Growing and Scaling Businesses: 25 Reflections and Best Practices

Keynote Speech/ Remarks by Olu Akanmu at GrowthCon 1.0 of the Premier Business Network

 1)   A #business with a #product that nobody needs or that people can do without, cannot scale. A clear market, that is potentially large, where your business is solving a real tangible problem is a pre-requsite for #growth and scale. It is amazing sometimes how this simple truth is missing in many businesses. In technical jargon, this is called product-market fit.

2)   Investment in growth and scaling when a tangible market problem is not being solved, is likely to be a waste. This applies in both #digital and non-digital business.

3)   A key validation that your business is solving a problem of a fairly defined homogenous group of customers is when those customers are willing to pay for use of the service or someone is willing to pay for their use of the service.

4)   Where customers are acquired with free services as an acquisition #strategy, the test of fit is that they graduate to use other paid services on your platform.

5)    A common learning among the #fintechs that have scaled was that they solved the problems of large potential markets that incumbent players have traditionally ignored, where such uncontested or least contested markets have the potential to scale. They leverage tech and new business models to solve the problems of the large excluded markets, from Opay in Agency banking to Paystack in sme online payment collection or FLW in #crossborderpayments. The lesson is that you are not likely to succeed as a start up in a head-on collision with incumbents who are more resourced than you

6)   When you have found product market fit, you need to run and scale as quickly as possible. Most markets around here can probably just take 2-3 players at scale before the market is locked up. #Scale is an advantage due to cost economics and network effects where it is available.

7)   By experiments and iteration, find or define as early as possible the profile of potential early adopters of your product. They are likely to be those who have the biggest problem or pain that your product solves. Focus your initial acquisition investments on them. Your marketing investment will be more efficient this way rather scattered targeting of diverse customers

8)   Finding a market gap is not enough. You need to have a good product design to drive uptake of your services. Solve real problems and remove the frictions of usage. #Designthinking is good. Complement it with the #ACCORD design model to drive rapid adoption and usage for your service. A – your product/ service must demonstrate a clear advantage over existing behaviour or product in use to drive rapid adoption,. C- the higher the compatibility of your product with existing customer behaviour, the more rapid its adoption; C- design your products to be simple, the higher the complexity of your product, the lower its potential for rapid adoption; O- Observability of benefit in use, the more observable the benefit of your service/ product  in use , the higher your product adoption; R- risk- the higher the risk -perceived or real, of using or trying your service, the lower its adoption; D- make it easy for  target customers to try your service, the more divisible it is to try your service, the higher the potential for rapid adoption. This Everett Rogers principle applies to both digital and non-digital businesses.

9)   A simple way to imagine building a growth and scaling model for your business is to imagine it like a triangle , in which the base is the size of your customer base and the height represent the degree of usage, usage frequency and use occasions of your service by your customers. Everything you are doing in growth and scaling to get the triangle bigger by expanding the base and increasing usage at the height. Become granular and scientific- what drives the customer base and the usage of services ?

10)  Customers are not the same in value and their revenue potential. It is important to relate customer life time value (#LTV) ( net revenue , revenue-( cost to serving them) over the lifetime of the customer on your platform to the customer acquisition cost ( #CAC). The LTV/ CAC ratio, ensuring it is greater than 1, is one of the most important metric of your business. If your projected LTV to CAC ratio is less than 1, you re acquiring value destroying customers.

11)  Essentially, it means you must build and work a clear monetisation and profitability path in your growth and scaling program. If you scale for example where your net customer lifetime revenue is less than your acquisition , you will be scaling at increasing loss and you will begin to erode your capital. Ultimately, you business and your growth will not be sustainable. It is important to have a clear eye on the unit economics of your business

12) In many businesses, from #telecoms to #banking and #fintech, there is a natural tendency for your average revenue per customer to decline as you go deeper into your market base , exhausting the higher level of quality and high value customers. At the same time , there may be cost pressure on acquisition as competition increases which implies that your customer #lifetime revenue to acquisition cost degrade. This is where the deep science of scaling begins, the constant daily iteration to extend the life time of your customers and their daily usage / revenue generated, understanding their behaviour, getting them to use more products and services, removing fictions and keeping them happy begins. Those who do these well will have a compounding scale and growth advantage over their competition.

