Martin Gontovnikas (Gonto): The Biggest Mistakes Startups Make When Scaling into Enterprises | E1115

Intro (00:00:00)

• Psychology is key to marketing.
• First impressions matter and you can only get them once.

Entry Into the World of Growth (00:00:44)

• Martin Gontovnikas got into growth by chance when he was promoted to head of self-service at Auth0.
• He had no prior marketing experience and applied engineering principles to improve the company's numbers.

Lessons from 7 Years at Auth0 (00:01:46)

• Branding and psychology are key to marketing, even when selling to developers.
• There's no exponential growth company that happens without problems and crazy events.
• Taking big risks is absolutely important to having exponential growth.

Importance of Taking Risks (00:03:48)

• Most people are frightened to take risks, but brave people are those who are scared but do it anyway.
• If you know you need to take big risks to succeed, you're more prepared to take them.
• Not taking any big risks will never lead to success.

Creating a Culture of Risk-Taking (00:04:34)

• Encourage risk-taking by providing a budget for experiments and ideas.
• Avoid punishing failures; instead, focus on learning from them.
• Create a culture where people feel comfortable trying new things and taking risks.

Learning from Failure (00:05:37)

• Conduct postmortems to analyze failures and identify learnings.
• Prioritize qualitative information (e.g., user interviews) over quantitative data.
• Document learnings and make them easily accessible for future reference.

Essence of Growth (00:06:52)

• Define growth as applying the scientific method to KPIs.
• Data alone does not provide solutions; creative thinking is essential for driving exponential growth.
• Understand your customer persona, conduct qualitative interviews, and use creative thinking to design unique experiences that drive KPI growth.

Role of Data in Growth (00:08:10)

• AB testing is easier in v2c (vertical to consumer) than in v2v (vertical to vertical) due to the larger user base and faster results.
• AB testing provides useful information but may not always give the best answer.
• Big swings are necessary for significant results in v2v.
• Use AB testing to ensure metrics don't go down after implementing changes.

Budgeting for Big Swings (00:10:11)

• Investment for big swings is more in human resources than in financial resources.
• Consider trade-offs and opportunity costs when allocating resources for big swings.

Timing the Introduction of a Growth Team (00:10:46)

• Plan big swings as bets: small bets (e.g., changing button color), medium bets (e.g., changing onboarding page), and big bets (e.g., revamping onboarding).
• Execute multiple small and medium bets while waiting for big bets to yield results.
• Time big bets strategically to achieve incremental growth while allowing time for their impact to materialize.

Building a Growth Team (00:11:54)

• Time-bound experiments: Set a time limit for experiments to assess their effectiveness.
• Qualitative research: Engage with potential customers to understand their needs and preferences.
• Adapt based on feedback: Use insights from qualitative research to refine your approach.

First Impression in Product-Led Growth (00:14:07)

• Importance of big bets: Successful companies take risks and make bold moves to drive growth.
• Example of Amazon: Amazon's willingness to experiment led to the development of successful products like AWS.
• Small teams and autonomy: Encourage small, autonomous teams to foster innovation and experimentation.

Integrating Growth Team in the Organization (00:14:55)

• Ideal integration: Growth should be dispersed among all functions for effective collaboration.
• Challenges in larger companies: As companies grow, product teams become burdened with various tasks, leaving less room for innovation and growth.
• Separate teams for innovation: Larger companies often create separate teams for innovation and growth due to the challenges faced by product teams.
• Difficulty in achieving ideal integration: Despite the benefits of dispersed growth, it can be challenging to achieve in practice.

When to Start Building a Growth Team (00:16:00)

• Start with a growth mindset focused on creativity, data analysis, and iteration.
• Implement growth dashboards similar to sales dashboards to encourage competition and track pipeline creation.
• Partner growth people with those who understand the target audience to enhance effectiveness.
• Timing of hiring a growth manager depends on the need for data to drive growth strategies.

Role of Founder in Finding Product-Market Fit (00:17:14)

• Founders are responsible for finding product-market fit before hiring a growth manager.
• Founders should start with design partners (6-8 customers) to gather insights and improve the product.
• Prioritize onboarding and user experience to create a positive first impression.

Creating a First Impression in a PLG Motion (00:18:41)

• Avoid leaving users with a blank dashboard without data during onboarding.
• Introduce advanced features gradually after users understand the basic features.
• Understand different use cases to avoid pushing users towards irrelevant features.

Designing Effective Product Tours (00:19:38)

• Product tours can be useful for some users, but not all.
• Different users have different preferences for product tours.
• Junior developers prefer point-and-click tours, while senior developers prefer more concise explanations.
• Different onboarding experiences can be implemented depending on the seniority and preferences of the user.

Addressing the Needs of Horizontal Products (00:21:20)

• For horizontal products, it is important to provide templates and content for different use cases.
• The product experience can be fine-tuned based on the user's past behavior and preferences.
• Building a template engine and templates library can provide valuable information about the user's needs and interests.

