appeal.
Section: 2, Chapter: 6
For a company of one, the key financial goal in the early days should be reaching "minimum viable profit" as quickly as possible. This means generating enough profit to:
- Cover your basic living expenses
- Reinvest in the business's growth
- Build up some savings as a cushion
Minimum viable profit will look different for everyone depending on lifestyle and business model. But generally the lower it is, the faster you can reach it and start building on that base. Some tips for getting to profitability quickly:
- Keep expenses as low as possible by only spending on essentials
- Maintain a separate job or consulting income as long as needed
- Secure advance payments or retainers from clients to improve cash flow
- Focus on selling one product/service at healthy margins to a clear niche
- Resist urge to scale up staff, office space, inventory until absolutely necessary
Section: 1, Chapter: 4
Unlike specialist corporate workers utilizing a single skill, leaders of companies of one need a generalist skill set across multiple domains:
- Psychology - Understanding customer and team motivations and decision making
- Communication - Writing clear emails, documents and presentations
- Resilience - Bouncing back from adversity and maintaining optimism
- Focus - Saying no and avoiding distractions to focus on priorities
- Decisiveness - Making smart choices quickly without getting overwhelmed
Section: 1, Chapter: 3
The stereotypical brash, dominant, extroverted leader is not the only model. Studies show introverted leaders can be very successful, especially with proactive teams. Introverts tend to listen carefully, focus deeply, and provide autonomy.
For example, Mark Zuckerberg leverages his introversion to build genuine relationships with key team members and acquihires. He empowers them with trust and autonomy rather than constant oversight. Introverts should lean into their natural strengths and collaborate with extroverted colleagues to balance things out.
Section: 1, Chapter: 3
"More than ever before, trust is the most important currency in business. The ability to build trust, and do it authentically, is the greatest predictor of a brand's success... Without trust, a business fails."
Section: 2, Chapter: 5
For companies of one, relationships are everything. In a hyper-connected world, your most valuable asset is not what you know, but who you know (and who knows you). A strong network gives you:
- Referrals - Warm introductions to potential customers, partners, and top talent
- Resources - Access to insider knowledge, expert advice, and best practices
- Resilience - Support and encouragement during the inevitable ups and downs
- Reputation - Third-party credibility and social proof of your abilities
But valuable relationships don't just magically materialize. You have to put in the work to cultivate them over time. Some dos and don'ts:
- Do give before you get - Offer your time, expertise and connections generously
- Don't keep score - Focus on mutual benefit, not tit for tat transactions
- Do show genuine interest - Ask questions and listen more than you talk
- Don't be a "taker" - Constantly asking for favors without reciprocating
In short, approach networking like you would any important relationship - with authenticity, consistency, and dedication. The more you put into your network, the more you'll get out of it.
Section: 3, Chapter: 12
Word of mouth is the holy grail of marketing for companies of one. A single trusted referral is worth more than thousands of dollars in paid advertising spend. While you can't directly control what people say about you, you can stack the deck in your favor.
Some ways to encourage customer advocacy:
- Proactively ask for feedback, then showcase positive reviews and testimonials
- Thank customers for referrals with a handwritten note or exclusive perk
- Make referrals a seamless part of your post-purchase follow-up sequence
- Create a formal rewards program incentivizing customers to spread the word
- Equip customers with shareable content like case studies and social media assets
In short, treat your customers like VIPs and they'll treat you like royalty in return. The little gestures add up to big returns.
Section: 3, Chapter: 10
When starting out, don't get caught up in building complex infrastructure, hiring staff, getting offices, etc. Instead, identify the core problem you want to solve. What solution could you provide to a single customer right now, with the bare minimum of resources?
For example, designer Paul Jarvis started getting clients by simply emailing his network, offering his skills. Crew started by manually matching clients and freelancers, then automated only after proving out demand. Start tiny, prove your concept, then slowly expand only as needed to better serve customers. Premature scaling is the enemy.
Section: 1, Chapter: 4
Before launching your company of one, get clear on your purpose - the deeper reason behind what you do beyond just making money. Your purpose is a combination of:
- Your values - The principles you stand for and believe in
- Your mission - The problem you exist to solve or the change you seek to make
- Your vision - The ideal future state you're working to create
Having a bigger purpose helps you:
- Make better decisions by acting as a "north star"
- Attract and retain employees and customers who share your values
- Find deeper meaning and fulfillment in your work
- Build a brand that stands out by taking a stand
Section: 2, Chapter: 5
"Follow your passion" is common but misguided career advice. The reality is that very few people are able to turn their pre-existing passions into viable businesses. And even if you do monetize a hobby, the pressure of relying on it for income can drain the joy from it.
A better approach is to develop profitable skills, then leverage those skills in a field that interests you. Passion often follows from mastery and success, not the other way around.
Focus on getting really good at skills that are in demand in the market, and look for opportunities to apply those skills in industries/roles you're curious about. Skills first, passion second.
