Learning Trees: 7 steps to structure and accelerate your learning

It used to be that people would spend the first part of their life going to school, the second part of their life applying what they learnt in school, and the third part of their life retired and potentially teaching others.

Things are changing rapidly nowadays. It used to be sufficient to accumulate knowledge in the initial years of a career only, but knowledge now becomes irrelevant and outdated faster than ever. Simultaneously, new technologies and industries arise that are impossible to prepare for and learn about years in advance.

With this in mind, the ability to acquire new knowledge and skills are now more relevant than ever.

While some people have an easier time learning new things or acquiring new skills than others, there are certain ways to increase efficiency and, thereby, the speed of learning regardless of your talent for learning.

This guide will highlight techniques that have worked for me – techniques I’ve picked up from literature, and speaking to multiple true masters of accelerated learning. The result is a 7-step process covering how to: 

  1. Define your learning objectives
  2. Decompose the topic into a learning tree
  3. Get a sufficient level of depth
  4. Validate your learning tree
  5. Figure out the best way to learn about each twig
  6. Activate your understanding
  7. Stay up to date

1. Define your learning objectives

The best place to start learning is to define your learning objectives. Most people have an intuitive idea about the direction of the topic they want to learn about, but they lack a specific goal. A lacking goal usually comes from a lack of context, and this makes mapping the learning tree harder.

To illustrate this, imagine a person wanting to learn more about human behaviour. Depending on the actual objective, “human behaviour” could mean anything from understanding the biochemistry of the brain or the nervous system to developmental psychology. 

Ultimately, you will structure your learning differently depending on whether you seek to change an old habit, understand how your diet impacts your behaviour, or how to raise your child. It is therefore important to define the context of your learning as part of the objective, e.g. “human behaviour in order to change bad habits.”

An example of an objective could be: “I want to learn more about and improve on my EQ in order to improve my relations with other people and build stronger bonds”

In most cases, it is hard to definitely say that you have learned a new skill, as it is rarely a binary outcome but rather something you can always improve on.

2. Decompose the topic into a learning tree

Imagine that you are in a new city and want to visit three tourist attractions at three separate addresses. A map won’t give you the experience of going there, but it will help you navigate the new city, help you get from one address to the next in the most efficient way, and help you minimize travel time. The Learning Tree has the same role with regards to your learning.

In an AMA on Reddit, CEO of Tesla and SpaceX, Elon Musk talked about learning: “One bit of advice: it is important to view knowledge as sort of a semantic tree — make sure you understand the fundamental principles, ie the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to.” Think of your Learning Tree as the concretized version of the semantic tree.

To build a tree, you’ll need to start by decomposing the topic into its various conceptual sub-topics. This enables you to build a mental structure of the topic, which acts as a skeleton where you can attach your new insights and knowledge. This is what I refer to as the Learning Tree: each topic branch out into subtopics, which again branch out into another set of subtopics ad infinitum.

Example

Throughout this article, I’ll use emotional intelligence (EQ) as an example of how I would work with the learning tree. If you want to improve your (EQ), the broken down conceptual model of EQ could look like this1:

Emotional intelligence
  1. Personal competencies
    1. Self-awareness
    2. Self-management
  2. Social competencies
    1. Social awareness
    2. Social interaction/relationship management

Each of those can be further decomposed so that for example Social Interaction/relationship management could break down as per the below example.

Example2

2.2 Social interaction/relationship management

2.2.1 Inspiration (of others)
2.2.2 Influence/communication
2.2.3 Developing others
2.2.4 Teamwork/collaboration
2.2.5 Change catalyst
2.2.6 Conflict management

When you design the tree, you need to be careful to include all the sub-topics (the branches and twigs of the tree) you could learn more about on every relevant step.

The Learning Tree needs to cover the entire universe of each topic at an appropriate depth, even though you may already know that you want to focus on just a few of the sub-topics. This ensures that you don’t miss any crucial areas which could potentially limit your understanding. 

Insight

For EQ, even if you already know that you want to focus on improving your abilities within Social Interaction, you still need to ensure your list is comprehensive at the level where Social Interaction is just one branch.

If you don’t do this, it’s easy to falsely conclude that emotional intelligence only relates to our relationships with others (a commonly held belief). You will then completely miss the fact that in order to understand others, you must first understand yourself: It is no easier task to imagine a kind of feeling that you haven’t experienced before than it is to imagine the melody of a song you have never heard.

As you reach new insights, awareness of the full Learning Tree will also help you place those insights into the bigger picture. 

Feel free to only break down every relevant branch as you go down the tree, but ensure to do it fully every time the tree branches out, otherwise, you may lose track of how everything ties together in the end.

Tip

You may benefit from creating your Learning Tree in a clear structure that is both mutually exclusive and commonly exhaustive (MECE). To be mutually exclusive you should find a structure where the same subtopic does not fit under multiple headlines. Just like the example of the map above, it is significantly easier to navigate a city if each address appears only once. To be commonly exhaustive, you should include every subtopic – even the ones you may already have decided not to focus on.

3. Get a sufficient level of depth

At first, when learning a new language, the words melt together and seem like one long stream of sounds. But with experience, the sounds become words and you’ll be able to discern the different words from each other.

The same goes for learning. As you learn more about your topic, you’ll be able to expand on the Learning Tree with more detail and granularity. Some areas may seem like one at first, but the distinctions become gradually more obvious as you gain a better understanding.

Example

Think about how “engineering” may be perceived as one single area or function for most non-engineers. For engineers, however (and for the rest of us benefiting from their work), it makes a massive difference if the engineer is specialized in building bridges or aeroplanes. You probably appreciate the differences every time you cross a bridge or fly on an aeroplane.

Personally, by investing time in research initially, I like to go as deep as I can when designing my learning trees at first. I thereby identify all areas exhaustively so I know which area to focus on. As a novice, this may be impossible for some topics, but the important point here is to be as granular as possible to gain a broad understanding.

Keep in mind that the required depth of your tree depends on your use case. You can stay at the more superficial levels if you are just looking for a conceptual understanding rather than developing a profound skill.

4. Validate your learning tree

When learning a new skill, ignorance of an important branch can easily be the difference between strong competence or incompetence. Consequently, you’ll need to ensure that your learning tree reflects the real world.

There are often multiple ways to design Learning Trees covering the same topic. Rather than Personal and Social Competencies, for example, the tree for EQ above could equally well have been split by Awareness (passive) and Management (active) at the first level. 

It’s important to accept differences, but only as long as the overall tree is valid. It is easy, for example, to miss a layer in the tree when you are new to a topic. As per the example above on social interaction, omitting a layer is critical as you may miss out on new branches of insights that fork out from that layer, making it harder to get a comprehensive understanding.

There are many ways to validate your learning tree. The two most common are:

  • Speak to someone who is further down the learning curve than you are – this is my favourite way. If you are able to get input from a true expert, he/she may also provide guidance on where to start your studies and recommend good resources 
  • Research existing models or frameworks – during my research for EQ it became apparent that there was consensus around a model broken down like the above. In your own research, ensure that it includes the consensus and not just an opinion from a random person. Also, make sure to add other areas you find that aren’t part of the consensus model – you can always re-draw your tree later if a different branch or sub-topic  is more suitable

5. Figure out the best way to learn about each twig

Once your tree is designed and validated, you need to find the best way to gain the understanding, insights, or skill required for each sub-topic (the twigs of your tree). 

To optimize your knowledge, you need to consider both the type of media and the specific resources that will teach you what you need to learn.

Type of media

Books are more affordable and available than ever before. Videos and articles about most topics are available online, for free, and the list goes on. 

Information is no longer a scarce resource or the limitation for your learning. Chances are that the only thing holding back your learning is your own time and commitment to the cause.

To learn something new, start by exploring the media which best suit your way of learning. Some of the most common ways include:

  • Books (physical and ebooks)
  • Articles
  • Videos
  • Online courses
  • Conferences
  • Conversations with experts

Some of these formats (top four) are obviously easier to use than others (conferences and conversations). Resources for your area may not be available in all of the above formats, so find the best match between availability and your preferences.

Specific resources

Once you’ve set yourself on the type of media, say books, you need to find the best books to cover your topic.

Places I usually find recommendations for the best resources (My favoured form of learning is via books):

  • Check Quora if someone has already asked for recommendations
  • If the topic is taught at universities, I check the syllabi of the relevant courses for leading universities
  • Check interviews with domain experts. It’s common for them to list resources
  • For books, check the bestseller lists on Amazon and rankings on Goodreads
  • For videos, check ratings and view-count of YouTube videos. Although TED talks are usually much more conceptual, YouTube can provide more in-depth knowledge
  • For online courses, check the reviews of the largest sites (E.g. Udacity, Udemy, Coursera, Lynda, Khan Academy, MIT OpenCourseWare, Stanford Online, iTunes U, etc.)

It can be tempting to jump in with the first book or video you come across, but it may be worth your while to check the consensus to ensure you don’t invest your time sub-optimally.

Tip

If you want to go extra deep into a field, check the references sections of the books you read. Often, the books that are frequently referenced are worth reading.

A separate post on how to get the most out of reading books will follow at a later date.

6. Activate your understanding

As mentioned earlier, information is available in abundance. Knowledge is like language skills. For most people, they understand way more words (passive vocabulary) than they would actually use in their daily communications (active vocabulary). This should be particularly familiar for people speaking a 2nd or 3rd language.

Similarly, information can easily become passive (or forgotten!). That may be fine if learning is just for inspiration, but if your intention is to use your knowledge and develop it into skills or a profound understanding, you need to activate it.

I’m a big believer in the adage, “See one, do one, teach one.” The challenge for most people is not to “see one” (e.g. read a book, watch a video, speaking to an expert), but rather how to get in a situation to do or teach one.

Do one

For skills, nothing replaces practice. Doing the work itself is paramount. In cases of “just” securing understanding, studies suggest that repetition is important. One way, of course, is to read the entire book/watch the video/etc. again. I personally find it helpful to write notes and use these to write a summary. This is a good way to gather my thoughts and get a clearer picture of the key takeaways. It ensures that I don’t succumb to recency bias, focusing only on the learnings from the last chapter of a book or the last 5 minutes of a video.