13)  Some of the best ways to accelerate acquisition are to design your product in such a way that their increasing usage or expanding usage among your base generates compounding activities that brings in new customers. The most obvious one is great experience and good word of mouth that generates large advocacy base among your customers to their friends and community to come on board.

a) During the cashless implementation, the unique reliability of Opay generated a large word of mouth customer advocacy that made us to grow in good multiples. You can also formalise this in deliberate incentives and referral programs.

b) An even more powerful one is when your customers advocate and recruit their peers and communities for you because they get more value when they use your product together , generating #virality. During the cashless period for example, traders and their customers who needed to trade with each other, were persuading each other to get on the Opay platform, so that trade and payments between them can be smooth and reliable. 

c) Such things, word of mouth / customer advocacy in referrals and virality effects can potentially create a powerful continuous and reinforcing loop of growth. Find your own growth loops, design it and make it inherent in your product. Build clear metrics to track their effectiveness and continuously optimise them.

14)  The beauty of the above is that the growth is organic and the acquisition cost of customers are very low which gives you stronger unit economics.

15) Partnerships are also a key way to accelerate acquisition and low acquisition cost. Find platforms or businesses who have the customers you need, where your partnership with the platform increases their value to their customers while you also expand your customer base.

16)  Don’t be generic. Build and find differentiation within your category. It will make your acquisition cost lower and more organic. You will not need to over pay to acquire customers or retain them. The customer economics of the business within regards to LTV and CAC tend to degrade the more generic undifferentiated your business looks. You will be competing on price, pay more to acquire customers and retain them . Customer life time on your platform gets shorter as customers jump around while your cac increases leading to LTV/ CAC degradation ( the Uber-Bolt challenge- tough )

17) Your brand and reputation matters. They complement your acquisition and retention efforts and sometimes help you to charge higher price premiums that improve your margins. Pay attention to it. (MTN). You do not necessarily need to be big to be deliberate about your brand and reputation. It may not even be about market spend. It is about what you do, what you stand for and what your market sees or perceives and even those who you associate with.

18) Growing and scaling business and doing so efficiently and profitably is a lot of science. From your headline numbers such as Gross Transaction Value (GTV) or Gross Merchandise Value (#GMV – ecommerce), Revenue, you have to break them down three to four levels in terms of their levers or what drives them and put metrics and measurements arounds those drivers/ activities and customer behaviour. You should build a construct of your #GTV and their translation to revenue and the drivers / lever and doggedly power on the levers and expected customer behaviour , which may also be lead indicators of your transaction volume to ensure your GTV goal happen.

19)  Your drivers and levers in your GTV or revenue construct are not the same or equal. Pay most attention to most critical levers. Set clear metrics of performance at those critical levers and ensure they happen.

20) Customers that are acquired have to be kept engaged in the usage of your services. Engagement is usually measured by Frequency of usage metrics such as Daily Active Users ( #DAU,) Monthly Active Users ( #MAU).  As much as possible depending on the nature of your business, you want your customers to use your product daily and drive your DAU upwards. It may also be useful to separate revenue generating daily active users (rDAU) from your DAU where not all active customers are revenue generating. In telecom, they will call this RGS revenue generating subscribers (RGS 30days, RGS 7 days) . Different ratio of frequency of usage will give you different insights for engagement action such DAU/ MAU,  rDAU/ DAU, MAU / YAU ( Yearly Active Users). Engagement actions to drive up your usage frequency or more use-occasions will include what frictions do you need to remove, the incentive you need to deploy to stimulate usage, the content or information that customers need to see to elicit the behaviour required, or propositions to deploy to achieve your DAU/ MAU objectives. Engagement  will also include deliberate cross selling or upselling of other products and services to your base. The higher your product usage per customer, the more sticky your active customer base and their revenue generation. Set clear objectives of DAU and your MAU or product usage per customer, derived from your revenue objective and drive your customer behaviour to achieve the objective.

21) Vintage, Cohort , Segment or Usage Bucket Analysis of different customer types with regards to age or channel of acquisition,   customer lifetime and frequency of usage or product / service usage patterns preferences, growth of usage, maturity and decay are usually useful in revealing customer behavioural insights for growth and targeted engagement programs of your customer base. Invest well in data analytics competency.

22)  Set retention and loyalty objectives. What is the acceptable level of churn or dormancy given your business objectives. The best loyalty programs may not even be loyalty program per se but engaged customers who use your products frequently and regularly. Active customers don’t go dormant or churn.

23) Have deliberate programs to win valuable, churned customers back. Have win-back programs if you have had significant churn . Measure the effectiveness of your win back program and continuously iterate to improve.

24) your active customer base= Acquisition- churned (dormant) + win back

25) Good curiosity about data (quantitative and qualitative) and good problem solving skills are critical requirements to be a good business scaler or growth manager. Slice your data in curious ways to reveal hidden insights, triangulate your insights for validation with other sources, defining problems correctly and dis-aggregating them to build solutions are skills one must have . You must also be good team player because the best quantitative analytics and creative reasoning that solve growth problems may reside in different members of the team.

Best wishes as you scale your business

Olu Akanmu

July, 22, 2023.