Section: 2, Chapter: 5
For companies of one, the key to sustainable growth is implementing scalable systems that increase output without a proportional increase in costs or headcount. Some examples:
- Email marketing allows you to communicate with thousands of leads for the same effort as emailing one
- Webinars let you present to a global audience without travel costs
- Chatbots handle basic customer service inquiries 24/7
The goal is to automate and templatize repeatable processes so you're not always trading time for money. Look for opportunities to provide one-to-many value at every stage of your funnel. Could that sales demo become an on-demand video? That onboarding call a self-guided tutorial?
Scalable doesn't mean impersonal. Use technology to enhance, not replace, human connection.
Section: 2, Chapter: 8
In the 1990s, as most airlines struggled, over 100 cities begged Southwest Airlines to expand to their airports. Southwest turned down 95% of the offers and started serving only 4 new locations. They wanted sustainable growth with an upper limit, not growth at any cost.
Setting upper bounds works because there's a point of diminishing returns, where more growth doesn't improve quality of life. Identify "enough" profits and customers for your business. Don't assume more is always better. Grow slowly and intentionally like Southwest, not in an unsustainable rush.
Section: 1, Chapter: 2
The common advice that entrepreneurs need to be constantly "hustling" and sacrificing everything for their business is misguided. Studies show workaholics are no more productive, just more stressed. Leaders should avoid this "hustlin'" mentality and the implication that overwork equals success. Instead, focus on working smarter in condensed periods of high productivity. Build in time for rest and recovery. Your business should fit your desired lifestyle, not consume your entire life.
Section: 1, Chapter: 1
Multiple studies, including by the Startup Genome Project and the Kauffman Foundation, found that premature scaling and growth was the primary reason over 70% of startups failed. For example, startups would spend money and resources based on hoped-for future revenue, rather than actual profit. When the projected growth didn't materialize, the companies would implode, resulting in layoffs and bankruptcy. Growth can't be an end in itself - it must be based on real profit and sustainability.
Section: 1, Chapter: 2
Much of the obsession with growing businesses as big as possible stems from ego and envy, not smart strategy. We see other large, successful companies and assume growth is the only way to respect and clout. But comparisons are misleading - you don't see behind the scenes, only the shiny exterior.
Instead, use envy as a tool to identify what truly matters to you. If you envy a company's profits or impact, focus on improving those things sustainably, not just getting bigger overall. Don't let ego drive irrational growth. Stay true to your own definition of "enough."
Section: 1, Chapter: 2
the startup world, overnight success stories get all the glory. We idolize companies that seem to go from zero to billion-dollar valuations at warp speed. But the reality for most lasting businesses is a longer, slower, steadier climb.
Consider some examples:
- Basecamp - Took nearly 5 years to get to $1M in annual revenue, even slower to $5M
- Mailchimp - Grew gradually for the first 7 years before hitting 10K users, now at 20M
- Atlassian - Took 8 years to IPO, prioritizing sustainable growth over speed
The common thread is these companies focused on creating real value and building lasting relationships, not just grabbing quick cash. They were playing the long game. You still need a strong sense of urgency and bias for action. Just resist the pressure to inflate your numbers prematurely. Slow and steady adds up to success.
Section: 3, Chapter: 11
There are four main reasons most businesses pursue growth from the start:
- Inflation - Rising costs over time
- Investors - Pressure from VCs/funders for 10X returns
- Churn - Need to replace leaving customers with new ones
- Ego - Craving respect and status of a big company
But early stage companies can avoid these pressures. Don't take investor money if possible. Build loyalty so churn isn't an issue. Fight ego-driven urges. Have a realistic strategy focusing on sustainable profits, not just growth itself.
Section: 1, Chapter: 4
When recruiting early employees for a startup, look for people who are genuinely excited to work with you and believe in the mission of the company. Some tips:
- Hire for both aptitude and attitude. Raw talent is great but a shared sense of purpose is essential.
- Communicate a compelling mission that attracts like-minded people who will fit the culture.
- Favor highly motivated people over highly experienced people early on.
- Be wary of people who are more excited about the general idea of a startup than the specific mission of yours.
- Design a culture where everyone is rowing in the same direction, even without top-down direction.
Section: 1, Chapter: 10
Founders are often extreme outliers across multiple dimensions simultaneously:
- Extreme outlier abilities - e.g. Steve Jobs' design skills, Elon Musk's intelligence and work ethic
- Extreme outlier motivations - an intense desire to change the world and leave a mark
- Extreme outlier outcomes - their companies have an exceptionally large impact on the world and achieve outlier success
These traits tend to be self-reinforcing. Unusual abilities and motivations lead to unusual results, which then increase the perception of their unusualness and make them even more motivated to achieve extreme outcomes.
Section: 1, Chapter: 14
The defining characteristic of a successful company is that it has carved out a unique and valuable market position. The differences between companies are what matters - the more different and unique a company is, the more likely it is to succeed and maintain a monopoly. Failed companies, in contrast, all look the same - they fail to escape competitive dynamics, struggle to differentiate themselves, and get beaten down by the forces of competition.
