Growth Loops for Fun and Profit

Mary, Mary, quite contrary. How does your Product grow?

Around 10 years ago I set up multiple pieces of software that enabled me to get an app from 1 to 500k legitimate users in very little time, with very little (if not zero) advertising spend.

The process looked something like this:

In my naivety, and little did I know, I’d accidentally stumbled upon a technique known as a “Growth Loop”. Ten years on, I took a course from Reforge on Growth Loops called “Growth Loops are the New Funnels” which took this concept to the moon and beyond.

Excited with my new learnings, I ran a workshop on this. And I’ll share with you what I now know in this post about Growth Loops for Fun and Profit.

Let’s start with a question.

How does your product grow?

Some typical, and not entirely incorrect answers might be along the lines of:

1. Through Marketing Campaigns: Many would first think of external marketing efforts such as social media campaigns, email marketing, PPC ads, etc., as primary drivers of growth. They see these as direct ways to acquire new users or customers.

2. Word of Mouth: One might simply see word of mouth as an organic, uncontrollable, result of having a good product or service.

3. SEO and Content Marketing: Focusing on creating content to rank well in search engines or to engage users on their blog or through other content channels, without necessarily looping the output of this back into something else.

4. Sales Teams and Efforts: Especially in B2B contexts, the growth of the product might be attributed to the efforts of sales teams in direct outreach, networking, and converting leads into customers.

5. Product Improvements and Updates: Some might believe that simply making the product better over time through updates and new features will naturally lead to growth.

6. Partnerships and Collaborations: Forming partnerships with other companies or leveraging influencers and thought leaders to reach new audiences.

7. Offering Discounts and Promotions: Using pricing strategies, discounts, and promotions to attract new users or customers, seeing this as a direct input to growth.

8. Expanding to New Markets or Demographics: Identifying and targeting new user segments or geographical markets as a growth strategy.

These responses, while valid strategies and quite good in their own ways, are missing something.

A. They haven’t captured any cyclical, self-reinforcing nature. (Although one might argue that some generate revenue which can directly be allocated back into spending more on advertising).

B. The answers, given individually, only represent one piece of the puzzle. Is the sales team in sync with the SEO team for example? Will the sales pitch to the customer add up when the customer starts searching online for information about the product?

C. And the answers generally talk about the output and not the inputs. For example: Acquire more users, convert leads into customers, form partnerships, etc.

So how does your product grow 100x?

Growth loops, on the other hand, emphasize the importance of creating mechanisms within the product or service that naturally lead to growth by turning the output of one process (e.g., new users) into a new input (e.g., those users generating content that attracts more users) in a way that compounds over time.

For example, let’s look at this very common and simple growth loop that Pintrest used to grow their user base:

1. User finds Pinterest through long tail SEO/search-engines.

2. User signs up.

3. Pinterest activates the user on the product with specific/relevant content

4. Users save new content or repin existing content which gives Pinterest quality signals

5. Pinterest distributes the quality content to search engines

6. A user finds the content via search engines and either signs up/returns (a return to step 0)

Sounds super! In theory. Right?

Here's the thing with dissecting an excellent growth loop: it's easy to look at it and think 'that's genius' then try and create one for yourself without any structured way to create it.

Let me repeat that in some kind of quote, so it can be remembered:

So let’s now go through how we can actually create a growth loop (for fun and mostly for profit)

As mentioned above (and yes, I am repeating it a third time) it is nice to look at a successful growth loop and think to oneself “Wow. That’s smart”. Then you try and copy the growth loop for your own business. Then it doesn’t quite fit into your business. So what you do then is to remove parts and try and shoehorn your own parts in, with an extra topping of new untested ideas.

What you’re left with is a Frankenstein’s monster of a growth loop that kind-of works on paper but you’re left scratching your head when you launch it and it doesn’t have the effect you were hoping for.

What you really need to do, is start again from scratch and build a growth loop which fits your specific business.

The good news is that there’s a workflow for that.

A workflow to create a sustainable Growth Loop

This is the workflow given by Reforge:

1. Identify Loop Properties - By cataloging all available components.

2. Identify Available Loops - Systematically.

3. Model the Micro Loops - Visually.

4. Model the Macro Loops - To visually identify where your loop compounds.

I want to illustrate how this works by going through a simple example. There’s actually a lot more to this, which is covered in the Reforge course. What I’m trying to do here is introduce the concept through a simple growth loop that a well known company might have.

