
The Only Way to Grow Huge - runesoerensen
http://blog.samaltman.com/the-only-way-to-grow-huge
======
pg
Note to Sam: It's possible to anticipate ways HN readers will misunderstand
you, and tweak what you write to pre-empt them. It takes some practice, but
I'd guess I'm now able to do it maybe 3/4 of the time.

In this case the most common misunderstanding seems to be not to realize that
present day big companies were once small. You could have pre-empted that by
reminding readers that once companies reach a certain size they don't have to
rely on making something great to grow bigger, but that if you look back at
the earliest history of those companies, you'll find most did.

I usually put these pre-emptive replies to probable misunderstandings in
footnotes, because I don't want to clutter the text with things that are
obvious.

~~~
pak
> In this case the most common misunderstanding seems to be not to realize
> that present day big companies were once small. You could have pre-empted
> that by reminding readers that once companies reach a certain size they
> don't have to rely on making something great to grow bigger, but that if you
> look back at the earliest history of those companies, you'll find _most_
> did. (emphasis mine)

It's hard to call it a misunderstanding when the title of the post starts
boldly with "The Only" and the first paragraph starts with "All companies".
The premise of there being some universal rule for growth is absurd and
requires only a few counterexamples, of which there are certainly many to
consider (this page now contains dozens), to be demonstrably false.

By reinterpreting the author's argument with a requalification of _most_ ,
you've already reached a much more sane argument. But you know as well as I do
that this post would never frontpage if it had been called "The Best Way to
Get Huge" or "The Way Most Companies Become Huge".

Edit: Or maybe it would have anyway? Sam Altman is a partner at YC [1] and I
can't help but wonder if such content gets a boost to frontpage no matter
what. After all, people have shown that penalties are applied to a hidden list
of phrases and domains which boots them off the frontpage [2], so the same
principle might be applied in reverse to certain things. For example, the
controversy penalty might be removed for certain domains. I'm sorry, but after
reading [2] my faith in the scoring system here is at an all-time low.

[1]:
[http://en.wikipedia.org/wiki/Sam_Altman](http://en.wikipedia.org/wiki/Sam_Altman)

[2]: [http://www.righto.com/2013/11/how-hacker-news-ranking-
really...](http://www.righto.com/2013/11/how-hacker-news-ranking-really-
works.html)

~~~
larrys
With all due respect to Sam I have no idea what qualifies Sam to even be
opining on this subject without a bit more of a circumspect attitude.

If he was a professor of business or had a long standing knowledge of business
that would be one thing. The word "most" would certainly be better but even
that goes a bit to far with a subject as large as "business" and "companies".

~~~
nostrademons
He's founded a company. It was talent-acquired, but that's more than most
professors of business ever achieve.

Aside from the specific situation - I'm kinda curious what HN readers think
"qualifies" a person to give advice. My girlfriend's doing an MBA. I read her
coursework sometimes. Some of it is useful with the appropriate grain of salt
applied, but I find that blog postings from people who have actually _run_
businesses (or listening to Larry, Urs, Amit, Milo, Andy etc. at Google-
internal presentations and trying hard to read between the lines) are _far_
more informative. There is the theory and there is the reality when it comes
to running businesses, and most of the theory is bunk.

~~~
larrys
I agree with what you are saying. I went to Wharton but I also have started
and run two businesses not including things during high school and college. I
am referring to specifically statements that Sam made which would have been
something that someone who was either practicing for a longer time or had
knowledge of business history would know about more than Sam. That was my
point. I am well aware of "book" knowledge. And theory. My dad used to joke
about that all the time when I was at Wharton. (I was in the entrepreneurship
program.)

------
pak
> All companies that grow really big do so in only one way: people recommend
> the product or service to other people.

This is a bad opening premise. Time Warner and Comcast are huge and they don't
seem like word of mouth companies to me. Boeing is pretty huge and they don't
sell anything directly to ordinary consumers. I would never run around
marketing Pfizer products to my friends.

Take a scan down the Fortune 500 and "viral" growth companies are in the
minority.