Section: 1, Chapter: 3
Strive to create a monopoly business - one that is so good at what it does that no other firm can offer a close substitute. Avoid competition and aim to be a category of one. Some ways to build a monopoly:
- Proprietary technology - Be at least 10x better than the next best alternative. Create a product so much better it feels like it has no competition.
- Network effects - Build a product that becomes more useful as more people use it. This creates a barrier to entry.
- Economies of scale - Create a business with high fixed costs and low marginal costs, so you can scale efficiently.
- Branding - Build a strong brand that customers identify with and feel loyal to.
Section: 1, Chapter: 3
The early team of a startup should have a shared sense of purpose and identity stronger than most companies. Some characteristics to strive for:
- A feeling of shared mission and destiny, like the early team is "in on a secret" together
- Extreme dedication - people are down to work all-nighters, to put the company ahead of their social lives, to move across the country
- A degree of friendship and closeness among the early team that feels familial
- A disdain for "clock-punchers" or people who won't fully commit
Cultivating this dynamic takes conscious effort, but pays off. You need a core team that will stick together and power through the inevitable setbacks and challenges of an early startup.
Section: 1, Chapter: 10
The best entrepreneurs are ones who look where others aren't looking and discover secrets that seem obvious in retrospect. Some tips for finding secrets:
- Look for areas that seem neglected or taboo (e.g. biotech instead of pure software startups)
- Look for false conventional wisdom that most people believe but isn't actually true
- Focus on small, obscure, or seemingly trivial markets at first
- Talk to people who seem weird or unusual rather than just the obvious "experts"
- Look for markets or practices that seem broken or inefficient in "boring" established industries
Section: 1, Chapter: 8
For early-stage startups, it's better to do one thing really well than a lot of things decently well. Advice for maintaining focus:
- Define roles clearly. Each person should be responsible for one functional area. Blurred lines lead to reduced accountability.
- Stay small for as long as possible. The larger an organization gets, the more things it tries to do. Fight that tendency.
- Say no to projects that seem "nice to have" but distract from the core mission.
- Set rules around communication and decision-making processes to avoid everyone trying to weigh in on everything.
Section: 1, Chapter: 10
Focus on making qualitative leaps in technology, business models, capabilities - going from zero to one. Don't just incrementally improve or copy what already exists (going from 1 to n). Examples of zero to one progress:
- Creating a new technology that is 10x better than alternatives
- Developing an innovative business model
- Building infrastructure or systems that unlock new possibilities
Test yourself - are you just making something marginally better, or creating something genuinely new and unique? Is your product, technology, or company just a marginal iteration on what exists, or is it categorically different and better?
Section: 1, Chapter: 1
In the introduction, the authors explain that Rework is based on their experience building a successful company, 37signals. The book aims to show an easier, faster, more direct way to succeed in business. It rejects many "rules" of business and advocates for a simpler, no-nonsense approach focused on getting things done. The authors emphasize this isn't based on academic theories, but real-world experience in building a profitable business.
Section: 1, Chapter: 1
Making a great product is as much about what you leave out as what you put in. Extraneous features, options and preferences make products confusing, diluted, and bloated. They require more work and maintenance. And they bury the product's true purpose. So be a curator, not a hoarder. Constantly trim and prune. Limit your product to the essential. Learn to say no to additions that don't support the product's core use or value. When in doubt, leave it out.
Section: 1, Chapter: 5
Avoid the trap of doing client work to fund your product business. This makes you a consultant, not an entrepreneur. Your efforts go into serving clients, not building something scalable that can thrive without you. It's a tempting compromise, but it splits your focus.
You wind up with a viable portfolio but not a viable product. If you want a product business, make that your main focus from day one. Use your own resources and find a way to start generating revenue directly.
Section: 1, Chapter: 4
Having fewer resources drives resourcefulness. When you have unlimited time, money or people, inefficiency and waste emerge. But constraints breed creativity and clarity. With tight limitations you must:
- Solve problems simply, not elaborately
- Focus only on what's essential
- Find unorthodox ways to make do with what you have
Don't lament lacking resources. Treat finite means as a source of innovation. Let your constraints guide you to elegant, creative solutions instead of bloated, complex ones.
Section: 1, Chapter: 5
To avoid being a commodity that others can easily replicate, inject unique elements of yourself into your product. Infuse it with your values, identity, and personality.
Incorporate your way of thinking and working into how you build, deliver, and support it. By pouring yourself into your product, you make it an extension of you. No competitor can copy that. Your product won't just perform a function - it will represent a distinctive worldview customers can identify with.
Section: 1, Chapter: 6
Blind pursuit of business growth invites unnecessary complexity and problems. Growth alone doesn't guarantee profits, impact or longevity. Sometimes the right size for your ambitions is small - a size you can manage while maintaining freedom and focus. Don't assume getting as big as possible as fast as possible is the only goal. Question if expansion really fits your definition of success and is essential to fulfill your mission. Often the best growth is slow, controlled and deliberate.