Physical books have the added benefit of the ability to write in the notes. For ebooks, I use a kindle or the kindle app on an iPad. With these, I am able to export all my highlights which makes using them for a summary faster.

Finally, once I’m done with the first draft of my summary, I search for other summaries online to see if other people have highlighted different points from the material than I have – this helps me rethink my takeaways while the materials are still fresh in mind.

Teach one

Explaining something in a way that is easy to grasp for the listener requires a profound understanding. I find that having to explain something to another person forces me to think about what I have just learned with more structure and from the most fundamental principles, compared to if I just had to remember it for myself. This is probably a result of 1) the clarity required to explain something, 2) the pressure of not wanting to look like an idiot when explaining the topic.

It can be difficult for most people to get in such a situation, but I find that there are two good substitutes:

  1. Explain the topic to someone who is willing to listen, even if they may not have an explicit interest in the topic
  2. Develop teaching materials as if you were to teach the topic

The first is quite self-explanatory but the second point may require some explanation. I often find that forcing myself to prepare a document or presentation on a topic helps me structure my thoughts. I often make the materials with one particular person in mind and develop the materials in a way that I think would be able to teach him/her everything I now know about the topic.

Engaging with people who are further down the learning curve may help expose if parts of your understanding (or teaching materials) show a lack of understanding of certain areas. Try your best to always challenge how profound your understanding is and whether you understand the first principles.

7. Stay up to date

Finally, once you’ve built your learning tree and achieved the desired depth, keep in mind that most fields evolve over time. 

I recall at the graduation ceremony from business school, one speaker highlighted that of the things we had learned during the coursework, one third would be irrelevant for what we would work with, one third would be outdated by the time we would need it, and only one third might be relevant for what we were going to do.

Similarly, the knowledge that you have acquired may also be left behind if you don’t ensure to stay up to date.

Summary

To summarize the above, the best way to accelerate your learning is to follow the 7-step process:

  1. Define your learning objectives
  2. Decompose the topic into a learning tree
  3. Get a sufficient level of depth
  4. Validate your learning tree
  5. Figure out the best way to learn about each twig
  6. Activate your understanding
  7. Stay up to date

This methodology is based on both empiric observations and academic research. Please share below how it works for you and if you have any other ideas that have helped you accelerate your learning.


Sources:

  1. Bradberry, Travis: Emotional Intelligence 2.0 (2009)
  2. Goleman, Daniel: Primal Leadership (2013)

Images: Pexels.com

Why Building Something You Would Love May Be A Bad Idea

There is more of less a collective agreement among entrepreneurs that the idea is only a small fraction of a venture’s success.

This turns focus to the importance of executing on an idea. To work hard and to hustle. Numerous books are dedicated to this subject, and while I wholeheartedly agree with them, I want to drill down into why great ideas do not always turn into great products – let alone great companies.

Many advise fresh entrepreneurs to “build something you’d love to use yourself!” My argument in this post is that such advice is – at best – only partially right.

Focus and expertise paradoxically become an enemy – they distance you from the mass market.

Your organization will carry a lot of cognitive overhead

Great ideas aren’t always well-executed. Many of the most successful tech companies weren’t the first of their kind. Luck often plays a significant role, and so do the founders’ abilities to put their own thoughts aside – to build a company catering to their larger audience, rather than something that makes sense to the founders themselves.

The challenge for any organization born to solve a specific problem comes in the form of cognitive overhead. To solve a problem, you begin to develop expertise. You begin to understand how things work. Industry acronyms may become part of your vocabulary, and you forget that some of the knowledge you take for granted now may indeed have taken some time to pick up. This understanding is what allows you to navigate the field more easily and what I refer to as cognitive overhead (best defined by web designer and engineer David Demaree as “How many logical connections or jumps your brain has to make in order to understand or contextualize the thing you are looking at”).

Focus and expertise paradoxically become an enemy – they distance you from the mass market.

At Nova Founders Capital, most of our activities are in the financial industry, which – if any – overflows with jargon and TLAs (three-letter abbreviations). There is a lot of cognitive overhead for anyone working in the industry. When our companies try to guide laymen through the jungle that is retail finance, it is imperative to bridge the cognitive gap and speak in plain English (or Spanish or Cantonese, etc.).

As you gain experience in your industry, it becomes increasingly difficult to remember that ‘APRs’ and ‘household income’ aren’t layman’s terms (the latter is not self-explanatory in surprisingly many languages).

Don’t just ask your fans why they love you

The solution is quite simple but often missed: Speak to your target users. Almost all product development and usability books ever published advocate this point, but few organizations live by it.

Among the startups I see who do speak to their users, I see one common shortcoming – they only speak to their current, happy users. That poses two challenges:

Current – the easiest users to reach out to are current users of the platform. However, those users may not be representative of the users you need to cater towards if you want to continue to grow, especially for startups, which tend to have limited user bases. Most startups are classified as startups, at least partly due to their (limited) size.

You shouldn’t limit your source of input to the existing user base only: listen to the users you are targeting, rather than just those who use the platform today. Who will constitute your user base in 6, 12, or 18 months if you grow as you expect? For many organizations, the early adopters are not good representatives of the core user group once the market matures.

If you want to grow further, you may need to access a broader market where users may display a different behavior and understanding than your early adopters. In other words, your early adopters may share in your cognitive overhead. That said, if your full target audience has already adopted your product, you will probably not have any challenges in sampling users. This isn’t the case for most companies though.

The smartphone user base today is very different to the early 2000s. The same goes for Tesla, Amazon, Uber, and Google – the user bases today are different from when they first started. How should you build your user experience and product roadmap to attract and retain your future users?

For a founder of a successful company, this is the ultimate challenge. How do you stay close enough to the business that you can ensure the right execution while staying distant enough that you can question your own direction and correct if necessary?

Happy – it can be hard to get hold of users who left your website or deleted your app quickly because they didn’t “get it.” But the people who left your website, deleted the app or didn’t get to finalize a purchase are the very best source of insights and lessons. They have insights that aren’t obvious to you, the expert – because they don’t carry the same cognitive overhead that you do. Be aware of the potential for selection bias – the risk that you will sample users who will just confirm what you already know rather than tell you what you need to know.

Build something your mother would love

In our portfolio companies, we work actively to test usability for people without the cognitive overhead that our organization carries. Aside from being active in industries with high cognitive overhead, most people working in our portfolio companies are similar in demographics – they are roughly the same age and all quite tech savvy – which makes internal usability testing close to impossible.

Our favorite litmus test for usability is very literarily to show the platform to our parents and ask for their feedback. We are targeting mass markets for most of our products, so if our parents get it, more tech savvy people will most likely get it too.

The parent test has been very successful so far and yielded many useful insights. For financial consumer products, the most common feedback is most often on missing explanations of financial jargon, on why certain pieces of information we ask for are required; or requests to include information in our overviews that we – suffering from our mental overhead – may deem to be irrelevant or self-explanatory.

When not to listen to the experts

A friend recently shared the management principles of a hugely successful conglomerate. They said: “Customer focused. The most important step in servicing your customer is to communicate with them and listen to them. Do not listen to your organization. Never let engineers define a product. Never let sales people set prices.”

While the quote is a generalization, I do believe there is something to the quote. People who are very close to a topic are rarely the best at defining what it has the potential to become.

For a founder of a successful company, this is the ultimate challenge. How do you stay close enough to the business that you can ensure the right execution while staying distant enough that you can question your own direction and correct if necessary?

In my experience, the answer is a cocktail of constantly testing the product with new people I meet and getting their feedback (I’ve definitely annoyed my parents and numerous Uber drivers this way on more than one occasion), mixed with a healthy part paranoia, and thinking about whether you are on the right track or whether you should course-correct a bit.

***

A shorter version of this article has been published on Forbes.com.

Image credit: Shutterstock

The Non-Marketer’s Guide To SEO

Excelling at search engine optimization (SEO) is a key component of a successful strategy for most online businesses. However, for many founders and marketers without a strong online background, SEO can often come across as a black box.

As for all other marketing channels, my favoured approach is highly analytical. I prefer to start with a framework and work my way towards a list of actions based on the resulting insights. This, however, isn’t usually how SEO is approached, so if – like me – you prefer an analytical approach to strategy and execution, you are in the minority.

With millions of SEO tutorials and checklists, there are only a few areas covered by more online resources. Unfortunately, the majority are either ambiguous or give a list of so many factors that it becomes hard to filter the important from the irrelevant. The aim of this article is to offer an analytical framework for SEO that will help you look beyond the SEO buzzwords of the day and provide a way to set your priorities.

Keep in mind that search engines value the user’s experience over anything you may think or want!

When explaining SEO to my team members, I usually like to begin with a – for SEO – rather uncommon starting point: Numbers. SEO is notorious for secrecy and vague terms, so unlike the majority of other online marketing channels, it doesn’t come across as analytically grounded.

The SEO world surely has more shades of grey than most other channels, but for now, it helps to think about SEO in boxes. Regardless of your business model, you ultimately want to maximize the number of conversions from organic search. You can get to the number of conversions by looking at the four levers in this simple formula:

Conversions = Search volume * Visibility * Click-through rate * Conversion rate

The experienced online marketer will quickly realize that this formula is universal to all online channels and on a conceptual level, it even applies to offline marketing. For simplicity, I will describe it in the context of a single search query, but you can also think of it on an aggregate level.

As per the formula above, there are four levers to understand in SEO:

  • Search volume – the number of searches for the given query you are targeting. There are several tools to find this number. The most common is to use the paid marketing tool of a search engine such as the Google AdWords Keyword Planner
  • Visibility – how often search engines display your listing to users searching for your specific query
  • Click-through rate – the percentage of displayed listings that a user has clicked on
  • Conversion rate – the conversion rate on your website from a visit to conversion (order, sign-up, etc.)