Mastering Bottoms-Up Motion (00:22:41)

• To scale into enterprises, startups should understand when users are ready to talk to sales and provide value in a bottoms-up motion without giving away too much.
• To know when users are ready for sales, startups can identify when users are blocked by using their product, such as clicking on a section of the dashboard and then doing nothing.
• To provide value without giving away too much, startups can use data to identify clusters of usage and remove useful features from each cluster, moving them to the next plan to encourage upgrades.
• Anti-retention patterns, such as complex features like multiactor authentication, can cause low retention rates and should be avoided.
• Retention is about ensuring users consistently feel the core value proposition of the product, not just about money.
• Getting users to use the product for personal projects increases the likelihood of them using it in future companies.
• Paywalls that prevent users from experiencing features before paying are outdated; instead, let users try everything and then ask them to pay or remove access after they are hooked.

Scaling in Enterprise and mastering Top-Down (00:32:03)

• Combine top-down and bottom-up approaches when scaling into enterprises.
• Use psychology and biases to your advantage when crafting your message.
• Provide developers with resources and messaging to help convince their managers.
• Tailor your approach based on the company's size and industry.
• Startups should focus on creating unique products that set them apart from competitors.

Delivering Effective Demos (00:37:03)

• Arm users with demo tools and materials to increase their authority and credibility during demos. Tailor demos to the specific language and needs of the prospect, involving relevant experts such as Enterprise Architects in sales calls.
• Create verticalized or use case-based playbooks to provide domain-specific knowledge during whiteboarding sessions.
• Consider scaling into the Enterprise segment when seeing interest and sign-ups from mid-market or Enterprise companies.
• Recognize that while SMBs represent a deep market, most self-serviced or product growth companies eventually transition into the mid-market or Enterprise segment.
• Startups should consider the differences in approach required for larger organizations when scaling into enterprises.
• Tactics effective for small businesses, such as ads and content marketing, may not be as effective for enterprises. High-touch strategies, such as Michelin Star dinners and yacht events, may be more suitable for reaching enterprise clients.
• Focusing on a specific need or use case for a few large companies can be equally successful as focusing on a broader market of small businesses.

Challenge of High Cost Base & Low Revenue (00:42:46)

• Some companies have a high cost base to acquire and support customers but low revenue, which is not sustainable.
• Scaling with time and relying on the product-led growth motion alone may not be enough to address this challenge.
• It is important to take action to foster expansion within the enterprise, such as:
  • Asking champions to invite others from the company who could benefit from the product.
  • Sending a team to conduct interviews and convince other champions to use the product.
  • Generating more business in other business units.
• Waiting for customers to come on their own is not effective in the enterprise market.

Misunderstandings in Scaling to Enterprise (00:44:39)

• People often misunderstand the product complexity required to transition from an SMB product to a fully licensed Enterprise product.
• A common misconception is that scaling to Enterprise is a simple on-and-off switch.
• Startups forget about their original users when they focus solely on Enterprise customers.
• New Relic, a former leader in observability for developers, shifted their focus to Enterprise and experienced a decline in market cap.
• Selling to Enterprise involves selling checklists of features rather than the user experience.
• Enterprises prioritize checking off features on a checklist to justify their decisions, leading to bloated products and a decline in user experience.
• New Relic lost new customers due to a decline in user experience caused by bloat.
• To successfully scale to Enterprise, startups should balance adding checklist features with maintaining a positive user experience.

Role of CTMO in Marketing & Product Alignment (00:48:09)

• Enterprises prioritize security, privacy, compliance, and industry analyst validation to mitigate risks and justify decisions.
• The fear of getting fired and the desire for promotion motivate enterprises to innovate and take risks.
• The CTMO role aligns marketing and product teams to ensure the product delivers on marketing promises.
• To eliminate silos, growth teams should split into two: one focused on activated signups and the other on retention and conversion.
• Marketing and product teams should co-own the onboarding and activation process, with modifications requiring approval from both sides.
• A conflict arose when marketing wanted to add a "talk to sales" option during onboarding, but the product team opposed it.
• The compromise was to show the option only to non-developer users at the director level or from large companies.
• Healthy conflict and collaboration between marketing and product teams led to a successful resolution.

Hiring & Embracing Diverse Perspectives (00:54:06)

• The biggest mistake startups make when scaling into enterprises is overpromising and underdelivering on product capabilities, leading to unmet customer expectations and dissatisfaction.
• When hiring for growth, focus on candidates with a "hunger for glory" and specific characteristics like creativity, user understanding, competitiveness, and resourcefulness.
• Use case studies and exercises in the interview process to assess candidates' skills and creativity, and prioritize their thought process, questions, and unique perspectives over structured answers or impressive resumes.
• Build a diverse team by hiring people with different perspectives and strengths to complement your own weaknesses, creating a wider range of ideas and opinions.
• In growth tactics, avoid spending money on ads without considering user activation and retention, as paid ads may generate signups but if users don't activate or convert, the investment is wasted.

Learning from Growth Tactic Mistakes (01:02:57)

• Using vanity metrics as KPIs can lead to misaligned efforts and wasted resources.
• Focusing on metrics like open and click rates without considering downstream metrics like activation and retention can be misleading.
• Metrics that are popular or widely used may not always be the most relevant or valuable for a company's goals.
• Gamifying metrics can be dangerous as it can lead to optimizing for the wrong things.
• Metrics should be chosen based on their relevance to the company's goals and not just because they are popular or easy to measure.
• The role of marketing has evolved, and now includes more technical aspects such as marketing operations and engineering.
• With advancements in technology, tasks like web scraping, data analysis, and personalized email generation can be automated using AI and engineering tools.
• This shift allows marketing teams to be more efficient and effective in reaching their target audience.