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The Psychology of Startup Growth

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Jul 7, 2021

In her excellent book Mindset: The New Psychology of Success, Carol Dweck talks about two mindsets: growth mindset and fixed mindset. People with a growth mindset believe effort can change the outcome. They don’t consider failure as a final outcome. Something that tells about their ability. Instead, they embrace failure and regard every failure as a momentary setback — and an opportunity to learn — that they could overcome through hard work, dedication, and effort. 

According to Dweck, successful people maintain a growth mindset. To my understanding, so do successful organizations. Because mindset ultimately determines your behavior and actions. She writes in the book: 

For twenty years, my research has shown that the view you adopt for yourself profoundly affects the way you lead your life. It can determine whether you become the person you want to be and whether you accomplish the things you value. How does this happen? How can a simple belief have the power to transform your psychology and, as a result, your life?

Believing that your qualities are carved in stone — the fixed mindset — creates an urgency to prove yourself over and over. If you have only a certain amount of intelligence, a certain personality, and a certain moral character — well, then you’d better prove that you have a healthy dose of them. It simply wouldn’t do to look or feel deficient in these most basic characteristics.

I’ve seen so many people with this one-consuming goal of proving themselves — in the classroom, in their careers, and in their relationships. Every situation calls for a confirmation of their intelligence, personality, or character. Every situation is evaluated: Will I succeed or fail? Will I look smart or dumb? Will I be accepted or rejected? Will I feel like a winner or a loser? . . .

Then she goes on to illustrate a different mindset where things are not fixed, rather dependent on our effort: 

There’s another mindset in which these traits are not simply a hand you’re dealt and have to live with, always trying to convince yourself and others that you have a royal flush when you’re secretly worried it’s a pair of tens. In this mindset, the hand you’re dealt is just the starting point for development. This growth mindset is based on the belief that your basic qualities are things you can cultivate through your efforts. 

Although people may differ in every which way — in their initial talents and aptitudes, interests, or temperaments — everyone can change and grow through application and experience.

Do people with this mindset believe that anyone can be anything, that anyone with proper motivation or education can become Einstein or Beethoven? No, but they believe that a person’s true potential is unknown (and unknowable); that it’s impossible to foresee what can be accomplished with years of passion, toil, and training.

A growth mindset is what Shunryu Suzuki calls “beginner’s mind” in her brilliant book Zen Mind, Beginner’s Mind. She writes: “In the beginner's mind there are many possibilities, but in the expert's there are few.” 

Per Dweck, a growth mindset is when we are open to learning and curious about failure, when we don’t stop when we fail, rather we investigate our failure, learn and try again and try better. Exactly the mindset you need when you are trying to grow your fragile early-stage organization called startup. 

Hacking startup growth  

Growth hacking, a term attributed to Sean Ellis for first coining it, is a growth mindset and beginner’s mind put together in an organizational setting. You build an organization that is open to rapid experimentation, failure, learning, and trying better and do it in a resource-light and cost-efficient manner. In simple terms: that's growth hacking. While growth hacking is predominantly used in the context of marketing, it can easily be applied across operations in a company. 

We can organize the psychology of startup growth in three areas: a) mindset 2) knowledge 3) and tools. 

Mindset is our orientation regarding how we think about growth as an organization. For many organizations, growth comes from spending money in marketing and sales and in achieving perfection. This is not the right mindset for startup growth. 

The concept of growth hacking introduces a new mindset opposed to this traditional understanding: growth comes from disciplined experimentation, learning, and trying better. Since startups are resource-constrained organizations, growth hacking also proposes a lean but highly effective approach to marketing where a company runs rapid experiments to find the best ideas and strategies instead of throwing money at the problem. 

This shift in mindset is necessary for the successful execution of growth hacking ideas in your organization. Because mindset sets the orientation. As an organization, you maintain a growth mindset, a beginner's mind. 

Knowledge is about how to do something — in our case, what is growth hacking in practice and how to apply that in my organization. Knowledge is the mechanics of setting up a growth hacking organization in your company. Building a growth team. Putting together the processes and systems. Learning about idea generation, experimentation, high tempo framework, and so on. Once you know the what and how you can go on to put the knowledge into practice. 

Tools are skills and equipment you need to apply your knowledge. For example, you know growth teams are multidisciplinary which means you need a marketer, a programmer, a product person, and so on to put together a growth team. 