Even limiting yourself to tech companies, which I presume is all that the
author was thinking of, the principle is no less general. Epic is a gargantuan
EHR vendor and they grew via acquisition of other vendors, not word of mouth.
Cisco did much of the same, and consider Oracle. The list goes on and on.

~~~
not_that_noob
On the contrary, it is absolutely correct. You forget these huge companies
were once small upstarts. As upstarts, their growth was propelled by _buyers_
recommending the product to other buyers. (You can substitute users for buyers
here if it is an app). So his point is valid.

If you go back to the early days of Oracle for example, they were providing a
highly flexible database and would do it on (mostly) any computer platform you
had. The competition was databases that were glorified flat files on
mainframes, and IBM dominated that market. It took a few to take the plunge,
but the others followed.

Overall his point is very valid.

~~~
sjtgraham
Is that how enterprise sales work? I don't have any experience there but given
how highly paid sales sharks seem to be inextricably linked to ES as opposed
to social sharing buttons, I'd say no.

There is always more than one way to skin a cat.

~~~
pg
Actually in the enterprise market Sam's point is even more true. The greater
power of incumbents means that you can't get customers unless your product is
better by a large margin.

~~~
smoyer
Incumbents do have an advantage, but the other key in enterprise markets is
that you have to recognize you're selling to executives who won't generally
use your product, so you have to sell based on they perceive important, but
deliver what the company actually needs. I have a lot of stories (those
funny/ironic/sad ones) that I won't go into!

------
sjtgraham
Looking at the comments here, most of them would be nullified if the article
wasn't "the only way to grow huge", but instead "one way to grow huge". So far
it's looking like this item will soon incur the controversy penalty. I enjoyed
the post; simply making something good is the growth strategy that is most
applicable to a random kid reading this, but it's not the only way.

~~~
pak
The controversy penalty would be perfect for an article like this that
features and builds off a linkbait title, which I now feel a little duped for
reacting to.

But after finding out Sam Altman is a YC partner, and reading more about how
the controversy penalty and other arbitrary penalties actually work, I don't
really buy into anything scoring equitably on this site
([https://news.ycombinator.com/item?id=6844169](https://news.ycombinator.com/item?id=6844169))
in the long term...

------
johnrob
One major exception: distribution. You can also grow big off the backs of
other companies. In the tech world, this has become fairly common in the
advertising space. Retargeting companies, for example, can grow quickly by
signing up only a few large e-commerce sites.

It's worth noting that in this scenario you often don't see regular monthly
growth. Instead you get huge spikes when new customers/partners are on-
boarded.

------
jsnk
This is not necessarily true for social apps where number of active users are
actually a feature. Your app itself might be great, but if you don't have
active users, say good bye to ever growing big. This is also true on the
contrary. If you happen to have started some service before others
(Craigslist, dare I say Hacker News), even though the app itself might not be
as good, because of the people you have on the site, it will win out against
superior apps that have smaller number of people.

~~~
cconger
I think this is a little bit of a trap. Sure the number of people on the
service are a feature and almost a meta-feature since it usually enables or
multiplies the fun of other features. However the real value is number of
_active_ people on the service (which you did write). Those people were
enchanted before I, as a new user, showed up. Therefore there is some
orthogonal benchmark of quality or delight is required. These features I
believe are what make someone get excited and share your app which then makes
it amazingly social and draw in "the good people"

------
JacobJans
This reminds me of an article I recently read in the Harvard Business review.

"The Three Rules for Making a Company Great."

The three rules are basically:

1\. Increase Revenue

2\. Increase Quality.

3\. Only rules 1 and 2 matter.

I've following these rules since I read about them, and I do think they are
very, very, helpful. Even though we grow mostly through direct response
marketing, our brand value has been increasing, as has readership loyalty and
revenue per unique subscriber. We are starting to get to the point where we're
producing the type of quality that nobody else produces, anywhere. This easily
solves one of the biggest marketing questions: What is your unique position?
Eventually, the answer will be simple: We're simply better than all of our
competitors. By a lot.

[http://hbr.org/2013/04/three-rules-for-making-a-company-
trul...](http://hbr.org/2013/04/three-rules-for-making-a-company-truly-great/)

------
rebelidealist
Good marketing and advertising can cover up a bad product. A prime example is
GoDaddy.

When their product is not growing like it should, Silicon Valley startups
always hire more engineers to add more features. Oftentimes, the product is
good enough they just need put in more marketing efforts.

