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🌱 5-Bit Fridays: Rethink Black Friday, why incumbents love AI, the power of sidecar products, getting promoted at a startup, and problem clarity
👋 Welcome to this week’s edition of 5-Bit Fridays. Your weekly roundup of 5 snackable—and actionable—insights from the best-in-tech, bringing you concrete advice on how to build and grow a product.
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Happy Friday, friends 🍻
In case you missed it this week:
This newsletter crossed 10,000 readers.🤯 It blows my mind that so many of you find value in my writing, and it truly means so much. Thanks for being here. Seriously. I wrote more about it.
I also launched a paid plan. As I wrote here, nothing is changing in terms of the content you get today. All the deep dives, 5-bits, and WTD posts will continue to be free. However, I will be adding a new subscriber-only series. Also, if you find value in my work, a $7 subscription is the best way to support this newsletter. The first 500 folks who subscribe will get 30% off for life.
Spotify launched AI translations, a game changer for the podcast industry. In short, they’re experimenting with foreign language AI voice clones with a few creators. Localization = unlocked markets.
Zuck touted AI home assistants in the voices of MrBeast, Snoop, and Tom Brady in this video. It’s not clear exactly what these assisants across Meta apps will do, but I’ll definitely give it a go.
I shared a curated resource of my favorite information sources. If you want to sharped your product/growth skills and general thinking…check it out.
Finally, startups are shutting down in waves. 543 this year, to be exact.
So, go hug a founder.
Otherwise, onto today’s post.
Here’s what we’ve got this week:
Rethinking Black Friday
How to get promoted at a startup: A 12 step playbook
Why incumbents LOVE AI
A look inside Snyk's biggest growth loop, and the power of sidecar products
A Problem vs. The Problem
Let’s get to it.
(#1) Rethinking Black Friday
With November approaching and folks starting to think about their Black Friday sales…let this bit be an important PSA.
p.s You might want to forward this post to a marketer on your team…
In November 2008, the US started one of the largest discounting (via couponing) experiments in entrepreneurial history.
Simply, Groupon launched the category of digital coupons.
You remember it. Groupon was a huge hit, and they drove sales for tons of small businesses.
At their peak, they were valued at $13B.
For salons and mom and pop shops, it looked like Groupon was the magic bullet to get foot traffic. Who would go for a massage if it wasn’t off a Groupon?
But…where be Groupon today? 🤷
The category collapsed. And Groupon with their flash discounts became an irrelevant marketing channel.
As The Category Pirates put it in an excellent post…Groupon was Black Friday all year long.
In the beginning, small “e” entrepreneurs loved running Groupon promotions because it practically guaranteed a mob of customers.
But after running a few Groupon promotions, these same entrepreneurs realized the vast majority of the customers that showed up to take advantage of the discount weren’t the customers they wanted.
Were one-time buyers and weren’t very likely to come back and ever pay the normal rate (and also weren’t very likely to sign up for any sort of membership or loyalty program).
Weren’t appreciative Superconsumers of the discounted product or service, and instead were unappreciative consumers only there because it looked “cheap.”
Customers that only purchased when the product or service was heavily discounted, forcing businesses into a “race to the bottom” in a way that actually hurt their year-long economics—now “on the drip” and reliant on running Groupon promotions to drive revenue.
In a word: these customers sucked.
Sitting here looking at a company that’s had 98% of their value wiped out, nobody is gunna raise their hand and say there’s no lesson here.
If you’re a marketer or business owner, it’s a big one: when you play the discount game, you boost sales in the short term and ruin your business in the long term.
As the Pirates reported, almost every small business owner in the States (and even back home in South Africa) used Groupon promotions for nearly a decade, only for the conclusion of the experiment to be: couponing (aka discounting) doesn’t work.
And and I love this excerpt from their post so much. Classic humans.
Ask any hair salon or pizza parlor today if they want to run another Groupon promotion and they’ll likely say, “No way.”
But ask any company if they want to run a Black Friday discount promotion, and they’ll likely say, “Absolutely! Everyone else is discounting themselves—we should too!”