Section: 1, Chapter: 3
The way to build an audience is to share passion and knowledge so generously that people keep coming back to learn more. Speak, write, blog, tweet, make videos - whatever medium showcases your expertise and enthusiasm.
Deliver information your audience craves. Make them smarter. Give them insights they can't find elsewhere. Help them so much with your free content that they'll line up to pay for your premium offerings later. An audience built organically through sharing beats one bought through ads any day.
Section: 1, Chapter: 8
Seek outside money only if absolutely necessary. Bootstrapping gives you more control. With investors, you have to answer to others who may not share your vision. Pursuit of an "exit" so investors can recoup their stake takes priority over long-term sustainability. And the mentality of spending other people's money breeds bad, unsustainable habits. Unless your endeavor absolutely requires major upfront capital, find a way to self-fund through savings, sales, or trading services. Your freedom is worth more than easy money.
Section: 1, Chapter: 4
The best way to create something great is to make something you want to use yourself. Then you can:
- Design based on firsthand knowledge, not assumptions
- Directly assess the quality and usefulness of what you make
- Rely on your own enthusiasm for the product to drive you forward
When you solve your own problem, you achieve a level of understanding and passion that's difficult to replicate when making things for others. So start by addressing your own needs and desires. Odds are others will share them too.
Section: 1, Chapter: 2
When you're unknown, you can try new things without expectations or pressure. No one is watching, so you're free to experiment out of the spotlight.
Obscurity protects you from criticism as you find your voice and vision. You can iterate boldly without fear of public failure or ridicule. So be glad no one has heard of you. Enjoy the freedom to make mistakes, learn, and improve. Once you're established, that flexibility to experiment diminishes. Use obscurity to evolve your idea safely.
Section: 1, Chapter: 8
Business folklore romanticizes failure as an essential step on the path to success. But the authors argue this is misguided logic. Failure is not a prerequisite for success. The goal is to succeed, not fail first. While you can learn from mistakes, you can also learn from successes - both your own and others'. Focus on what works, not what doesn't. Studying and replicating success is more constructive than mythologizing failure as a required rite of passage.
Section: 1, Chapter: 3
Individual products can generate good revenue. But to build serious wealth, you need systems that produce consistent, predictable results. Scalable business systems are valuable because they:
- Allow you to expand rapidly
- Reduce dependence on individual team members
- Enforce quality control and a uniform customer experience
- Create an asset you can sell
McDonald's isn't in the business of selling hamburgers. They sell franchises of their hamburger-making system. The system is the value, not the burger. To systematize your business:
- List every role required to deliver your product/service
- Define the specific, measurable tasks each role is responsible for
- Document step-by-step processes for executing each task
The goal is to make your business a well-oiled machine that cranks out profits without your daily involvement. Products make you money, but systems make you a fortune.
Section: 3, Chapter: 7
Successful businesses have three key roles covered:
- The Entrepreneur - Has the vision and creates the strategy. They "make it up."
- The Specialist - Executes the strategy and produces the core product/service. They "make it real."
- The Manager - Handles ongoing customer service, admin, finance, HR etc. They "make it recur."
Early on, the founder often covers all three. But to grow, you need to delegate the specialist and manager roles so you can focus on the high-level entrepreneurial work.
Most businesses are missing the manager piece. They deliver a great product but don't have systems for generating leads, onboarding clients, upselling, getting referrals, etc. As a result, growth is limited.
Section: 2, Chapter: 5
Develop a Unique Selling Proposition (USP) that clearly answers:
Why should the prospect buy your product/service?
Why should they buy it from you specifically?
Your USP should:
- Concisely convey the unique advantage/benefit you offer
- Avoid clichés like "quality," "service," or claiming to be the "best"
- Focus on what the customer really wants (the end result), not just the features
- Be understandable in a single sentence
- Force an apples-to-oranges comparison with competitors
Section: 1, Chapter: 1
To transition users from initial retention to building a habit in the medium-term retention phase, growth teams should construct an engagement loop:
- An external trigger prompts the user to action
- The user takes the action
- They are rewarded for taking the action
- Over time, an internal trigger develops so they take the action on their own without prompting
"As users become more experienced at using your product, features they haven't used yet—and new ones being introduced—should be brought to their attention, gradually and in a way that allows them to tackle learning a new feature only after having achieved mastery of the previous one."
Section: 2, Chapter: 7
Use data to personalize the user experience and build a stronger relationship. Ways to personalize include:
- Customized homepages and landing pages
- Tailored product recommendations
- Behavioral triggered messaging
- Personalized offers and incentives
"With the ever-ballooning databases of customer information being built by companies and powerful new tools for analyzing that data available, a company's ability to serve customer needs and desires more precisely—even individually—has been vastly improved"
Section: 2, Chapter: 8
To identify your product's core value and "aha moment" that turns users into devoted fans, analyze user behavior data to find:
- The tipping point number of actions that engaged users take vs casual ones (e.g. Following 30 people on Twitter, adding 7 friends in 10 days on Facebook)
- The common actions that retained users take but lost users don't
- The key product features or parts of the user experience that most engage your fans
Then focus your user experience on driving more users to that aha moment as quickly as possible. For example, when Facebook identified adding 7 friends in 10 days as a key tipping point, they redesigned their new user experience to focus people on adding friends upfront.