Then there are tactical aspects to your growth such as crafting a marketing message that resonates with your users, setting up a data analytics system so that you can track what’s working and what’s not, etc. These things are relatively easy to put together when you have the right mindset and understand the psychology of growth. 

The psychology of startup growth 

A mindset of experimentation: It begins with the mindset. Adopting the right mindset which you can call growth mindset or beginner’s mind in an organizational context is the first step to setting up a growth regimen for your startup. 

Sean Ellis introduced an interesting framework he named: high tempo testing framework — a rapid idea testing framework. From High Tempo Testing: A Powerful Framework For Growing Your Business

“At the heart of every meaningful growth story is iteration. You test hundreds of ideas. Some fail. You learn. Some sticks. In simple terms, this is called high-tempo testing.

High tempo testing is a framework first proposed by Sean Ellis of Growth Hackers.com and author of Hacking Growth. The basic idea: the best approach to growing your business is rapid ideation, testing them, and executing the ones that work, and learning from the ones that fail.

You develop a system to generate ideas, experiment, learn from those experiments and apply the lessons to improve the entire process. The idea is to test, test, and test some more.” 

The first thing to understand about growth is that it is the result of relentless experimentation and testing and learning. You have to be willing to experiment, fail, and learn and then do all of it again. 

High tolerance for failure: We have a misconception about the growth that startup growth is only right when it is a hockey stick growth — always up and towards the right. This is not true. Most growth is circuitous and full of ups and downs. Understanding this reality and internalizing it organization-wide makes failure easier to accept and thus experiment and testing more natural to pursue by every member in the team. 

Using the high tempo framework, when you're testing hundreds of ideas every month, the majority of the ideas will fail and that’s okay as long as some of the ideas work and you learn from the failures. 

For finding the ideas that work and learning what works and what does not, you need to allow, in fact, encourage failure. 

Disciplined consistency: Executing on growth hacking ideas is demanding for any organization. It requires organizational discipline and commitment. 

Many early-stage companies can see it as an unnecessary resource commitment. But growth comes from the commitment to the process and commitment to building something that people want. 

It is not enough to run tests after tests, it is equally important to learn from these tests and apply the lessons in the next iteration.  

Temptation and distractions: A common growth killer for startups is a distraction. They come in many forms. From Fatal Founder Distractions

The defining nature of all these distractions is that they give you a false sense of progress. You feel like you are doing something important and moving forward but in reality, you are not. This is precisely why these distractions are fatal.

They are slow killers and by the time you realize you are wasting your time, it could become too late to fix things. Be aware of them and avoid them at any cost. When pursuing growth, startups need to be focused on their north star metric and actively resist any temptations to easy gains. 

Keep trying: This is the repetition of the first point: the companies that survive/sustain keep trying new approaches, new things, and keep moving. 

At the heart of growth and progress lies our willingness to keep going. This is common sense but we frequently forget when it is most critical to remember. 

Startups are counterintuitive so always look for data: Paul Graham famously wrote: startups are counterintuitive. Don’t rely on your intuition. Instead, look at data and proof for every decision you make. 

Build for your users: Your users should come first in everything you do. Invest time in understanding your users better. Learn what they like and don’t like. 

If possible, learn who they are as people. Talk to your users. Put yourself in their shoes when creating features or writing a communication copy and then do it. When you put your users first and think for your users, everything follows. 

Putting things in practice 

The most critical part of growth is the mindset. Once you have the right mindset, the tactical side comes naturally. The challenge of developing tactical skills is much easier to address than adopting the right mindset. 

To that end, founders need to invest deliberate time and effort in developing the right mindset in the organization, teach people about these ideas and encourage the idea of a growth mindset and a mindset of experimentation in the organization. 


Announcement

We have started a new culture at FS — working on a new theme every month which we will explore in-depth. We have chosen “Growth” as our inaugural theme for July. We plan to publish a series of articles, interviews, and case studies on growth throughout the month. 

We are also accepting contributions. If you want to write a reflection, a strategy piece, a thought piece, or do an AMA on growth, please feel free to share with us at [email protected]

Keep growing! 

Thanks to Yanur of Bohubrihi, Fahad of Pathao, and Naziba for reading and commenting on an early draft of this article. 

Ruhul Kader is a technology and business analyst based in Dhaka, Bangladesh. He is also the co-founder and CEO of Future Startup and author of Rethinking Failure: A short guide to living an entrepreneurial life. He writes about internet business, strategy, technology, technology policy, and society. He can be reached at [email protected]

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