I’ll cover each of them in detail including the key levers and things to keep in mind for each of them.

Before we dig into the detail, keep in mind that search engines value the user’s experience over anything you may think or want. If you’re ever in doubt about what will give you the better ranking, just ask yourself, “Which of these options will give the better user experience?”

WARNING: Don’t think you can outsmart the system. Google and other search engines have thousands of the smartest engineers on the globe working on algorithms to detect and eventually penalize websites that aren’t following their guidelines. The maximum penalty is a complete delisting of your website, so don’t take this too lightly, no matter what your SEO agency may say.

Search volume

You want to start by picking the right search queries for your business. When picking your queries, you should consider three main factors:

  1. Search volume – How many people in total search for the query?
  2. Relevance to your goal – How relevant is this query to what you are trying to achieve with your website? Many people mistakenly hear the cliché “Content is king” and start producing content that isn’t relevant to the core of their product, so make sure you target queries that are in line with what you are trying to achieve
  3. Competition – How competitive is your target query? In some cases, going for a query with lower search volume may be a faster and more efficient way to ramp up traffic if there is less competition for a top position

If possible, you should start with a set of queries. 10-20 queries are usually a good place to start. As you will see later, targeting too few queries isn’t good either. Search engines will flag suspicious behaviour if you over-optimize for just a few terms.

Try to find phrases that aren’t too similar. In many cases, search engines treat synonymous queries as one (you may even see a similar number of searches for these queries in the keyword planner).

Visibility

Once you’ve selected your target queries, you’ll need to ensure that the search engine knows that your pages are a good match for those queries.

Web-lingo: one website (e.g. bbc.com) can contain multiple web pages (e.g. a specific subfolder such as bbc.com/sport or sub-domains such as sport.bbc.com (which doesn’t exist)).

Getting indexed correctly

To a search engine crawler, every web page is a blank sheet of paper. A page can be about anything (in practice, it makes an educated guess, but I’ll ignore this for now). This means that search engines look at a few factors to figure out what your page is about:

  • The content on your page
  • The content on other pages on your site
  • The links you use internally towards that page
  • The links other websites point towards your site and the specific page
  • What the anchor text of links pointing to your page and site says, and
  • What the websites linking to you are about (more relevant pages linking to you help search engines categorize you)

A few tricks for getting the best visibility in the most efficient way:

  • Search engines have an easier time categorizing your website if there is a common theme across all your pages
  • If you have multiple topics, group content with related topics within the same subfolder
  • Never copy your content from another website. Search engines don’t like copycats
  • Ensure that you never have duplicate content on your site. While there are ways to tell search engines to ignore certain pages, it’s generally advisable to make sure that your content is unique, as search engines don’t want to spend energy on figuring out which page is the original
  • Target one query per page. Focus the content on your page on one target query rather than multiple queries as it will make it easier for search engines to categorize your page accurately
  • Have one page per target query. Don’t target the same query with multiple pages as this will dilute the SEO value you build up for that query

Getting to the top of the page

There is a saying among SEOs that the best place to hide a dead body is on page two of Google. In other words, you’ll need to get to page one to really get visibility and traffic to your site. When is the last time you clicked on to page two?

The ability to rank well depends on multiple factors, but the most important are:

  • Your internal linking structure is important. You’ll need to make sure that each page is accessible through links on your site. Search engines won’t index an “orphaned” page with no links pointing to it. Similarly, when you have links from the main navigation, it indicates that those pages are more important than those that barely get any internal links. While it may be tempting to give everything high importance, keep in mind that this will also dilute the value of each link
  • The quality of the websites providing inbound links to your website
  • The number of inbound links. However, quantity can never make up for low quality!
  • The behavioural metrics of your site – e.g. time on site, page views per visit, and bounce rate. These are great indicators of the quality of your content. Search engines would take low quality as a signal that they shouldn’t display your site to similar users in the future
  • The click-through rate (CTR) of your listing. The more engaging your site is, the better. Search engines take interaction as a sign that the result was a good match to the search query. Listings with higher CTRs than the surrounding listings will generally rise towards the top (more on CTR in the next section)

Google has declared that they aim to rank websites without the use of links as an indicator of trust and authority, so it is only a matter of time before they will become irrelevant. The quality of the user experience is king!

Click-through rate

Once you’ve done the hard work of getting your search listings in front of a large, relevant audience, it’s all about getting these people to click your ad (don’t mistake this for the paid ads at the top and bottom of the page).

Ironically, the vast majority of SEO efforts are poured into improving ranking. Optimizing the ads rarely gets the attention it deserves but once you are on the first page, the return on optimizing the ad is often higher than on any other SEO-related activity.

You can normally control what the search engines display on the search engine results page (SERP). This happens in your code via the title tag and meta description. These tags must be different from page to page to help search engines distinguish between pages. The syntax could be similar though, particularly for the title tag.

When I say that you normally control what search engines display on the SERP, it’s because they display what they consider the best ad in certain cases. They grab content from your site and display that instead of what you have asked them to show even if you are explicit about your intention. Remember, search engines are here for the user, not you.

Tips on increasing the CTR of your ads:

  • Make sure your copy matches the intention of the user. Unlike other marketing channels, search marketing is about intention, so make sure to match it well!
  • Use best-practice copywriting techniques (have a look at my reading list for useful resources)
  • Learn from your other advertising – particularly your search engine marketing!
  • Include Schema structured data in your content to get more attention. This can, for example, be in the form of reviews (see example below)

Conversion rates

Finally, once the traffic is on your page, you should do your best to get the most out of it!

Unlike other channels, you know – or at least have an idea – about user’s intention when they arrive on your site. This means that you should prepare well so that your guests will feel at home. In other words, every clear intention comes with an expectation. You need to meet this expectation.

(Un-)Fortunately, there is a clear self-fulfilling prophecy around matching the users’ expectations. Web pages that don’t match the users’ expectations tend to have higher bounce rate and lower time on site. Both metrics are important ranking signals for search engines, so with low performance, you will quickly drop in the rankings, despite having fought hard to get up high.

Summary

While there are many tips and tricks online, you should never default to trying to game the algorithms. While it may give you a short-term lift, it will never pay off in the long-term.

Rather, use your understanding of search engines in the following order to maximize your impact:

  1. Pick the right query to target
  2. Write killer copy for the SERP ad
  3. Write awesome content tailored to the users’ expectations
  4. Get amazing inbound links from high-quality websites

Good luck winning the SEO game!

Image credits: Negative Space

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Do you have any other areas you feel should be covered? Feel free to mention them in the comments below!

How Making Yourself Obsolete Can Help Your Company Succeed

It’s a common misconception that the key to career success is to be central to the business; to take on as much responsibility as possible and hold on to it. After all, if you alone can perform a critical task, surely you are the company’s biggest asset?

This couldn’t be further from the truth. You don’t become an asset. You become the company’s largest bottleneck. This mindset is a problem both for the company and the individual.

There are many things you can do to be valuable to an organization (I’ve shared some tips on how to generate more value here), but equally, there are many ways that you can decrease your value.

If you are ambitious with your career, then you’re better off ensuring that you don’t become that bottleneck. Unless of course you are gifted with a skill so unique that no one else can learn it – but being truly honest to yourself, is that really the case?

I’ll use an example from a tech development team here, but the lesson is applicable for other areas, too.

Building the wrong culture

We once had a bottleneck in the tech team of one of our companies. In response to bugs in the code that were pushed to our live site, a senior member of our technology management team – let’s call him James – made himself the only person who could continue to push code live.

With good intention, James had made himself the bottleneck. Based on precedent, he didn’t trust other people to get it right. The flaw here was that James didn’t think of a way to fix the reasons behind overlooked mistakes. In trying to fix the symptoms, he made all code go through him before promoting it to the live website.

James was now the only link between a large group of engineers and our live site. Everything had to go through him. Now that the team didn’t have to think about deploying their work, the output of the team increased, but resulted in a large queue for James. As more work built up on a young system where it wasn’t easy to update the code, the pressure on him increased.

Whereas James was previously a hero, jumping in to save the day, he was now setting himself up for failure. As James became a larger bottleneck, the team’s output was held back. Trying to keep pace with the team, James eventually missed mistakes and shortly after, we had more bugs in the code than ever.

I am by no means perfect and have myself been a bottleneck to our companies on multiple occasions. Nevertheless, I strive to never be the bottleneck, unless I cannot avoid it. I highly encourage anyone to think in a similar way. Scaling rather than limiting your impact is the best way to provide value.

** I have previously shared a shorter version of this article on Forbes **

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Image credits: Pexel.com

Planning For Personal Development

6 Tips For Planning Your Personal Development: The Challenges of a Steep Learning Curve

For business, as for sports, even the most talented people in the world need years of practice to be the best they can be. It should be a surprise to no one that you can’t go from the street and straight to the top of any sport.

The top athletes have been matched with challenges at or slightly above their level of abilities through several years to get to the very top. Years of hard work and practice have allowed them to add more facets to their repertoire. Similarly to sports, the business world is obsessed with faster progress. Doing more and developing faster in a shorter time. While the methodology from sports is directly transferable to most other areas of building solid skills, many talented people take a less well-planned path for their professional careers – particularly in the early years of their career.

The challenge with a steep learning curve is that hunger for quick development often invites for cutting corners rather than putting in the hard work

Whether or not you have a crystal-clear end goal in mind for your own career, most people have some idea about where they are heading. With ambition and hunger for heading in the right direction comes impatience. The opportunity to get responsibility early on drives more and more talents towards opportunities within fast-growing technology companies. The pros are clear: Fast development, opportunity to take on responsibility, and a steep learning curve.

A steep learning curve is tremendously attractive and offers a perception of almost instantaneous development and progression towards a more desirable place in life: A new skill(-set), a new title, more responsibility, more prestige, more success, a higher salary. The list is endless.

The challenge, however, with the steep learning curve is that hunger for quick development often invites for cutting corners rather than putting in the hard work required to build a strong understanding. This often happens unconsciously and comes at a cost.