Section: 1, Chapter: 2
Before creating new features or products, ensure that your current features are fully optimized. Continue experimenting until you reach a "local maximum," which means achieving the best possible result within the current setup.
For instance, continuously testing a pricing page over a year may optimize its performance to a local maximum. However, to achieve even better results, you should eventually try a completely new design for the pricing page. Overcoming these local maximums is crucial for unlocking further growth.
Section: 2, Chapter: 9
Introduce a "decoy" pricing option that is slightly cheaper but offers significantly fewer features to steer more customers toward your preferred plan.
Initially offering monthly and annual plans at SmartShoot, where 40% of customers opted for the annual option, the team added a slightly cheaper, less featured alternative to their $299 plan. This strategy resulted in a 233% increase in conversion rates, with 86% of customers choosing the $299 annual plan.
Section: 2, Chapter: 8
Dropbox is a classic example of growth hacking success. With help from interim growth lead Sean Ellis, Dropbox:
- Created a referral program giving existing users 250MB of extra space for referring a friend, and giving referred users 250MB too. This offered a highly relevant reward for a storage product.
- Experimented extensively with the referral flow, optimizing all elements over many iterations.
- Grew from 100,000 to 4M users in just 14 months with these growth tactics, all with no traditional marketing spend on advertising, PR or promotions.
This demonstrates the power of growth teams focusing on product-led, viral growth tactics that can massively scale while keeping acquisition costs low.
Section: 1, Chapter: 1
To keep experiments organized and surface key insights, document each test with the following details:
- Name: A concise label to refer to the test
- Description: What change is being made and who will see it (e.g. a 50/50 split test of two landing page headlines for new visitors)
- Hypothesis: The expected result and why (e.g. Changing the headline to emphasize key benefit X will increase signups by 10%)
- Metrics: The key metrics to track (signups, click-through rate, retention rate, etc.). Include a primary metric that determines success.
- Launch details: When it started/ended, sample size, anything that might affect results
- Results: The actual metric changes seen in the test. Note statistical significance.
- Conclusions: Insights gleaned and ideas for follow-up experiments to further optimize
Section: 1, Chapter: 4
When growth lead Sean Ellis proposed a double-sided referral program to Dropbox - giving existing users 250MB of extra space for referring a friend and giving new signups 250MB too - the founders initially rejected it, fearing it was too generous and would be abused.
However, Ellis persuaded them to run a test to a portion of users. To their surprise, referrals shot up with no signs of abuse - so they quickly rolled it out to all users. Referrals increased 60%, with 2.8M invites sent per month!
Always test ideas before rejecting them. You may be surprised by the results!
Section: 2, Chapter: 5
While adding new features is important for retaining users long-term, be careful not to overwhelm them with too many options, which can decrease retention. This is called "feature bloat."
Product teams can be surprised by competitors introducing new technologies or using existing ones in novel ways. On the other hand, companies may face slowdowns if they shift their attention from core offerings to new products, excessive features, or new market ventures.
Section: 2, Chapter: 9
Chapter 1 discusses the importance of building cross-functional growth teams to drive rapid experimentation and growth.
- Growth teams should include members from marketing, engineering, product, and data analysis. This breaks down organizational silos. The team focuses relentlessly on a singular goal - driving growth through rapid experimentation and analysis.
- Growth teams work best when they have strong executive sponsorship and authority to work across normal organizational boundaries.
- Two common growth team structures are the independent model reporting to a growth lead, and the functional model embedded in product teams. The right structure depends on the company.
Section: 1, Chapter: 1
Chapter 4 lays out the four key steps in the growth hacking process:
- Analyze: Review macro metrics, dive deep into user behavior data, and gather insights from customers via surveys/interviews to generate experiment ideas.
- Ideate: Encourage the team to brainstorm bold experiment ideas aimed at improving a North Star metric. Create an idea pipeline and rank using the ICE method.
- Prioritize: Each week, review top experiment ideas and prioritize based on impact, effort and company goals. Assign an owner to each.
- Test: Launch experiments quickly, ensuring each is constructed to give clear, statistically significant results. Track results obsessively.
Section: 1, Chapter: 4
"You need marketers who can appreciate what it takes to actually write software and you need data scientists who can really appreciate consumer insights and understand business problems." - Brian Monahan, former VP of Marketing at Walmart.com
Section: 1, Chapter: 4
Chapter 2 explains that before focusing on rapidly scaling growth, companies must first ensure they have achieved product-market fit and are delivering a "must-have" experience to users. Ways to assess:
- Conducting a user survey asking how disappointed users would be if they could no longer use your product. If over 40% say "very disappointed", that indicates the product is must-have.