It almost feels like marketers and business dev people are second rate
employees compare to engineers when their job is could be more important after
the initial launch.

~~~
tvladeck
An alternate take, using your example: good marketing and advertising can make
a bad product good. In GoDaddy's case, by reaching a segment of the market
that is unaware of the options. For this segment, it's not GoDaddy vs.
Namecheap; it's GoDaddy vs. not knowing how to put up a website.

------
cbsmith
The real magic is:

customer acquisition cost < customer lifetime value

Now, one way to get there is referrals. But other ways to get there is to have
a product good enough that at least you get repeat customers, and still yet
another way is to find a way to cheaply acquire new customers through
advertising/marketing/distribution channels/etc (i.e., "growth hacker" route).
That last one is pretty hard to sustain if your product is "bad" but might
work if your product is "ok". The other two require varying degrees of
positive customer experiences.

Generally the tried and true way to get the job done is to build a product
that reliably gets return customers to maximize customer lifetime value. Then
you continually reinvest every dime you've got on sales/marketing to drive out
that fast growth to give yourself advantages of scale as quickly as you
possibly can.

This tried and true approach works better where you aren't in a market where
you are constantly reinventing your product/company (i.e., not the tech
business). For tech companies, the referral approach is the easier one to pull
off.

So while I wouldn't entirely disagree with the article, I think as a
consequence of perhaps being overly focused on tech, it's under appreciating
the value of a proper marketing & sales strategy.

------
midhir
Read this with interest earlier. Personally, I think the author is spot on.

We've been launching a new product quietly, building a simple landing page[1]
that asks subscribers to tweet or share the page by email after they enter
their business name/email. I thought I was wasting my time but didn't want to
just leech away the engagement.

The very first business that signed up immediately brought others.

We hadn't even got a prototype yet, it's how we framed the problem and offered
a solution that made it compelling enough to share. OK, it's important to make
it easy to do so but if you're not compelling who'll bother?

I wish I'd done this the first time round. Of course not every business in
every industry can do it with social media but the principle applies. Looking
at some of my friends launching businesses in competitive sectors I
immediately started wondering how they could do it and, if not, why they
weren't already. I suppose it's good peripheral validation as well. If your
product isn't enough to make people talk what can you do to make it so?

1: [http://events.shiftdock.com](http://events.shiftdock.com)

------
kevinalexbrown
I wonder why. There are plenty of ways to get growth, why is this one so
important?

I can think of one reason off the top of my head:

Perhaps it's because many organizations that grow very large do so by creating
a market, or largely shaping it in some way. It seems that in that case, word
of mouth is even more important.

As an example, I tell my friends about gyro food trucks all the time. But most
of them have decided whether or not they're going to eat greasy falafel. On
the other hand, if there's a new type of food vendor they've never heard of
before, it will count for a lot more, because their opinion hasn't been formed
yet.

I suppose the other explanation is that word of mouth is only a signifier of
high quality, but I'm not sure that's all of it.

------
jmduke
This is a great article, but really only applies to a small subset of
companies for whom organic growth is the only way to grow huge.

An abbreviated list of counterarguments:

Epic, CenturyLink, NBC, Waste Management, Honda, Vanguard.

~~~
nostrademons
Honda and Vanguard absolutely grew through word of mouth, and NBC probably did
too but it was before I was born. I compare notes with friends when buying a
car, and people are not shy about recommending Honda or Toyota. Very few of
them recommend GM or Ford.

I also heard about Vanguard through word-of-mouth, where everybody gave the
general advice that indexing funds are much more sane than other investing
systems, and Vanguard was the leader in that space.

~~~
jmduke
This doesn't really contradict your point, but I was more thinking about the
arc from 'small to huge', not the arc from 'huge to ginormous' \-- after all,
how did Vanguard become the leader in the space? Honda competed on price and
efficiency to secure government industrial contracts; for Vanguard's first
five years its only investors were institutional[^1], where their success laid
much more in being a (massively successful) niche fund that no other firm
offered than having any household success.

Other commenters have argued that repeated success in an RFP environment comes
from reputation (and thus word-of-mouth), but I think that's stretching too
far from the original thrust of the article.

[^1] I read this in a book but Wikipedia says that its first index fund in
1976, was available to individual investors, so I'm not 100% on this.

------
DonPellegrino
Not true for marketing-oriented companies that grew huge by having a really
good salesforce and managing to become the go-to name in slow, bureaucratic
markets such as governments.

------
manishsharan
This is grossly simplistic view of the world. Enterprise sales does not work
this way at all. And no financial company/banker will recommend your super-
duper product to anyone; in fact, some purchasing officers will ask you to NOT
sell your product to their competition before they consider buying from you.
In industrial supplies business, some factories require you to not sell their
product to anyone one else in their target market region.