Let’s use…

Notion as an example. Let’s go.

Analyzing the growth loop properties for an app like Notion involves considering the ways in which Notion attracts, retains, and engages its users, as well as how it nudges and encourages them to contribute to its growth. I’ll make a presumption about their growth loops and break them down using Reforge’s framework of growth loops, focusing on micro and macro loops.

1. Step 1: Identify the Loop Properties of Notion

   We, ideally, begin by cataloging every potential component for crafting growth loops. This process involves constructing a comprehensive map of loop properties, laying the groundwork for strategic loop formulation.

   Three Properties of a loop

   - What? What actions are happening? There’s three types of actions that can happen a. receiving value, b. generating value, and c. distributing value.

   - Who? Who is doing the action?

   - Why? Why is the ‘who’ doing the ‘what’?

   Every loop is made of a combination of these three qualitative properties.

With Notion, we can presume that they have a “Viral Sharing Loop” because there’s an inherently frictionless nature of how it allows users to create and distribute content.

• What: Users invite others to collaborate on documents or to view their public Notion pages.

• Who: Both individual users for personal projects and team admins for collaborative workspaces.

• Why: The motivation here can be personal (sharing information with friends or family) or professional (collaborating on team projects), leveraging the utility of the platform for seamless collaboration.

2. Step 2: Identify Available Loops

   Systematically pinpoint the types of growth loops that are actionable within your framework, offering a clear overview of your strategic options.

   There are quite a few actionable loops available to Notion in order to address the who, what, and why to deliver value to the users whilst compounding the effects.

   Three of which, I can think of as some possible loops, are:

   A. User Invitation Loop

   • What: Encourage existing users to invite new users to the platform.

   • Who: Existing users inviting colleagues, friends, or family.

   • Why: Users might invite others to collaborate on shared projects, share knowledge, or simply introduce the platform's utility to others.

   B. Template Sharing Loop

   • What: Enable users to create and share templates within and outside the Notion community.

   • Who: Template creators and users looking for productivity solutions.

   • Why: Creators share their templates to showcase their expertise, gain recognition, or help others. Users search for templates to improve their productivity and organizational skills.

   C. Integration and Plugin Loop

   • What: Develop and promote integrations or plugins that extend Notion’s functionality.

   • Who: Third-party developers and power users.

   • Why: By integrating with other tools, Notion becomes a more indispensable part of the user's workflow, encouraging users to share these integrations within their networks.

3. Step 3: Model the Micro Loops

   Visually model the interconnections between all identified micro growth loops.

   Modeling micro growth loops visually involves creating a diagram that illustrates how each loop interacts and feeds into the others, highlighting the flow from inputs to actions and back to inputs. This process helps identify synergies, bottlenecks, and opportunities for optimization, ensuring alignment and efficient resource allocation.

   Our example Notion growth loops look something like this:

   

   Or in a table, simply:

   

   As a disclaimer here, this is a fairly simple growth loop, and it is a great example because you can see the effects of the loop directly impacting a metric like “New Users”. However, not all growth loops need to be focused on generating new users or leads. One example is how Netflix compounds the value that their users get, the more they use the product.

   

   This is powerful as a retention and engagement loop for existing users which is not directly impacting the growth/acquisition of new users.

4. Step 4: Model the Macro Loops

   A macro growth loop connects your underlying micro loops and enhances their effectiveness by either reducing their cycle costs or improving their performance over time. It's essentially an overarching mechanism that strengthens the foundation provided by your micro growth loops, making the entire growth engine more efficient and powerful over time.

   For instance, YouTube's personalization algorithm is a good example of a macro growth loop. YouTube’s algorithm creates what's known as a Data Network Effect. As a user watches a video (completing a cycle of a micro loop), YouTube gathers data that helps to better personalize future video recommendations for that user. This personalization improves the likelihood that the user will watch more content, thereby increasing the total content consumed. As a result, more content is shared, attracting new users and enhancing the effectiveness of YouTube's micro loops (like their content creation and consumption loop)​​.

   Another example is Salesforce, where a macro loop is created through a Cross-Side Network Effect. This effect occurs when the growth of one set of users (e.g., customers) enhances the value of the platform for another set of users (e.g., developers), and vice versa. As more customers use Salesforce, it becomes more attractive for developers to create integrations for Salesforce, which in turn makes Salesforce more valuable for customers, fostering a cycle of compounding growth over time​​.