- Analyzing user retention data to see if retention stabilizes over time, ideally showing increased retention the longer users stay with the product. Declining retention is a red flag.
Making your product a must-have comes before growth tactics. Otherwise you risk scaling up a product that ultimately fails to retain users.
Section: 1, Chapter: 2
To enable high velocity testing, create a growth idea pipeline that captures experiment ideas and follows these principles:
- Empower everyone on the growth team to submit ideas in a standard format: Idea name, description, hypothesis, and metrics to track.
- Use the ICE prioritization score (Impact, Confidence, Ease) to objectively rank and prioritize ideas. Rate each idea on a 1-10 scale for each.
- Each week, review top ideas and decide which to resource. Assign an owner to each chosen experiment.
- Run multiple experiments per week. More experiments = faster learning. But ensure each is well-constructed to give clear results.
- Track all experiments and share learnings broadly. Build a knowledge base of past tests anyone can access. Be sure to also track failed experiments!
Section: 1, Chapter: 3
Chapter 3 focuses on why the pace of experimentation is crucial to the pace of growth:
- The faster you run experiments, the more you learn about what works and what doesn't. More experiments = more insights.
- Most experiments will fail or show inconclusive results. Growth comes from many small wins compounded over time vs one big win.
- Early on, focus experiments on areas most core to your product vs incremental changes. Experiment boldly to maximize learning.
- Establish a weekly growth meeting rhythm to review results and determine the next most important experiments to run. Keep the growth team accountable.
Section: 1, Chapter: 3
Chapter 6 focuses on improving user activation - getting more new signups to reach their aha moment and become active, engaged users. Key activation tactics include:
- Obsessively reducing friction in the signup flow and first user experience. Minimize fields, use social logins, and cut steps ruthlessly.
- Designing a clear "happy path" in your product that guides users to key actions and value. Don't make them think!
- Using triggered messaging and prompts to nudge users to key actions. But avoid nagging and message fatigue.
- Deploying re-engagement tactics for users who visit but don't sign up or who sign up but don't complete key actions. This could include targeted emails, in-app prompts, and more.
Section: 2, Chapter: 6
To craft an engaging early user experience that maximizes activation, use the Triple A framework:
- Acknowledge: Make users feel acknowledged and appreciated for signing up. Send a personalized welcome message.
- Affirm: Affirm that the user made a good choice by signing up. Reinforce your value prop and benefits. Share impressive usage stats or social proof.
- Action: Direct the user to a key action that will deliver value and help them experience the aha moment. Focus on one clear call to action.
By making users feel good about their signup while also guiding them to unleash your product's core value, you can build early engagement and improve activation rates for your product.
Section: 2, Chapter: 6
"A good plan violently executed now is better than a perfect plan tomorrow."
This quote, cited by Facebook's Alex Schultz, underscores a key growth team principle - moving quickly to ramp up the tempo of experimentation is more important than having a flawless, thoroughly debated plan. Analysis paralysis and over-planning are the enemies of growth. Growth teams must act decisively and with urgency.
Section: 1, Chapter: 1
Look at a graph of your product's retention curve over time. Ideally, it should look like a smile - retention should increase the longer a customer uses the product, as they get more value out of it over time. This is called the "smile graph." "Evernote's retention graph looks that way essentially because the service's usefulness improves over time.
The core value is enhanced the longer you use Evernote because as a note-keeping product, the more information that is saved within it, the more likely people are to return to access those ideas and notes and add more to them." If your retention curve doesn't increase over time, dig into why. You may need to add more features and value for long-term users. Analyzing cohort retention curves is key.
Section: 2, Chapter: 7
Chapter 5 introduces the concept of Channel/Product Fit - identifying the optimal channels to reach your target customers with your product offering.
- Make an exhaustive list of possible channels - paid, organic, viral, PR, email, etc.
- Consider your business model and customer to prioritize channels to test. B2B products will focus on different channels than consumer apps.
- Prioritize 1-2 channels to start. Go deep before expanding to more channels.
- Experiment within each channel to optimize your customer acquisition. Track CAC and LTV.
The key is aligning your channels to your product, and focusing on the most effective channels while avoiding premature "channel sprawl" that dilutes your efforts.
Section: 2, Chapter: 5
To rise above your competitors and achieve market dominance:
- Provide value your competitors cannot, due to their size, inflexibility, or preoccupation with other priorities.
- Exploit your competitors' contractions and cutbacks to expand your own presence and footprint.
- Be willing to take unconventional approaches and break industry norms to stand out.
- Don't just compete, redefine the industry. Make your competitors play catch-up to you.
Section: 1, Chapter: 10
The most successful companies and individuals seem to be everywhere at once. This is called omnipresence. They dominate their market by being top of mind across multiple channels and mediums. Wherever prospects look, they see you. You can achieve this by:
- Advertising across multiple channels both online and offline
- Constantly generating PR and media coverage
- Partnering with well-known brands and thought leaders
- Having an active, valuable social media presence
- Speaking at events and hosting your own events
- Writing books, articles, blog posts, white papers etc. The goal is to become synonymous with your industry so you're always the first choice.
