Why You Must Do Things That Don't Scale If You Want To Grow
Unless you want to be a small-business owner with a lifestyle business, you're probably looking for an idea that scales – something that allows you to 10x your customers and profits in record time – but how do you accomplish this? Here's some counterintuitive advice.
In the early days of Airbnb, when the site had just a handful of hosts in its website, the founders of the company did something surprising: They offered to have the accommodation hosts were offering professionally photographed for free.
As they didn’t have the money to actually pay professional photographers, they did this themselves. They showed up, introduced themselves and took some pictures.
Scaling Starts Small
In the world of Silicon Valley, this seemed absurd. Silicon Valley is all about scaling. You want an idea that’s easy to expand exponentially. For instance, the marginal cost of adding a single user to Facebook or Dropbox is small, which makes these companies extremely scalable.
Service businesses, meanwhile, are typically not very scalable, since they are limited by the time and energy you can physically put in. Every new client brings more complexity and demands more time and resources.
With their free photography, the Airbnb founders had turned an Internet start-up into a service business. There was no way you could scale this kind of behaviour, so, according to the dominant Silicon Valley philosophy, this was not worth doing. If this was what was required to sign up people on Airbnb, it could never be a success.
The Manual Approach
So, why did the founders do it? Because Paul Graham at the famous Silicon Valley incubator Y Combinator suggested that they do it.
Y Combinator has funded many, many successful start-ups (including Airbnb and Dropbox), and one of its most common pieces of advice to new start-ups is to do things that don’t scale. Recruiting users manually is not a failure or proof that your concept won’t scale. Most of the time, it’s simply a necessity.
“The most common unscalable thing founders have to do at the start is to recruit users manually. Nearly all start-ups have to. You can’t wait for users to come to you. You have to go out and get them,” says Graham.
“This can’t be how the big, famous start-ups got started, they think. The mistake they make is to underestimate the power of compound growth. We encourage every start-up to measure their progress by a weekly growth rate. If you have 100 users, you need to get ten more next week to grow 10% a week.
And while 110 may not seem much better than 100, if you keep growing at 10% a week you’ll be surprised how big the numbers get. After a year, you’ll have 14 000 users, and after two years you’ll have two million.”
Surprise and Delight
Another reason, according to Graham, why the manual approach is important, is because it allows you to really know and understand your customers. By visiting all those Airbnb hosts, the founders quickly learnt what they loved and hated about the service. By doing things that don’t scale, you get a much greater understanding of your customer, which comes in handy once you’re ready to flip the switch and grow quickly.
“You should take extraordinary measures not just to acquire users, but also to make them happy. Your first users should feel that signing up with you was one of the best choices they ever made. And you in turn should be racking your brains to think of new ways to delight them,” says Graham.
Lighting the Fire
The only opportunity you’ll ever have to thoroughly engage with all your customers on a personal level is when your business is still small. That’s why it’s important to do things that don’t scale early on. It creates the foundation for successful scaling.
“Sometimes the right unscalable trick is to focus on a deliberately narrow market. It’s like keeping a fire contained at first to get it really hot before adding more logs. It’s always worth asking if there’s a subset of the market in which you can get a critical mass of users quickly,” says Graham.
“Most start-ups that use the contained fire strategy do it unconsciously. They build something for themselves and their friends, who happen to be the early adopters, and only realise later that they could offer it to a broader market.”