~~~
sjtgraham
> in fact, some purchasing officers will ask you to NOT sell your product to
> their competition before they consider buying from you.

Which companies have become huge by doing that?

------
cconger
I agree with this firmly and have often doubted if it made me a naive "non-
marketer". When discussing with marketers I would often point to the idea that
our funnel was already resulting in so few long term customers, why would we
spend money to pour more people into such a tiny funnel? I think a really good
and "enchanting" (to steal from another front-page article) first impression
is necessary particularly when demoing to end users due to the large amount of
products they're being bombarded with on a daily basis.

So while I agree with your overall stance, I'm worried about the implied
advice to wait until your product is good enough. Since the phrase by
definition is difficult to assess otherwise everyone would succeed.

------
arbuge
"When you are still small, you can spend a lot of money marketing or
advertising and have a big impact on usage growth. But eventually, you get so
big you simply can't spend enough money to move the needle..."

Well, that depends. Specifically, it depends on how scalable your advertising
channel is. If your customer acquisition cost through that channel remains
below your customer lifetime value, the only limit on your scaling is the
working capital you have available to spend on advertising.

Advertising can take you a _very_ long way in some cases.

------
DustinCalim
> All companies that grow really big do so in only one way: people recommend
> the product or service to other people.

Yeah, I recommend all my friends to get Exxon gas and buy GE lightbulbs...

There are some things essential to us(inelastic), and those are the things
where we'll see really big changes-- Invent things that everyone uses all of
the time, not something that some people use some of the time.

------
LetMeListen
I agree with his initial premise that a good company - that offers a good
product - first becomes well known through word of mouth. That is a given for
any situation, hype will, whether false or not, bring people to your door
steps; what you present to them afterwards is another story. But having them
visit/try your product for the first time is essential.

------
ivankirigin
At the recent growth hacker conference, essentially every speaker dedicated
time to idea that product quality matters. I certainly did when talking about
the Dropbox referral program. You can see a version of my talk here:
[https://www.youtube.com/watch?v=ECvLsimoSjU](https://www.youtube.com/watch?v=ECvLsimoSjU)

------
arthuredelstein
> Having a growth team is still a good idea--you almost always need to
> jumpstart things. But don't forget about what you actually have to
> accomplish.

Maybe it's better not to jumpstart things. One strategy could be to fail
faster by purposely not marketing, to quickly find out whether a product is
intrinsically viral.

~~~
gk1
Most products are not intrinsically viral, and they have no reason to be such.

------
mmuro
There's a lot to this that rings true. I think the core idea here is that
growing slowly, with your customers, is how you get big.

In those early days of running a business, spending money on marketing is no
way to guarantee new revenue. Word of mouth almost always is. Plus, it's a
hell of a lot cheaper.

------
conductr
Author mentions _product_ a few times without consideration to the problem
it's meant to solve. Sometimes the problem being solved just isn't
big/important enough for users to risk the social capital of making a
recommendation; even when the product solves it perfectly

------
abenga
There was an interesting article in the Harvard Business Review way back that
seems to agree with this: [http://hbr.org/2003/12/the-one-number-you-need-to-
grow/](http://hbr.org/2003/12/the-one-number-you-need-to-grow/)

------
prottmann
But many companies have good / excelent products and services and nobody now
them.

If the companies grow you are absolutely right, but what did this companies do
that they grow ?

That is the crucial question. I think there are many services like Dropbox
before Dropbox exist, but nobody now them.

------
egfx
Am I the only one arriving at this article thinking it was about working out?

~~~
theorique
"Bro, do you even lift?" :)

~~~
egfx
I do now

------
coofluence
Sam is only highlighting an aspect of a company making it big. This is a
multivariate problem with no single trick for solving it.

------
eberyvody
yep, if you want your product to succeed, it has to be a really good
product... why do people think this article is so great? isn't what altman
says common sense?

------
chasing
Really? Plenty of sub-standard products do huge business despite higher
quality competitors. Microsoft is only the most obvious example in the
software world.

------
ilovecookies
then there is starbucks...

------
iterative
I was really hoping for some viagra jokes.