Section: 1, Chapter: 20
Many companies become so obsessed with "customer satisfaction" that they forget to focus on customer acquisition. They worry so much about not upsetting a tiny fraction of customers that they fail to aggressively market and sell to new prospects. This is shortsighted. You can't satisfy customers you don't have. For example:
- Apple isn't afraid to obsolete its own products in order to offer newer, better ones.
- Amazon expanded beyond books into countless other markets despite critics saying they were spreading themselves too thin.
- Starbucks continues opening new locations despite having a shop on every corner in some cities. Don't be so concerned with a few complaints that you miss opportunities to massively grow your customer base.
Section: 1, Chapter: 19
Traditional accounting judges new ventures on the same metrics as established companies. But those metrics don't accurately predict a startup's future prospects.
Innovation accounting requires a new kind of metrics, ones that are:
- Actionable - Metrics must demonstrate clear cause and effect. When a startup makes a change, it needs to be able to measure the results.
- Accessible - Reports should be simple enough for everyone to understand and use actionable metrics.
- Auditable - Data should be credible to employees. It needs to reflect reality. Metrics should report on real progress, not vanity. Need to audit metrics to ensure they're tied to the real world.
Section: 2, Chapter: 7
In building an MVP, any feature, process or effort that does not contribute directly to the learning you seek should be removed. Even a "low-quality" MVP can facilitate valuable learning. When in doubt, simplify. Cut out features and focus solely on what you need to learn.
Resist the temptation to overload your MVP with features you think it needs. Your job is to find the simplest thing you can build that will facilitate the learning you seek. Order MVP features based on how much validated learning they will get you, not on how "important" you think they are.
Section: 2, Chapter: 6
Traditional mass production systems use a "push" model - they produce large batches of products based on forecasts and push them to the next stage of the supply chain. Toyota revolutionized this by using a "pull" model - each step only produced what the next step needed and "pulled" materials as needed.
The same concept can apply in startups. Instead of building massive features and pushing them to customers, Lean Startups need to let their experiments and validated learning "pull" work from product development based on what needs to be learned next. Essentially, avoid large batch development and only build what is needed to test the next assumption. Any other work is waste.
Section: 3, Chapter: 9
Contrary to popular belief, a startup is not just about developing a product, coming up with a brilliant idea, or being in the right place at the right time. A startup is a human institution designed to create a new product or service under extreme uncertainty. This means entrepreneurs are everywhere, in companies big and small. Entrepreneurship requires a managerial discipline geared towards handling extreme uncertainty.
Section: 1, Chapter: 1
Early adopters are a special breed of customer. They accept an 80% solution and are eager to give feedback. Early adopters use their imagination to fill in what a product is missing because they see its potential.
When cultivating early adopters, focus your marketing efforts on places they congregate, use messaging that resonates with their beliefs, and speak to their needs. Don't try to appeal to the broader mainstream yet.
Early adopters are tolerant of a product's flaws and their feedback is invaluable for steering the product roadmap. Find them, cherish them, and shape your product to meet their needs.
Section: 2, Chapter: 6
In manufacturing, value is providing benefit to the customer; anything else is waste. But in a startup, who the customer is and what they might find valuable are unknown, part of the uncertainty of a new venture.
Ries came to realize they needed a new definition of value: The real progress they made was the discovery of what creates value for customers. Anything they did that did not contribute to their learning was a form of waste. Could they have learned the same things with less effort? The answer is yes. Unnecessary features, chasing the wrong metrics, delays in getting feedback from customers - all these are waste.
Section: 1, Chapter: 3
"Entrepreneurship should be considered a viable career path for innovators inside large organizations."
Section: 3, Chapter: 12
Metrics and numbers matter, but startups often put too much value into "vanity metrics" and grossing up their numbers for PR and investor purposes. But if a startup is not making progress, small numbers actually tell a more accurate story. Be honest about your numbers from the start, even if they're small. Vanity metrics let startups form false conclusions.
Decide what metrics actually matter for your business, track and be accountable to them. Too much focus on vanity metrics prevents startups from pivoting when necessary due to fear of accepting "lesser" numbers.
Section: 1, Chapter: 3
Entrepreneurs' visions usually consist of:
- A startup's vision: an overall idea of the change they want to see in the world
- A startup's strategy: the path the company will take to achieve that vision, often by identifying a target market, a business model, a product road map, partners, and competitors
- A startup's product: the end result of the strategy
Startups employ a strategy that takes the initial vision as a given and proceeds to figure out how to achieve it. But too often, startups develop a strategy based on assumptions that haven't been validated.