Particularly in young and fast-growing organizations, you may do various tasks that, in larger organizations, would be handled by multiple specialists, and not by a single person. The temptation to go wider and not deeper is ever-present. The more topics you cover, the more responsibility you’ll have, right?

Skills become easier and faster to acquire when you understand the underlying patterns, so what may seem to be a faster way to learn a skill may slow down your overall development. Elon Musk is famed for his ability to quickly acquire a working knowledge within very technical fields. When talking about gaining depth in knowledge, he explained that “it is important to view knowledge as sort of a semantic tree — make sure you understand the fundamental principles, i.e. the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang onto.”

Understanding the basics gives a context which allows for recognition and validation of patterns. Even without prior knowledge or experience, you may be able to recognize a pattern if the data is presented to you in the right format; however, judging whether such patterns are valid, or due to other underlying variables, requires a feel for the context.

If I were to ask you what 83 divided by 3 is, you may not be able to give me the exact number straight away (27.7) – but because you have a basic feel of numbers from dealing with them in everyday life, you would surely be able to reject if someone claimed the result to be 40.

Similarly, I often see, for example, statistical calculations being misused or ignored in the fields of marketing or product development because the fundamental level is missing. Many discussions can be avoided if the fundamentals are in place – in this case having a working understanding of statistics. Many people’s perception of a sufficiently deep understanding of statistics isn’t that deep and often ends at averages. If everyone would have a sufficient level, it wouldn’t take long to reject test results due to too little data.

Balancing width and depth

For personal development, you can essentially progress in two directions: Width (learning a new skill) or depth (learn more within an existing skill). Speed comes at the expense of depth. You can decide to invest your time in learning a little about a lot of topics or in learning a few topics in depth. I’ve had the chance to work with many talented individuals early in their careers, and way too often I see that their confidence in their skills leads them to believe that they have mastered a skill much too early.

In the long run, the winning combination is a sufficiently deep knowledge of the right skills. You should, therefore, be structuring your career to achieve this, rather than focusing on getting your hands on as many challenges as possible in a short time.

The million-dollar question persists: Why do people rush when it’s not in their interest?

There are essentially three reasons why people don’t build up a proper foundation, despite it being in their best interest:

  1. The temptation of shortcuts and their appeal to impatience
  2. Blindness towards actual level of competence
  3. The bikeshed effect

1. The temptation of shortcuts and their appeal to impatience

Many people nowadays are constantly on the lookout for shortcuts. The web is filled with “how-to” articles that promise X rules for achieving everything from conversion rate improvements to getting a six pack. There are unquestionably ways that are more efficient than others, but there is no substitute for building up a deep understanding of a field.

The problem is that most areas bring an initial excitement. You’ll approach it with a beginner’s mind. The excitement of something fresh. It will require and get your full attention – you’re learning something new after all!

But once the novelty wears off, the task becomes routine and you’re left with your own persistence if you are to continue your development in depth. The task may appear to become routine. It may appear repetitive. It’s now up to you to acknowledge that the challenge is in fact always very different as circumstances differ.

Former American national gymnastics coach, Christopher Sommer, broke down the path to success in gymnastics into three steps:

  1. Top performance is based on a strong confidence in your skills and your ability to perform
  2. Confidence builds on competence within your field
  3. Competence comes from repetition of the required tasks

The challenge for impatient millennials is that repetition takes time and there is no substitute for this.

2. Blindness towards actual level of competence

“It is impossible to begin to learn that which one thinks one already knows,” Greek philosopher Epictetus once wrote. It’s easy to be blinded by initial success and mistake it for mastery of a skill, but it’s important to avoid that.

Being humble about your actual level and avoiding the temptation to “check the box” of a skill is difficult, particularly early on in your career. Achieving confidence from competence takes more than a few repetitions to gain deep understanding.

3. The bikeshed effect

When learning a craft (as opposed to a single skill), it is essential to understand the layers of skills. Some projects may seem easy at first, but doing a proper job may require more than what is clear at first glance. Tim Ferriss, in his book “The 4-Hour Body,” illustrates this with “the bikeshed effect”; the difference between building a nuclear power plant and building a bikeshed. Because of the perceived complexity of building a nuclear power plant, most people would (rightly) assume that they know nothing about this. However, when it comes to a bikeshed, which has a far lower degree of perceived complication, many people will have an opinion on how to (or how not to) build one.

Similarly, understanding the fundamental building blocks is often the difference between a good and an excellent online marketer or product manager. These building blocks are rarely in direct use, but they transcend every decision made. Such fundamental building blocks include a basic understanding of statistics, copywriting, analytics, behavioural psychology, etc.

Having the right fundamentals in place allows for a more in-depth understanding. Suddenly you aren’t rotating your search ads just because you hit 3000 impressions, but because you understand at what point you have enough data to make a decision. Suddenly you aren’t just testing including that you are the largest in your industry in your ads because it fits with the character limit and sounds great, but because you understand that social proof, perception of success, and being the perceived de facto standard are all valuable psychological tools to help the user decide and act.

What’s next?

If you do desire to build your skills for long-term success, there are six things I suggest to keep in mind:

  1. Seek guidance – speak to someone who has done what you are trying to do (or is further down the road) who can help you know whether you are going wide too quickly
  2. Stay patient and work hard – invest the time needed to learn your skills in depth
  3. Compare yourself to the best – you aren’t necessarily good enough just because you are better than the guy at the next desk. Compare yourself with the best to find your true level and adjust accordingly
  4. Be paranoid – for most things I’ve had to learn as an entrepreneur, I have had to learn by doing and by reading blog posts, books, and articles online. I am always afraid that there is something I have missed and therefore still to this day, I’m doing my best to gather as much knowledge as possible within the fields that I work in. My paranoia of having missed a vital point still drives me to read as many books and speak to as many industry experts as possible within the areas that take up my time
  5. Be humble – always be humble about your own level, particularly when you consider yourself an expert. Always keep Epictetus’ quote on learning in mind. Don’t let yourself limit you in what you can learn!
  6. Keep the end-goal in mind –  Are you as good as you want or can be? What do you need to know five or ten years from now? Would that change the way you prioritize your own development today?

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Image credits: Take and Talk Pics

Generating Value Through Execution: 7 Steps to Rising in a Start-Up

The pinnacle of generating value within our companies is the ability to execute. Unless you’re in a corporate environment with a strict career ladder, the opportunity to grow within a company and attain more responsibility is determined by your ability to generate value for your team and the company as a whole.

As we will explore in this post through the introduction of the Execution Pyramid, an individual who operates at higher levels of the Pyramid will see a faster rate of both personal and professional growth.

The main idea behind the Execution Pyramid was first developed by my partner at Nova Founders Capital, Mads Faurholt-Jorgensen and we have since used and developed the model to help our team members grow exponentially, guiding them on the path to execution whilst adding value at every stage. Whether you’re working with a company at an early stage of its development, like many in our portfolio, or a company that is more established, the principles are the same.

The philosophy behind the Pyramid transcends experience levels, so whether you are early on in your career or an experienced professional, being cognizant of the levels can help you understand how to maximize your impact and add value.

The Execution Pyramid utilizes a hierarchical structure and is composed of three distinct layers with seven steps in total. The steps in layer one are substitutes for one another and the quicker you rise, the better. From step 3 (Summary) and on, the steps become complementary and add on to the value you provide to the team and company. In some cases, you can execute at one level without the lower layers, but I highly recommend that you don’t. I’ll give examples as I go through the individual layers on how to do both.

Execution Pyramid

LAYER 1: The Base Layer — Understanding the importance of time

Execution Pyramid - Base Layer

The first layer consists of three steps and goes from adding no value to helping the team or management be more effective by saving time.

Step 1: No information

To illustrate the No information layer, imagine a team member reading an article with important updates about a topic relevant to the team (a software update, changes to a procedure, legal changes, etc.) and them not sharing that information with the team. In this case, the team member adds no value and in some cases, value may even be lost. The rest of the team will have to spend the same time understanding and potentially sourcing the same piece of information. With a high opportunity cost across all of our companies, this highlights the importance of sharing basic information amongst peers and team members.

The same concept applies to software development when documenting code, participating in meetings on behalf of a team, conducting an analysis, and so on. Information is the currency of adding value.

Step 2: Full information

The second step in the base layer is giving full information. You find a relevant article and send the link around to your colleagues without any further information. While you may help the team by sharing the article, the value you’re adding is very limited. It will take the rest of your team the same amount of time and effort to get the information as it took you.

Step 3: Summary

The highest step in the base layer is mastering the art of the summary. You’ve completed a piece of work: attended a meeting, conducted research, read an article about a relevant topic or similar tasks. Instead of giving the full story, you’re now summarizing the key points. It’s critical to this step that you understand both the topic you are working with and the business context. It’s impossible to summarize a piece of information and highlight the most important points if you aren’t able to filter the relevant from the irrelevant. At this step, you are now saving time for your teammates or manager, making the process of knowledge-sharing more effective.

Action points:

  • Think about how you can boil the research or article down to a few bullet points. It is particularly important to think about the “so what” of the article – what are the key takeaways?
  • Make sure your summary doesn’t get too long – most people are busy so strive towards a summary that takes less than 2-3 minutes to read
  • Think about who the summary is relevant for in your team and share your summary with them
Execution Superman

LAYER 2: The Decision layer – Enabling informed decisions

Execution Pyramid - Decision Layer

The second layer is about making information actionable and involves presenting options, giving recommendations and a way to execute the plan. In particular, it’s important to show the thought process behind the recommendations and ideas as you progress further towards the top of the Execution Pyramid.

The progress from step to step in the first layer requires nothing more than a conscious decision to do a better and more value-adding job. Progressing from one step to another in the second layer requires an increasingly profound understanding of the business. For example, it is impossible to recommend an option and give an explicit plan of execution if you aren’t familiar with the challenges within your field.

Step 4: Present options

Building on from giving a great summary (Step 3) the next value-add is to present the options that are available to the team or company. By presenting options, you are making the decision-making easier for the team leader.

