If you want to create a successful, hyper-growth company, you've got to focus on creating the right and how to rapidly experiment.
In this blog, I continue my discussion on these two key subjects with Jeff Holden, a brilliant entrepreneur and executive who has held leadership roles at three hyper-growth companies – Amazon, Groupon, and Uber. Today Jeff is the Chief Product Officer of Uber.
As Jeff explains, there are critical lessons for every entrepreneur, so let's dive in.
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1. You Have To Continually Invest In Culture
Culture is often difficult to define – and yet, it's extremely important to get right.
For a startup without structure, culture can be this amorphous "thing" that is often a reflection of the attitudes of the people on the team – an emergent property, of sorts.
But if you're not careful, the wrong culture (or even the 'lack of culture') can be lethal to your business, especially in the early days of hyper-growth.
You have to be deliberate about creating and investing in culture.
To illustrate this, Jeff shared a fascinating story about Jeff Bezos' relentless obsession with culture and customer-centricity at Amazon.
He explained, "Bezos was a fantastic leader and he invested in making the company durable. He was continuously investing in the culture."
"Building a solid culture was so critical, especially for a hyper growth company. It was our resilience fabric. It held the whole company together through all kinds of different things."
"I worked at customer service one Christmas, and I remember this woman who was traveling to Russia for the holidays. She ordered all of these Christmas presents, and they weren't going to make it there in time. She called customer service, worried sick."
Without hesitation, the Amazon team pulled out all the stops to fix it.
"We spent probably $500 or $600 to overnight her $1,000 worth of gifts, and she was so completely blown away that she couldn't stop saying, ’Oh my god, you saved my Christmas!’"
"It was the Amazon way. It was so core to the culture. There was this energy and passion to just win for the customer and to do something no one's ever done before."
2. Be Crystal Clear About Your Mission
One of the most important parts in the process of establishing a culture is clearly defining the mission of the company.
Jeff goes on, "You have to be very clear about your mission. At Amazon, we knew the top three things customers cared about were: Price, Selection, and Convenience."
As such, they were able to define their culture around how best to provide the lowest prices, most selection, and most convenient service for their customers.
And within a company as dynamic as Amazon, one of the best strategies to doing so was to be constantly experimenting!
3. You MUST Build an Experimental Engine from Day 1
The only constant is change, and the rate of change is increasing.
The only way to keep up is to be constantly experimenting and innovating. Hyper-growth and experimentation are very closely linked.
Bezos likes to say, "Our success at Amazon is a function of how many experiments we do per year, per month, per week, per day…"
Jeff Holden, who has built experimental engines at Amazon, Groupon, and Uber, agrees: "The philosophy is you have to build your company to be a big experimental engine and it has to start right at the beginning."
It's not easy to just "retrofit" that engine in later – it's a cultural shift. You have to be in the mindset of constantly testing crazy ideas, new business models, new products, and new processes.
At Amazon, in the early days, they had a huge experimental platform that was available to almost everyone – meaning, if somebody wanted to test a new button or new feature on the website, they could.
The problem was – many of these experiments were useless.
Jeff continues, "They had no chance of yielding any value. There wasn't any point to them. We were just kind of curious. We were just running a lot of experiments, which have a cost by the way, and taking up experimental slots (so others couldn't), and things started colliding with each other."
Their solution was to create an 'Experiments Group' – if you wanted to do an experiment, you had to run it through this group.
The first question the group would ask was: What's your hypothesis? The second question: What's the value proposition to our company?
"If you couldn't articulate your hypothesis crisply or your hypothesis didn't matter for Amazon or Uber or Groupon, then they must not do that experiment. Often times you'll be like go back to the drawing board or recast the experiment. The company learned and we got much better."
Finally, "you have to be able to interpret the experimental results really well. It's statistics. Know the difference between statistically significant and insignificant results."
Uber, for example, runs thousands of experiments per month to test different features. They A/B test key features that are core to the business and choose the one that performs best.
- "Build a team inside your organization that has an experimental ethos, and make sure that the experiment, value proposition, and hypothesis are really thought through before you invest the time and energy to actually do them."
- In general, only hire people who are familiar with the experimentation / data-informed mindset.
4. Get Comfortable with Being Misunderstood
Part of having a strong culture around experimentation means: you are going to be misunderstood by outsiders.
Jeff explains, "That tolerance of being misunderstood or being beaten up by the outside world was so important to launch our success."
"Amazon Prime could have been one of those catastrophic failures. We tried auctions and that failed and we tried zShops and that failed. But we just kept going, and we finally cracked it."
"Then, when we launched it to the world the response was: 'You guys are insane!' 'This is like, super risky.' 'You're going to blow up with all this margin from shipping'.
Bezos, characteristically, replied, "Yeah, I kind of figured this would be misunderstood…"
These days, Amazon Prime has over 50 million members who spend on average $1,100 every year -- nearly double the purchases of non-Prime members.
As another example, at Uber, maybe 20-30% of the experiments they run actually work. The rest don't… but they are informative and useful nonetheless.
Innovative companies just need to be very comfortable being misunderstood.
Jeff's advice: "You want to look inside and be inside out about the way you think about your company."
In other words, ignore the noise and keep building.
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This blog is part of a series I am doing on "Hiring, Culture, and Experimentation". If you have questions or comments about these topics, tweet at me @peterdiamandis and @codyrapp, and we'll incorporate them into our research.
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