Section: 1, Chapter: 2
The Lean Startup method treats each new product or feature as an experiment designed to test a vision. It follows the scientific method:
- Start with a clear hypothesis that makes predictions about what is supposed to happen
- Design an experiment to test those predictions
- Get out of the building to test those assumptions with real potential customers
- Analyze the results and decide what to do next based on validated learning rather than vanity metrics
Build an MVP based on the smallest set of features needed to rigorously validate your assumptions and start the Build-Measure-Learn feedback loop quickly.
Section: 1, Chapter: 4
The Five Whys is a technique for getting to the root cause when something goes wrong. By asking "why" five times, you can peel back layers to find the human problem at the source. For example:
- Why aren't customers using our new feature? Because they can't find it.
- Why can't they find it? It's only accessible from an obscure screen.
- Why is it only accessible there? Because the senior designer thought it would be better.
- Why did he think that? He wasn't properly briefed on the goals.
- Why wasn't he briefed? Because the PM was busy with other features.
Five Whys helps you build an adaptive organization that fixes processes, not just symptoms.
Section: 3, Chapter: 11
Startups exist to learn how to build a sustainable business, not just to make stuff, make money or serve customers. This learning can be validated scientifically by running frequent experiments. The Lean Startup model is built on 5 key principles:
- Entrepreneurs are everywhere
- Entrepreneurship is management
- Validated learning
- Build-Measure-Learn feedback loop
- Innovation accounting
Progress in a startup should be measured through validated learning - demonstrated by positive improvements in the startup's key metrics.
Section: 1, Chapter: 1
"A startup's runway is the number of pivots it can still make."
Entrepreneurs often speak of runway - the amount of time until a startup runs out of money. But Ries argues that the real definition of runway is the number of opportunities a startup has left to pivot. It's the number of times a startup can make a major change to its business strategy. A startup can extend its runway two ways:
- By reducing costs or raising additional funds to add more time
- By pivoting faster to find a sustainable business model sooner The goal is to find ways to achieve the same amount of validated learning at lower cost or in a shorter time. Ries argues pivots are a more useful measure of runway than financials.
Section: 2, Chapter: 8
To apply Lean Startup principles in an established company, Ries argues you need to create a platform for experimentation with three key attributes:
- Scarce but secure resources - The startup needs to be assured long-term budgetary security from cancellation but not so much that they become complacent or bloated
- Independent authority - The startup needs complete autonomy to develop and market new products within their limited mandate without excessive approvals
- Personal stake - Teams need to have a personal stake in the outcome, either through bonuses tied to success or a strong sense of ownership and autonomy
Section: 3, Chapter: 12
At the core of the Lean Startup model is the Build-Measure-Learn feedback loop. The process goes as follows:
- Build a minimum viable product (MVP) to test fundamental hypotheses
- Measure how customers respond using actionable metrics
- Learn whether to pivot or persevere based on feedback
This cycle of turning ideas into products, measuring customer response, and learning whether to pivot or persevere is at the heart of the Lean Startup model.
Section: 1, Chapter: 2
Startups with successful products eventually see their early metrics go flat. That's because they've exhausted their early adopters and now need the product to appeal to mainstream customers. Be guided by your actionable metrics and innovation accounting. If, despite numerous attempts at tuning your engine of growth, your metrics are showing slow growth, that may be a sign to pivot.
Don't be afraid to honestly evaluate if your original strategic hypotheses have been disproven. Changing course is not a sign of failure if the data supports it. Better to pivot based on validated learning than to blindly stay the course.
Section: 2, Chapter: 8
The engine of growth a startup uses can act as an early indicator of product/market fit. If a startup can demonstrate that each of the assumptions in its growth model is true, it may have discovered a repeatable, scalable business model.
Before product/market fit, a startup should be focused on learning-based metrics, not growth. Using engines of growth as a guide, a startup can evaluate if it's getting closer to product/market fit as it tunes its engine through experiments. If your metrics are improving consistently, you're making progress. If not, you may need to pivot.
Section: 3, Chapter: 10
There are three primary engines of growth that power startups:
- Sticky - Companies with a high customer retention rate. They grow by increasing revenue from existing customers over time. Key metrics are churn rate and customer lifetime value. Example: IMVU.
- Viral - Products that spread rapidly from person to person. Key metric is the viral coefficient - how many new customers each existing customer brings in. Example: Hotmail, which grew its user base extremely rapidly via viral word-of-mouth.
- Paid - Companies that can affordably acquire new customers and get back more revenue than the cost of acquisition. Key metrics are customer acquisition cost and average revenue per user. Example: Direct marketing businesses.
Section: 3, Chapter: 10
Google is famous for setting audacious goals. Underpinning Google's outsized ambition is a philosophy they call "10x thinking" - the idea that you should aim for a 10X improvement versus incremental gain.
As Larry Page explains: "If you set a crazy, ambitious goal and miss it, you'll still achieve something remarkable."
By systematically stretching for 10X gains, Google believes you can achieve outsized results over time. You create a culture where the question is never "can this be done?" but rather "what would it take to make this happen?"
Section: 2, Chapter: 12
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