Aside from enabling your manager to make a more efficient and informed decision by presenting the options you see, this will also train you in understanding the decision-making process. Does your manager bring up other options based on your summary that you didn’t think of? Did she pick the option you would have gone for? Make sure to get the most out of this step and ask questions. Seek to understand why she may prefer to act differently than you would and do your best to understand how she could see options that may not have been obvious to you. Assuming you’ve joined a team with a leader that you can learn from, this part of the process is the best opportunity to get an insight into how they think and approach problem-solving and decision making.

Action points:

  • Make sure that you don’t end up with too many options – in most cases, 3-5 will do
  • Do your best to be MECE (Mutually exclusive, collectively exhaustive) in picking your options so they aren’t indirect duplicates
  • Ask questions when you go through the options with your team/manager
Execution Superman

Step 5: Recommendation

When you’ve presented the summary (step 3) and the options (Step 4), the next obvious step is to make a decision and indicate which option you would go with. Don’t be afraid to make recommendations from your options, even if you aren’t completely comfortable. Just highlight it when you present your recommendation that you aren’t completely sure, making it clear that from what you understand, you would go with option X. This is a great starting point for a discussion and for you to get valuable feedback on why that may or may not work.

Note that many have a tendency to jump straight from Summary to Recommendation (or sometimes even without the summary). It’s difficult for your manager to evaluate whether your recommendation is truly the best if he doesn’t understand how you got there. Helping your manager understand your process, means you need to help him answer five questions about your process:

  1. Which options did you consider and why did you consider these options?
  2. What was your basis for evaluating them?
  3. Why do you recommend the option you’ve picked?
  4. Which critical assumptions did you make in picking your recommendation over the other options?
  5. If your critical assumptions were different, which options would you then go for? (if you have more than two such critical assumptions, you may need to be selective in doing this)

When picking your recommendation, do your best to be as structured as possible. Could you evaluate all the options based on a universal set of criteria? (Tables and grading (or Harvey Balls for visual presentations) are great for this). The better you manage to explain your train of thoughts and your process to pick your recommendation, the easier it is for your manager to make a decision. The decision-making changes from understanding a problem and thinking about options and pros/cons to simply a ‘yes’ or ‘no’. Of course, the longer process will be initiated if the answer is no, but as you get better and so do your recommendations, a larger share of your recommendations will hopefully materialize.

Action points:

  • Be structured in your evaluation – it makes the following discussion much easier and concrete
  • Get input on your evaluation on qualitative criteria (from team members or online research) so you avoid any bias you may have
  • Ask questions when you go get feedback on your recommendation

Step 6: Plan for execution

Once you’ve picked a recommendation, the next step is to plan how to execute on the idea. This step requires an excellent understanding of the business and the particular challenges and bottlenecks you may face in the execution. It is incredibly important to highlight any single points of failure and to identify the main stakeholders in the successful execution of the project. Finally, the plan of execution should include a clear timeline and an overview of the resources required to succeed. Action points:

  • Consider which critical assumptions you’ve made – does your plan have a single point of failure?
  • Make sure to include a timeline broken down by each milestone
  • If you are not completely confident about your plan (in whole or parts of it), mention that upfront, when you present it to your team
Execution superman

LAYER 3: The Autonomous Layer — Mastering the art of execution

Execution Pyramid - Execution Layer

In the autonomous layer, the process and nature of the work change significantly. You will pro-actively fix challenges as they arise. You will take responsibility for the results, and not just the execution of projects. This is the highest degree of value in an organization. If the manager doesn’t have to spend time with you on defining your tasks, you can spend the time on developing your skills and think about how you can keep on developing.

Step 7: Execution

The top of the pyramid consists of only one thing: Execution. While this may sound very simple, don’t rush into this! It’s a double-edged sword and while a successfully executed autonomous project may buy you some brownie points, a failed one may put you in bad standing. Executing autonomously has multiple points of failure. Failing on any of the underlying layers will lead to a negative outcome, even from a successful step 6. In other words, the business impact of executing the wrong plan may be anything from bad – at best – to disastrous, even with excellent execution.

One final consideration before jumping into the execution phase is your relationship with your manager. Depending on the amount and nature of the trust you have with your boss, she may not be comfortable with you going solo on your plans yet. Even in situations with a great and trustful relationship between you and your boss there may be reasons unbeknownst to you why working autonomously isn’t the best option at that time. For bigger organizations, there may be information that you haven’t yet received, which – had you known about – would drastically change the direction and what you would spend your time on. Action points:

  • Make sure you get feedback on your plan internally
  • Even though you may be at the execution step, it’s always a good idea to inform your team/manager about your plan
  • Once you start executing, make sure you take full end-to-end responsibility for the success of the project. If you are taking on a project, there are no excuses for not delivering

You are never on just one step

Depending on the nature of the task, you may be able to progress faster on certain tasks than others. If you’ve have joined a marketing team for example and have been tasked with doing AdWords, you may get to the execution level relatively fast when it comes to the day-to-day optimization, but that may not mean that you yet have the experience to significantly change the total budget. This has an important implication: Not only does the amount of value you create in a given area depend on how far up the pyramid you are able to operate, the value you add to the company overall is also a function of the number of different tasks you can comfortably deal with at a higher level (step 4 and beyond).

What’s in it for me?

All the talk about how to add value to the team or the company may lead you to ask, “What’s in this for me?” The answer is simple: Unlimited growth potential – both personally and within the company! When people are hanging around at the lower levels, the interaction they have with their boss will be more instructive: Which tasks to look at, how to approach them, etc. Once you progress up the pyramid, the nature of the relationship changes. The role of the boss is now to coach and support you – to help you understand and eventually find the answer yourself.

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Image credits: ComicVine, WallPaperCave, ForWallpapers.

Product Management Tips

25 Product Management Tips For Your First 100 days

Product Management Tips

Congratulations on your new role as product manager!

As a product manager, you will have a big role in executing the vision of the company and of delivering the true value to your users. It’s an exciting space to operate in, but it is also very unlike any other field. You will be the glue keeping the projects together when business, design and engineers are pulling in different directions.

In order to succeed, I have gathered some of the best advice I have come across:

1. You’re the CEO

In the words of Ben Horowitz, as a product manager, you’re the CEO of your product. You are end to end responbile for the success or failure of your product and you need to treat it with this in mind. There are no excuses for not having a winning product. Ultimately, you are in charge and responsible!

 

2. Know how to say no

If adding all requested features was the right path to an excellent product, then there would be way more excellent products out there. It’s not. It’s all about selecting what features not to display.

Your key task: To say no!

 

3. You will be hated

As the CEO of your product, you will make a lot of decisions. Some of them will be popular with some of your stakeholders, but upset others. You can’t be a people pleaser and you need to accept that some people will inevitably be unhappy with some of your choices. Remember: Every choice you make about priorities is also a choice about what to deprioritize and someone has requested those deprioritized tickets for a reason.

 

4. Your most important skill is structure

As a product manager, you are juggling a lot of teams at the same time: Engineers, designers, and business among other. If you aren’t structured from you step out of bed until you go to sleep, you are setting yourself up for failure.

Make sure you keep track of all outstanding tasks and take advantage of some of the many tools available for product teams.

 

5. Your second most important skill is communication

The biggest challenge in managing your processes end to end is that you need to manage all your stakeholders. As mentioned above, some people may hate you (or your decisions), but no matter how thick skinned you are, you will benefit from being on as good terms as possible with your stakeholders. The only way to do this effectively is by making sure they are up to speed on your priorities and deliverables.

Most people can handle if projects get delayed for a good reason, but it is much easier to handle if you are informed ahead of time rather than after the expected delivery. Be proactive in your communications rather than reactive!

As former PM at LinkedIn, Google, Netflix, etc., Zal Bilimoria puts it:

“Flat out, great product managers have excellent communication skills. They’re constantly in contact with their team, peers, executives, and all other stakeholders. Whenever prompted, they can clearly and concisely supply their team’s elevator pitch outlining the vision for their product, what they’re currently working on, why it will be impactful, and how they’ll measure success.”

Math

6. Be comfortable with numbers

Nothing is worse than wasting time. You will probably never feel like you have enough time for all the tickets you are managing, so make sure not to waste time.

One of the most common reasons for wasting time is inaccurate analyses. People tend to jump to conclusions that fit their perception of the world. It is your job as a PM to ensure that you don’t base your decisions on yours or other people’s gut feel, but on facts and data.

In god we trust, everyone else must bring data.

If you aren’t comfortable with numbers and statistics, you may find this incredibly hard, so do yourself a favour and skill up if needed!

 

7. To understand your numbers you need to understand behaviour

Numbers per se, do not tell you much. They can help you choose between one of two test scenarios, but that’s where the insights end.

A secondary aim of every single test you run must always be to get a better understanding of the user. Numbers won’t help you understand numbers, but they may give you a hint. Getting to a true understanding requires that you understand the psychology and behaviour of your users.

Numbers tell you what people do. Understanding psychology and behaviour will help you understand why they act like they do.

 

8. It will be hectic

Your role is one of the most exciting, but also one of the most chaotic at times. Be prepared for the times when you will need to juggle a hundred balls in the air at once. You will be push your own limits for how many projects you can handle at once, so don’t expect to be able to do everything at once – at least not from the start.

Busy

9. Get your nightly sleep when you can

Your product can break at any time and it may require that you need to stay long in the office. Do yourself a favour and get a full night of sleep whenever this is possible – you never know when you will need to stay up half the night.

 

10. Know you are set up for failure

No matter how well you do, you will never please everyone. You will make mistakes along the way which can make you doubt yourself. Before you jump off a cliff, remember that you won’t be able to please everyone.

 

11. Maker’s vs. Manager’s schedule

Understand that your schedule works differently from that of an engineer. Read this essay by Paul Graham.

 

crack

12. Build for scale

Build a product that will scale. Unless you have an extremely good reason, don’t focus on the short-term fixes. Choose the solutions that will be the right ones today and 6 months from now (you won’t know what will happen more than 6 months into the future anyway).

