Going Slow to Go Fast: The Science of Scaling from SXSW Interactive

Porch SXSW 150316 Ink SketchJust back from South by Southwest (SXSW) Interactive where I attended a lot of great sessions on marketing, but one that keeps coming back up in various debriefs was actually about business growth and an unusual approach by Matt Ehrlichman, CEO and Founder of Porch. He wrote:

“Conventional wisdom says that to build a successful startup, you need to begin with the product and then scale by growing the business and nabbing market share. But what if you took the opposite approach? What if you prioritize gathering the essential elements of a strong and healthy business first and then used it as a platform to launch amazing products? This is the strategy we’ve used at Porch.com and in 18 months, our newly launched startup has scaled from 25 employees to nearly 400 and raised $100 million in funding.

He went on to explain the concept of how being deliberate (even slow) early can lead to scaling at a uniquely fast speed. And Porch.com knows fast. The home-improvement network reached 350+ employees, $100 million in financing, 3.2 million professionals and 130 million projects in just 18 months.

 

How Did Porch Scale?

Matt said that instead of taking a “product-centric” approach, he took a “business-centric” approach. The product-centric approach will sound familiar: find a great product and then build the infrastructure to produce it in the most cost-efficient way. But fitting a business around a product is inherently trial and error, and simply trying to make up for inevitable setbacks with more market share can get you invested into your problems deeper.

Instead, Porch’s more holistic perspective took a lot of time (six months–an eternity for a technology company) before any real technology was built. They tracked their growing customer and provider network on a simple Excel spreadsheet until they identified the features they felt both parties truly needed, with merely an implication that behind it all was a sophisticated, proprietary engine. Only when it had a competitive edge in data and an exclusive partnership with Lowes (which wanted to catch up to Home Depot’s early start with a partner that seemed, at the time, more promising), did Porch invest in technology.

At each juncture, the Porch team set out to list all the risks the business faced. Then they stack-ranked and tackled each, one by one, starting with the most important. This somewhat grueling, iterative process saved a lot of pain down the line. By reducing risks, they gave themselves more time to get to Product-Market Fit.

Matt recommended five steps to entrepreneurs not too distracted by the wonders of their new product.

  1. MVPs (Minimum Viable Products): Like many, he advocates developing MVPs as a means of eliminating waste, gathering valuable customer data and generating a revenue stream that shows viability.
  2. Build Moats: However, Matt says that the very step after developing your MVP is to form exclusive partnerships and procure unique data to “build moats,” raising barriers to entry on your competition.
  3. Minimum Excellent Product: Then, develop your product a little further into an “MEP” or “Minimum Excellent Product” that exploits the moats you just built and generates accolades from your customers, influencers and stakeholders.
  4. Math: Core to your business health is a keen understanding of its costs.  Porch took 5 months to test models and iterate through financial spreadsheets, but once it was done, it was easy to grow quickly instead producing a great, but costly, product and then struggling to penny-pinch.
  5. Culture: Matt says to work on improving your company culture at this stage, assuming you want a durable company and are not planning to flip it.

Matt’s main takeaways were:

  • Apply a conscious strategy
  • Attack biggest risks first — vet your stack rank carefully with mentors and team members to avoid blind spots
  • Build something “durably unique” — not just a cool feature but a cool feature that will still be unique a year fr now because it’s hard to copy.

He must have had a lot of foresight and patience in building Porch — I know in a tech startup the pressure to release code is enormous.

 

Thanks to Matt Ehrlichman for a great “Future15” Presentation at Southby, and for meeting with me afterward to ensure I had my notes straight!

 

You can also read our two newsletter articles based on material from this year’s SXSW:
Marketing GPS: Going Southby for the Winter, Part One
Marketing GPS: Going Southby for the Winter, Part Two

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A digital marketing company with almost two decades of experience, NSI Partners helps clients achieve robust results in search marketing, social media, and other digital marketing spaces.

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