   In Notion’s case, they can benefit from several macro growth loops that leverage the interconnectedness of its micro growth loops which will enhance their effectiveness over time.

• Data Network Effects from User Collaboration: As more teams and individuals use Notion for project management, documentation, and collaboration, the value of Notion increases for all users. The increased data (in terms of templates, integrations, and use cases) enhances personalization and usability for users, encouraging deeper engagement. For instance, as users create and share more templates within the ecosystem, new users find more immediate value upon joining, and existing users discover new ways to use Notion, thus enhancing retention and engagement.

• Cross-Side Network Effects between Users and Integration Partners: Notion benefits from a growing ecosystem of integration partners (Google Drive, Slack, Trello, etc.). As Notion's user base grows, it becomes more attractive for third-party apps and services to integrate with Notion, improving Notion's functionality and appeal. This, in turn, attracts more users and increases engagement among existing users, as they can leverage Notion as a central hub for their work, integrating various tools they already use.

Some other macro growth loops that Notion is possibly using:

• Brand and Community Building: As Notion's user base grows, the community around it also expands, contributing to forums, creating educational content, and sharing use cases. This community-driven growth loop strengthens Notion's brand, making it a go-to solution for productivity and organization. The community acts as both a support network and a marketing channel, organically driving new user acquisition and enhancing Notion's defensibility in the productivity tool market.

• Learning and Improvement from User Behavior: With a diverse user base spanning individuals, small teams, and large organizations, Notion can harness data on how different segments use the product. This insight allows Notion to refine its features, improve user experience, and introduce new functionalities that meet the evolving needs of its user base. Over time, these improvements make Notion more indispensable to its users, enhancing both retention and the likelihood of users recommending Notion to others.

These are just my presumptions about Notion's growth strategy. It may include these and other unique elements tailored to its specific market position, product offerings, and user base characteristics​​​​.

Concluding Notes on Creating Growth Loops

The growth loop modeling process represents a strategic and analytical approach to understanding and leveraging the mechanisms that drive organic growth within a product or service. By focusing on the creation, optimization, and connection of various micro and macro growth loops, organizations can foster a self-sustaining ecosystem that not only attracts new users but also enhances the value and engagement of existing ones. This process is essential for several reasons:

1. Compounding Growth: Unlike traditional linear growth strategies that rely on continuous input of resources for each incremental gain, growth loops emphasize compounding growth. Each loop is designed to reinvest its outputs back as inputs, thereby creating a self-reinforcing cycle that becomes more efficient and powerful over time.

2. User-Centricity: Growth loop modeling inherently focuses on the user’s actions, motivations, and benefits. This user-centric approach ensures that growth strategies are aligned with delivering real value to users, enhancing satisfaction, retention, and ultimately, the likelihood of users contributing to the product's growth through their actions.

3. Strategic Alignment: The process of identifying and modeling growth loops requires a deep understanding of the product’s core value proposition, user behavior, and market dynamics. This leads to strategic alignment across different functions within the organization, ensuring that product development, marketing, and sales efforts are cohesively geared towards amplifying the growth loops.

4. Innovation and Adaptability: By continuously analyzing and refining growth loops, organizations can remain agile and responsive to changes in user behavior, market conditions, and technological advancements. This adaptability is crucial for sustaining growth in the fast-paced and competitive digital landscape.

5. Resource Optimization: Growth loops allow for more efficient use of resources by focusing efforts on mechanisms that not only attract users but also turn them into advocates for the product. This leads to a higher return on investment for growth initiatives and enables resources to be allocated more effectively.

6. Defensibility: Well-executed growth loops can create a competitive advantage that is difficult for competitors to replicate. By intricately tying growth mechanisms to the unique aspects of the product and its user base, companies can build moats that protect and sustain their market position.

Concluding Thought on Growth Loops for Fun and Profit

The growth loop modeling process is a fundamental shift from traditional growth strategies towards a more dynamic, user-focused, and efficient approach. It recognizes growth as a holistic and continuous cycle, driven by delivering value and engaging users in ways that naturally promote the product. For startups and established products/companies, mastering this process is the way to unlock sustainable and compounding growth.

Further Reading

Why Slack’s Growth Strategy Led to Billions Without A Sales Team

https://www.drift.com/blog/how-slack-grew/

Growth Loops are the New Funnels

https://www.reforge.com/blog/growth-loops

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