 

13. Have a clear vision and align expectations

Have a clear vision for where you want to take your product and make sure that you align that with your key stakeholders.

Remember that not all your stakeholder will agree on everything, but you need to make sure that your key stakeholders buy into your vision. The key stakeholders are normally your boss and – if your product is critical to the business – maybe even the CEO.

 

14. Know when to ask for help

As a new product manager, you will have to learn a million things. Make sure you don’t just try to wing it if you are trying out something new. Rather ask one time too many than one too few.

You will never be the domain expert on all the topics included in being a product manager, so your success depends on other people. Make sure to surround yourself with experts who can help you!

 

15. Design for your grandparents

Remember the target audience for your product. No matter what industry you are in, you will quickly be so deeply into your product that what may seem illogical to your target audience looks like the most obvious thing to you.

David Lieb uses the below chart as an illustration in his excellent article on cognitive overhead and simplifying your product.

lieb-digram

16. Focus

Focus on getting a few things completely right, rather than many things 80% there. You will only see the real impact, when the last few percentages are complete.

(This doesn’t mean you should chase perfection to the extreme – you will never get there either).

 

17. Know your platform

Spend some time understanding the platform and architecture – harness the power to its fullest.

Sit with the CTO or lead engineer and ensure you state clearly that you perhaps don’t understand certain parts. Too many Product guys and girls try to give of the air of technical acumen – engineers prefer honesty. Don’t be afraid to ask any of the business “dumb questions”, it truly is the best way to learn.

Get down and dirty with data – What is available?  What systems are in place? Read everything you can get your hands on, and if it doesn’t exist then write it!  By documenting the gaps, you make your organisation stronger and a better on-boarding experience for new starters.

 

18. Interview key stakeholders

Spend a few days interviewing key stakeholders across the business – get the full picture of where the business is and where it wants to be.  Consider scheduling 1-to-1’s in your first week with everyone in your team, walking 1-to-1’s are great and informal – and time saving!

 

19. Spend time with your users

Spend time with your customers – buy them a cup of coffee, do some guerrilla testing in the streets.  You’d be surprised how many PMs don’t understand the importance of this or even perhaps overlook a major question, who are your customers? Ask one question “What can I do to make your life easier?”

 

20. Resist the temptation!

Don’t jump in feet first and change the entire product on your first day.  Gain more domain knowledge and credibility, mature your thoughts by asking questions and listening – then make a balanced and informed decision.

Untitled-1

21. Don’t wait for objectives, set them!

Don’t wait for OKRs or SMART objectives to be spoon fed – write some!

What should you start doing? Stop doing? Continue doing?  Be proactive in this area, what do you want to achieve in your first quarter? You can always run them by your stakeholders once you’ve got a first draft ready.

 

22. Understand the business

Understand your market and revenue model – you’d be surprised how this can get lost in the excitement of building things.

 

23. Use your product – and your competitors’ too

When taking over a product, try out the full experience with your own product and that of the competition or related products. You will immediately understand the issues and be empowered to make a better product.

 

24. Do whatever it takes

The best tip I can provide: do whatever it takes!

QAing, technical writing, public speaking, designing, coding – Just do it!

 

25. Have a great time!

You’ve just landed one of the most exciting jobs in the internet space – enjoy it!

 

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What other tips would you recommend to new Product Managers?

 

Images credit: Comic VineIP InnovationBrainstorm Your BizEarthpormSuzanne Carillo

AirHelp

Henrik Zillmer, AirHelp founder, on being part of Y Combinator and moving to Silicon Valley as a foreigner

AirHelp

Henrik Zillmer has been a friend of mine for some years now. In the past, we built e-commerce companies across the continents, but nowadays, Henrik works on AirHelp, which he co-founded and now heads as the CEO. AirHelp was picked to be part of Y Combinator’s Winter 2014 Class and has since succeeded in helping more than 250.000 customers being compensated for delayed flights.

What inspired you to start AirHelp?

That’s a completely random situation. I started by having the problem of delayed flights myself and then I spoke to other people who had the same experience: pain and suffering. Eventually I said, “Okay let me help some of my co-workers, friends and family”. Once I did that, I realized that maybe if I did it for everyone it could work as a business model. That’s basically how it happened.

I was not specifically qualified to go into aviation. I’m not a lawyer or pilot and I have never worked in the travel industry before. It just happened; it was not really my domain expertise. I have a sense of entrepreneurship and then on top of that a good mix of people in my family. My brothers and cousins are pilots and my uncle is a lawyer, so I had the right mix of people who could give advice in this model. Ultimately, it’s just a good idea!

I think the demand has always been there, but I think the lawyers – who in the past were doing this for bigger groups of travelers – didn’t see the potential in automating lots of it

Very interesting. How did that happen from being an idea to building that into an real business? How did it get started in a more formalized and structured way?

I don’t think we have been super structured at any given point. I think that may also be a characteristic of a good startup – you move so fast that you don’t have everything under control.

The way the business started was a landing page two-and-a-half years ago. We asked people for flight information and we would then go and get the money, get the compensation from the airlines in exchange for 25% of the compensation we got for them. If we didn’t succeed, it’s free of charge. There was no functionality as such. It was just a landing page where you could type in your flight information.

Zillmer Bloomberg

Various news media and different consumer rights news shows picked up our landing page. We got about 3,000 members in one week. Then my two co-founders and I were doing customer support for two months, just answering people and figuring out how this would work. We also tried to map out how we could automate a great part of the work so we could get high volume of claims instead of just the one or two people we could help per day.

That was the first phase of the landing page that turned into a bigger page with more functionality that then turned into a mobile app that turned into an email scanner, which turned into partnerships and so forth. I think all of it happened in a natural order, but everything began with just emails being sent back and forth.

Its sounds like the perfect way to test the demand before building a business around it.

I think the demand has always been there, but I think the lawyers – who in the past were doing this for bigger groups of travelers – didn’t see the potential in automating lots of it or powering the whole thing by tech, and thereby making it possible to handle lower value claims. That’s really what we did. We took law, put it into code, and made it accessible for everyone in an app. That’s quite revolutionary in a way – you don’t see law applied in that way in many other areas.

You can never be so desperate that you choose to work with people who can damage your company. If your gut feeling says that this person might cause problems in the future, then it is 100 percent certain that this will happen

You mentioned your co-founders earlier. How did you end up teaming up with them?

The first 12 months were really, really tough. At first, it was just me, but then I found two partners. One friend going way back to elementary school and another guy I met at an entrepreneurship event in Southeast Asia (Project Getaway). They both jumped onboard and then we were three.

On the topic of co-founders, it’s important to choose them very wisely. Before you start any company, you have to sit down and agree that from now on, you will do one or maybe two years with no pay and work your ass off 100 hours a week. You do that until the company raises money, breaks even, or becomes profitable. You all need to agree on the same vision and mindset, the hours that you’ll do it for no pay or very little pay, and sticking through the whole startup phase. It’s very important to align.

When you choose your co-founders, you need to set these agreements in a shareholder agreement or some document. If you don’t, then some people will lose their motivation after six months because there’s no salary or they might get an offer from another company that sounds better. But that’s not part of the deal. You need to align those expectations before you sign and say yes, this is what we’re going to do and allocate the year of our lives – or two or three years – to the project. We are going to do it even with the big chance that we won’t get any money out of it at all. You do it because this is what you believe in.

Airport delays

An issue many startups face once they’ve got the initial proof of concept, or product-market fit, is financing. How did you get it off the ground? Were you able to fund yourself in the early days or how did you get this started?

Firstly, when raising money, be very careful in choosing the right investors. You are in dire straits in the beginning because you don’t have any cash and have a lot of things you want to do, but cannot afford. All of a sudden, investors come along that can give you money, but these investors might be terrible investors, and since you’re desperate, you have tendency to say yes. But these people don’t just disappear.

You can never be so desperate that you choose to work with people who can damage your company. If your gut feeling says that this person might cause problems in the future, then it is 100 percent certain that this will happen. They just need to be small indications. Getting an investment is one thing, but when you start working with each other, whew! That’s a completely different thing. Remember, once they own a piece of your company, you can’t just get rid of them without paying them out.

You need to be careful, but don’t go too far in the other direction either and say that it has to be that one perfect investor. I have seen many startups being too proud to sell shares and equity in their company, and then the company died. It is a balance, so don’t go to any of the extremes and be careful.

Y Combinator is almost like a church—it can even be like a religion for some people in Silicon Valley. They have an extreme focus on product: The product quality and value proposition for the customer or user

You managed to secure a number of advisors and investors in the early stage, how did that affect your development?

Yes, we’ve had some great advisors. Different advisors for different things. We’ve had entrepreneurial advisors – one of our angels for example, Morten Lund, a famous Danish angel. Morten is very inspirational and knows what it means to be a startup, to create a company, to get other people to follow you, and to build an ambition or a goal that everyone works toward. He also helped connecting us to the right people.

From an industry perspective, we’ve had other advisors who know how the travel or legal industry works. We quickly got advisors with the expertise that we didn’t have in the team.

At the end of the day, many of the advisors we worked with shared their knowledge but didn’t recommend a decision. They mostly said, “This is how it works, this is the knowledge I can give you, however you are in the best position to make the decision yourself because you know more about your own company and about the specific situation that you’re in.” You have to make this decision yourself. That’s also something Y Combinator preaches a lot. They don’t make the difficult decisions for you.

Advisory can be many things, but we’ve used it for knowledge –to gain expertise. Eventually, you will reach a point where you know more about what you’re doing than anyone else. That’s got to be your competitive advantage. If you don’t, then someone else will be able to do it better. Eventually, the advisors will turn into a board of directors for bigger companies. They are industry experts, and that is a different form of advisory.

We will get more in depth with the experience with Y Combinator later, but one thing that strikes me looking at AirHelp and having been on the sideline from early on is that you were a very global business more or less from day one. How did that affect the way you built AirHelp?

