Growth engineering is a systematic, technical approach to the improvement of conversion and the user experience. Combined with business engineering it helps business people build valuable companies from scratch.
Understanding growth engineering
Growth engineering is somewhat of a recent concept, having been pioneered by Facebook at a time when the social media network had around 50 million monthly active users. By moving away from a functional organizational structure toward functional growth teams, the company was able to rapidly grow its user base to over 2 billion in rapid time.
Facebook’s rise was caused by growth engineering, an intentional, scientific, metrics-driven approach that relies on hard data to improve conversions and user experience. To do this, it relies on experimentation and not on the intuitive, “quick-fix” mindset that is characteristic of growth hacking.
Every organization has a metric that it wants to improve on, but the role of a growth engineer is to break that metric down across various stages of a funnel. This results in a systematic and methodical way to build, manage, and improve processes, content, software, and organizations themselves. Funnels can also be used to increase the number of users, visitors, or customers with respect to budgetary constraints or existing capabilities.
An example of a growth engineering funnel
Funnels are used in growth engineering to clarify what it is that needs to be tested. Before a team can answer this question, however, it must have a detailed understanding of user behavior and areas that could be improved.
Australian software company Atlassian prefers to use the AARRR funnel. Also known as “pirate metrics”, the AARRR funnel was created by VC and accelerator fund founder Dave McClure. The funnel works on the idea that the more customers use a product, the more the company can invest in its features.
This funnel is comprised of five stages:
- Acquisition – how do customers discover a company?
- Activation – do they have a great first experience?
- Retention – do they stay, or do they churn?
- Revenue – how does the company make money?
- Referral – does the customer tell others about the experience?
Funnels vary in complexity, composition, and even nomenclature from one organization to the next. Atlassian also notes that some of its funnels contain multiple products, such as when a customer evaluates Confluence and Jira at the same time.
Growth teams may also focus on a specific part of the funnel. Activation teams may work on new user experiences while referral teams may identify ways for clients to invite their peers to use Atlassian products.
Perhaps intuitively, growth engineering will focus on different stages of the funnel according to the maturity of the company. Early-stage startups will prioritize experiments that focus on awareness and customer acquisition, while retention is most important for most companies at a later stage of maturity.
- Growth engineering is a systematic, technical approach to the improvement of conversion and the user experience. It is a metrics-driven approach that differs from growth hacking, which mostly relies on intuition or gut feeling.
- The role of a growth engineer is to break down a metric the organization wants to improve on across various stages of a funnel. The precise composition of the funnel will vary from one company to the next, but many use derivatives of the AARRR approach.
- Growth teams may also focus on a specific part of the funnel according to the maturity level of the company, while other funnels may focus on multiple products simultaneously.
- Porter’s Five Forces
- Competitive Advantage
- Business Strategy Frameworks
- Blue Ocean Strategy
- BCG Matrix
- Ansoff Matrix
- Profit Margins
- Competitive Moat
Related Business Concepts
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