Yes. That’s a very good observation. That is where AirHelp differentiates itself from a lot of our competitors today. AirHelp was born global. We never had one country in mind where we would grow the business and then spread to other countries if we were successful. AirHelp was an international play from day one. We knew that there might be some local law firms who would focus on, say, Germany, Holland or Spain. You would think they would move to other countries, because they wouldn’t be satisfied, right? Interstate Removalists Australia can create a stress-free relocation for you. You know, if I were a German startup and had 80 million people as potential customers, I would be pretty happy about that market and wouldn’t have any incentive to go to other places. Those markets are big enough for a company.

Silicon Valley attracts some of the brightest minds in the world. It provides many opportunities for people with the interest and passion for tech. All those people gathering in one place, with money and funding for the whole thing

The lack of incentive was exactly the gap in the market that we saw. We wanted that people could always use AirHelp, no matter which country you are in, who you travelled with, where you travel from, or where you live. If we could succeed in this then we would be the preferred service of every traveler.

No one wants to search locally for a provider in each country that they’re flying to or from. We said from day one that AirHelp would launch in eight languages and eight countries in Europe, even if it would slow down our development. If you have eight countries and eight languages, then everything you do, any functionality, you’ll have to translate. That definitely slows things down. In hindsight, this was actually what made us the preferred service and created a momentum compared to many of the competitors. It was also one of the reasons Y Combinator saw us as a team who could take this entire market of flight compensation. The international scope has been a fundamental part of what we do and we’ve focused on that since day one.
ycombinator
Now that you mentioned Y Combinator – coming to Silicon Valley as a foreigner, what are some of the things that struck you as different from your experiences in both Europe and Asia previously?

Y Combinator is almost like a church—it can even be like a religion for some people in Silicon Valley. They have an extreme focus on product: The product quality and value proposition for the customer or user. You are your product, right? You can’t hack growth. You can’t be very good at sales. You can’t be very good at your finances. You can’t be very good at anything unless you have a product that kicks ass and sells itself. So really, get focused on product.

The focus is perhaps a bit different from what you see outside of Silicon Valley where the emphasis on product is not as high. Society works in a different way in Europe or Asia for example; it’s not so much about getting the cleverest minds to create a product that is superior to everyone else, right?

Silicon Valley is all about product development and less about everything else. The belief is that if your product is good, it will naturally become big, as people will use it and refer others to use it.

Is this focus on product the only reason they have been able to build so many large and successful companies?

I think brainpower is a big difference. Silicon Valley attracts some of the brightest minds in the world. It provides many opportunities for people with the interest and passion for tech. All those people gathering in one place, with money and funding for the whole thing –the universities play a great role too where people jump in and out of faculties as CEOs or co-founders. All this has created this huge melting pot of great talent, money and people who know what they’re doing and with great expertise. Those three things make Silicon Valley special and are very difficult to copy.

I don’t think you will find the same power of VCs in line with Silicon Valley anywhere else. They simply don’t have that amount of money in one place, in one city or one area.

It is definitely easier to raise money in Silicon Valley. When we started in Europe, we probably had about 30-40 “Nos” for every “Yes” from investors we talked to. Forty meetings for every Yes from investors in Europe! When we moved to Silicon Valley, that number went down to around 20 Nos for every Yes we got – and that was on twice as high a valuation! All of a sudden, we could raise money much easier than before. That has a big impact, especially on startups like ours. We knew that if we want to go fast and meet the demand then we needed to raise money. If you can’t raise money, well it’s going to go slower and it’s going to take too long time.

Zillmer_GetPaid_300

Regarding your point on the valuations, is that because they see more opportunity in the companies or do they just have higher valuations for comparable companies?

No, I don’t think those are the reasons. It’s much more risk-willing capital. In Europe, VCs are not willing to take the high risk on software or internet startups. There are a lot more people with more money in Silicon Valley and since they are not scattered over 18 different countries, nationalities, languages, it’s much easier. In Europe, people don’t speak the same language, which also makes VCs much less connected and harder to reach out to.

When you have a high concentration of VCs and angels on that level, then they’re competing with each other in getting a good deal. It’s the push on the entire market. If you don’t want to dilute yourself as much as possible, then Silicon Valley is the best place to be. It also attracts people for that reason when they can raise large sums without giving away the entire company.

Many of these things sound like they are difficult to replicate. Are there any lessons that other parts of the world can apply to catch up with Silicon Valley?

I think it’s the mindset first and foremost. I definitely saw that coming to Y Combinator. The European startups had a disadvantage because they didn’t know how to sell themselves. They didn’t know how to present their own company so that other people would understand it. If you pitch to investors and you can’t present what you’re doing so other people understand it, then you can’t raise money. It’s that basic. Many of the people who were in our batch were simply not as good at this because they were European and being modest. They were maybe also less clear about what their value offering was. That’s why they didn’t do as well in fundraising after Y Combinator.

In that sense, entrepreneurs outside the US can learn to present their company better and figure out what it actually is that they sell and how they make the world a better place. That’s very important – especially also to raise money in Silicon Valley.

The mindset of the investors is also different. Investors in Silicon Valley are typically all startup people themselves so they’ve gone through the hell of starting a company or maybe multiple startups and maybe done exits. They know what the entrepreneurs have been through from day one. This is something that most European and Asian VCs don’t know.

To my experience, most partners in VCs in Europe are typically management consultants or bankers. They’ve never had a startup. They don’t know what it means to run a startup. They look at the investment as if they were looking at a corporate company they used to work for. This is completely different.

You’ll certainly never find the next Facebook, YouTube or Google if you apply management consultant logic to a startup. Many VCs in Europe are simply not picking up on the good deals because they don’t have the mindset of an entrepreneur. That may also be the case to some extent in Asia, but there it’s more family-driven. A family may have created a huge success, but they might not be as talented investors as European or American investors where former entrepreneurs have gone through several exits and invested several times.

Most startups I’ve seen that failed has been because the founders were simply not having the sense of urgency and seeing the painting on the wall, so to speak

Taking a step away from Silicon Valley as a topic, what have been some of the biggest learnings you have learned yourself and would pass on to other entrepreneurs?

Henrik Zillmer, AirHelpMy biggest recommendation is to get a sense of urgency in the company. From the day you start a company, you only have a limited amount of time before your company will die. You only have limited amount of time where you can go without money, or where you’ll be able to raise money and then the company may be able to live for another 18-24 months. But then the company will die. You’re always fighting for survival.

If you don’t have the sense of urgency and ability to execute quickly, then your startup will die. It will either run out of cash or survive a few years and eventually die when other companies will win the battle because they have that sense of urgency and are able to execute much faster.

The first two years of a startup are all about survival. You need to implement a sense of urgency in everything you do in a startup. There’s no reason to say that you are going to do it tomorrow or to sit and talk about it some more and then figure out what the customer will say or what the partners will say and speculate. Instead, go out and ask the actual customer or partners. Pick up the phone or email and take action.

I cannot emphasize this enough, most startups I’ve seen that failed has been because the founders were simply not having the sense of urgency and seeing the painting on the wall, so to speak. Your company will die if they don’t get to profitability as fast as possible.

Great advice. I couldn’t agree more! Do you have any other projects going on now, or are you still fully devoted to AirHelp?

That’s the thing –you can’t have more projects on the side. AirHelp for me is 110 percent. That’s what we focus on and what we do. We have been under way for two-and-a-half years now.

We initially said it was going to be three-to-five year project and potentially longer if we were successful. Now, it seems we have really attained a foothold in the industry and we have lot of new things coming out. We could potentially go all the way to an IPO, if everything goes as we want it. But of course, there is only a fraction of startups that have gone that far. But you shouldn’t be spending a lot of time thinking about this because you will never get there unless you are able to build a company. That’s where all my attention is on right now.

Finally, what are the different places you look to get inspired in your work? Are there any books, blogs or podcasts that you would recommend?

Maybe cliché but I think Richard Branson has done some great books. They really illustrate the hard work associated with success and that it has taken 40 years of working your ass off to reach the point where he is. That is really what you have to acknowledge before going into a startup. There is no easy way.

For blogs, I think Sam Altman, Paul Graham, Paul Buchheit, some of the Y Combinator partners are writing great stuff about entrepreneurship in general.

There’s a couple of podcast I listen to: I think 500 startups Dave McClure has a weekly podcast that’s very good. He’s a no bullshit kind of guy. He quickly picks up on business models or revenue models and asks the right questions. Michael Arrington is also a good guy who has a podcast. They do interviews of startups or founder interviews and they show a very good understanding of entrepreneurship and the business model. It’s different to what you would hear from any journalist at TechCrunch or Business Insider, etc. They wouldn’t ask those questions.

 

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What is your take on the focus on product and what can the rest of the world learn from Silicon Valley?

 

Images: A1Travel and AirHelp 

Why You Shouldn’t Use Budgets In AdWords

One mistake digital marketers repeatedly make is to use the budgeting function in Google AdWords to limit their spending. You should never limit your spending by your budget – there are other ways to control the spending.

To reach this conclusion, it’s essential to understand the fundamental dynamics of how search engines allocate impressions across the individual bidders in the auctions.

Each search term has a certain search volume per day. For simplicity, I will assume that this number is stable and known by the search engine ahead of time (data fluctuates, but search engines generally have a good idea due to their vast amounts of data). I’ll use the terminology of Google, but this is conceptually the same across search engines – Google just happens to be the most widespread.

How Google determines how often to display your ad

The illustration below displays the relationship between Ad Rank and the allocated share of impressions. The blue graph denotes the total searches for a given search query over a given time span. Depending on your Ad Rank relative to the other players in the auction, the search engine will display your ad for a certain share of the impressions (known as Impression share) as indicated by the red graph below.

The relationship between impressions allocated (impression share) and ad rank
The relationship between impressions allocated (impression share) and ad rank

In the example below, the green line indicates a certain Ad Rank. Again, the red line indicates the relationship between Ad Rank and impression share. At this Ad Rank, impressions are allocated to the ad up until the dotted line. In this case, the number is lower than the blue line. The impressions between the blue and red line are Google’s way of penalizing the bidder for not having a good enough, quality-adjusted offer, relative to other bidders.

Google AdWords denotes the percentage of impressions between the blue and the dotted line as Lost Impression Share (Rank), which you can add as a column in the online interface. For simplicity, I will refer to Lost Impression Share as LIS throughout this post.

Lost Impression Share  (Rank) is the percentage of total available impressions where the ad does not display due to low ad rank
Lost Impression Share (Rank) is the percentage of total available impressions where the ad does not display due to low ad rank

“What does this have to do with budgets,” you may ask. Let’s introduce an illustration of why having a budget cap will be counterproductive. Again, for simplicity, let’s assume that we can’t change the ads, the landing pages, the keywords, etc. over the time span that we evaluate, but only bids and budgets. When this is the case, our CTR is stable across impressions and our quality score doesn’t change.

This allows us to re-write our axes by a factor, given that:

  • Impressions * CTR = Clicks
  • Ad Rank = Max CPC bid * Quality Score (incl. device adjustment)

In layman terms, first, by dividing Ad Rank by the quality score (which is fixed), we get to Max CPC bid on the horizontal x-axis. Secondly, when multiplying impressions by CTR (also fixed), we get clicks on the vertical y-axis. In both cases, the absolute values of the axes may of course change, but the correlations between them (i.e. the graph) doesn’t change. If the blue line used to denominate for example 100 impressions, it may now denominate 20 clicks, if your CTR is 20%. Similarly, doubling your CPC would double your Ad Rank when QS is fixed.

Isolating CPC as the only moving variable, allows for a straight relationship between the bid and the number of clicks
Isolating CPC as the only moving variable allows for a straight relationship between the bid and the number of clicks

The new denomination shows you why Google suggests that you increase your bid to receive more impressions. It is obviously not such that Google will run out and ask more people to search for your queries; they simply just allocate you a larger percentage of the search volume when you increase your CPC (or quality score).

The AdWords Budget Constraints

With these new denominations on the axes, we can now add the graph for the budget constraint. For simplicity, we assume that we intend to spend the entire budget. That means we aim for a situation where our cost equals our budget.

  • Budget = Cost = CPC * Clicks

Given the set budget, Google will continuously bid for all relevant searches on your behalf until you have reached your budget limit. For any given CPC bid, what we are interested in is how many clicks we will get. Given that CTRs and budget are fixed, CPC is now the only variable we can use to influence the number of clicks. This means we can re-write the above cost function to:

  • Cost = CPC * Clicks => Clicks = Cost / CPC

The relationship is clear, if we spend, say $20, then the number of clicks we get only depends on how much we pay per click. The grey graph below denominates the above relationship between clicks and CPC on the budget graph. Note the convex relationship as the maximum cost is fixed given the budget cap – the more you spend per click, the fewer clicks it takes to reach your budget cap.

Introducing the budget cap as another "ceiling" to the available clicks (impressions) for any given bid
Introducing the budget cap as another “ceiling” to the available clicks (impressions) for any given bid

Individually, the graphs dictate that it is impossible to get a number of clicks above the graphs for any particular CPC level. Just like the red Ad Rank graph, the grey budget graph serves as a ceiling over how many clicks you can get, given your Ad Rank (and indirectly, your CPC bid). In other words, for CPC levels to the left of the intersection of the two graphs, the red graph denominates the maximum number of clicks available. Similarly, to the right of the intersection, the grey graph denominates the maximum number of clicks you can get before you run out of budget.

We know that as CPC goes up, the Ad Rank will always either increase or stay flat (once it assimilates the blue line). Contrary to the Ad Rank graph, the Budget graph falls as CPC increases. This means that global maximum volume of clicks available (i.e. across all possible CPC bids) always will be at the intersection of the two graphs.

This insight has one important implication: If you are to the right of the intersection and want to maximize the volume of traffic for your money, you are always better off by bidding less!

The reason is that for any point on the grey graph to the right of the intersection will have a corresponding point on the red graph with the same amount of clicks, but at a lower cost and with a lower total cost (CPC * clicks)! More conceptually, remember that the red graph is Google’s attempt to penalize you for bidding to low (or having too low QS), so you know that when you hit it, you are pushing the envelope for how little you can bit for that amount of traffic!

This raises one fundamental question: How do I know if I am on the right of the intersection? The great thing is that Google gives you the answer indirectly.

I earlier explained how LIS (Rank) works: you will always miss the impressions above the red graph. Tough luck, but you aren’t bidding enough. However, if you are on the right side of the intersection, you will run out of money before Google will limit you on the impressions. Once you hit the grey graph, you won’t get any more impressions.

The graph shows how Lost Impression Share occurs on the right side of the intersection between ad rank and budget graphs
The graph shows how Lost Impression Share occurs on the right side of the intersection between ad rank and budget graphs

The diagram above displays how the impression share is derived as total impressions deducted LIS budget and rank. Note that on the left of the intersection, all impressions above the red graph stay as part of LIS (Rank). In other words, on the left side of the intersection, LIS (Budget) will always be 0%. On the other hand, this means that the moment LIS (Budget) is higher than 0%, you know that you are on the wrong side of the intersection and hence overpaying!

…the moment LIS (Budget) is higher than 0%, you know that you are on the wrong side of the intersection and hence overpaying!

Control Spending By Bids, Not By Budget!

The conclusion is simple: If you can only afford to spend a certain dollar amount, then you are better off controlling your spending by adjusting the bids rather than by setting budget caps. Remember to look for that ‘sweet spot’ where you maximize the number of impressions allocated to you before you hit the amount you want to spend. Budget caps are only good as a last resort to make sure you don’t overspend if impressions suddenly spike (however, even then you should only do this for cash flow reasons).

Remember, this graph alone must not dictate your CPC level. The order of your considerations must be:

  1. How much can I afford to pay per click (i.e. Max CPA you can afford * Exp. Conversion Rate * (1 – Exp. Drop-out rate)
  2. Can I finance this volume of traffic? (I.e. will I run out of cash before I get the revenue if I invest at this level?)
  3. Am I better off bidding less for the same or higher amount of traffic, as per the diagram above?

I hope this post has been helpful. If you liked it, you can share it on twitter here (you can edit first). Let me and others know in the comments below if you have other tips. Happy optimizing!

– Stefan

Multiple factors influence conversion rates

Why There Is No Optimal Conversion Rate

Multiple factors influence conversion rates

One of the questions entrepreneurs and marketers ask me the most concerns conversion rates. Looking for benchmarks, they ask, “What’s the optimal conversion rate we should aim for?” The idea behind the question is flawless – they want to measure the efficiency of your product (website). The challenge is that this is not the right question to ask – there is a number of reasons why.

The main challenge is that the conversion rate is not just a function of your product, but also of the quality of traffic. As an illustration of this, think about a visitor to a fashion store in a mall. The likelihood of him buying a pair of jeans is not as much a function of how neatly the jeans are displayed (equivalent to the quality of your website) as of his intention when he enters the store or even the mall in the first place (your traffic). He may be on the lookout for a new pair of jeans or just browsing. The same goes for your traffic. Few changes in your website will be as impactful as the overall changes in traffic your site will experience over time.

Pull channels, where the customer is looking for you, usually have considerably higher conversion rates than push channels, where you are looking to find the customers

The challenge arises as your marketing mix changes. Different channels have different conversion rates. Nothing predicts conversion rate as well as intentions do.  Pull channels, where the customer is looking for you, usually have considerably higher conversion rates than push channels, where you are looking to find the customers. Examples of pull channels are search engines and comparison sites versus push channels like social media marketing and other display marketing. Someone searching for e.g. “buy ray-ban sunglasses” on Google has a very different intention than someone you pulled out of whatever else they did online when they saw your banner with sunglasses.

When you increase the relative proportion of traffic from push channels to that of pull channels, you will inevitably see differences in your overall conversion rate. In most markets, your proportions will change as you scale. You may exhaust the inventory available from pull channels and have to scale using the almost unlimited amount of inventory available on push channels.

Changes in conversion rates from changes in marketing mix are neither a positive nor a negative thing in itself. Lower traffic prices may justify going for lower quality traffic– that should purely be a financial decision based on your expected return.

In building an e-commerce company in the past, we relatively hit the ceiling for inventory available on search engines. It was a young market, so the population wasn’t used to searching yet. We could still tweak our ads to do improve click-through rates (CTR) and thereby get more traffic from search engines, but it was not enough to move the needle as much as we needed to sustain our growth. We started focusing more on display traffic, and particularly Facebook turned out to be a great channel in some markets. The conversion rates were significantly lower, but so were the CPC (cost per click). Ultimately, we were able to drive the same volume of conversions from Facebook as we were from search engines at the same cost efficiency (the basket sizes were lower, but so were the CPO (cost per order)).

Another implication of this thinking is that you cannot judge the performance of your product optimization based on the conversion rate alone. We have found that the best way to evaluate the performance is to fix certain groups of traffic with stable purchase intents that also have significant volume (so that fluctuations aren’t due to small sample sizes). Choosing a group of keywords from a search engine for example will allow you to monitor conversion rates over time for a fixed sample audience.

Whether the conversion rate is good or bad comes down to your ability to, profitably, drive traffic. A good rule of thumb is that if your competition can afford to buy traffic that you cannot afford, then there is only one of three options:

  1. Your competitor overpays for traffic,
  2. Your competitor earns more money per customer than you, or
  3. Your competitor is better at converting than you (and hence lower acquisition cost per user)

Very few companies face option a, so the issue is most likely b or c. In other words, if you can’t afford traffic that your competition can, then you are most likely performing below the market average either on monetization or conversion rates. The great thing is that optimizing your conversion rates is a never-ending game. If you can’t afford the traffic today, analyze your competitors and find out how they can convert the traffic profitably when you can’t. What do they do differently and what can you learn about your users from that?

 

Photo: Karim Nafatni