They’re the same thing.
Couponing = Discounting
Discounting = Couponing
So, stop being being a zombie and adding discounts because “that’s what you do in November”. The Category Pirates have a better way…
Discounting Relational marketing
Relational marketing—AKA, building your relationships with customers—might be as simple as gifting instead of discounting.
i.e “Thanks so much for using our freemium product for the last few months. As a loyal user, we’d like to gift you with a pro plan for half the price. All you have to do is answer this survey…”
Fundamentally, both are the same.
The customer pays some % less.
Except, the context is wildly different. One makes something feel cheaper, and one makes the customer feel special. Ideally, you do this with some give and get mechanism to keep the perceived value of your product still high. For instance, by answering a survey, we’ll give you a gift of 30% off.
Gifting = relational discounting.
But you can go beyond just repositioning a discount. Ideally, you take advantage of Black Friday to do something different. Here’s how the Pirates suggest thinking about it.
Instead of blanket discounting, we encourage you to ask a series of more thoughtful questions:
“What’s the real outcome we want to drive? Is it revenue? Is it lead generation? If we run a coupon promotion and capture a ton of leads, will those leads be the ones we want?” (Remember the Glengarry leads?)
“Do we want to leverage Black Friday to capture existing demand or create net-new demand?”
“How can we use Black Friday as not just an opportunity to generate short-term revenue, but also build our category over the long term?”
“Is there a radical stunt that we could pull off to drive home our POV?”
For example, do you know what brand your TV is?
Is it a Samsung? LG? Sony?
Chances are, you don’t know and don’t care. Last Black Friday, you went shopping for a TV and saw one of them was marked so far down that you felt you would be doing yourself a disservice if you didn’t click that Buy It Now button and have it shipped express to your house. But now, put yourself in the shoes of whichever brand sold you that TV. Did the brand do anything that furthered your conviction in their products? Did the brand use the promotion to build a relationship with you, the customer? Did the brand, in any way, shape, or form, turn you into an enthusiast for the category?
Not really. They sold you a TV.
So sure, they moved some stuff off a truck and made a buck (probably a small amount of money, and some companies lose money on “loss leaders”). But what’s the likelihood you come back and decide to buy more stuff in the future? Hard to be a repeat buyer if you don’t even know what brand sold you the thing to begin with!
This is what makes mindless discounting, couponing, and conventional Black Friday marketing so ineffective.
Black Friday is transactional.
Legendary businesses are relational.
Ultimately, the more transactional you are with discounts, the more you’ll train your customers to wait in anticipation for your deals. Why buy now when they know they’ll get it on the cheap in a few months?
They key takeaway here is to shift your thinking from sales sales sales, to actually building your business and solidifying your leadership position within your category. Black Friday and other marketing holidays (Cyber Monday, etc) are, as they say, “a chance to be provocative, innovative, and creative such that you bring attention to the CATEGORY and the problem you believe needs solving in the world.”
Just like Patagonia did.
While every clothing retailer offered discounts, they ran a full-page ad in the New York Times that said “Don’t Buy This Jacket”. Instead of slapping on a 30% off, they drove a different message that built their brand: “This holiday season, think before you buy. Save the planet.”
Be like Patagonia.
Do something different and interesting this November.
Send this to a marketing buddy.
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(#2) How to get promoted at a startup: A 12 step playbook
This might sound like a strange bit to get started with today given the chart above, but—the legend behind —wrote a great piece earlier this week on how to get promoted at a startup.
It’s great advice, and it’s definitely applicable beyond startups. Here’s a run down. 👇
Craft your own unique hook (SKU): In other words, find your unique value—what you can do better than anyone else—and make that superpower known across the company by executing it consistently well. It opens up doors and gets you looped in projects because people need what you’re best at. An example could be building a growth model.
Know your customer: Your customer here being that one person at the company that you need to be relentless at making their lives easier. This is the person you report to since they call the shots on your promotion. Know their goals, anticipate what types of questions they ask and have answers, and just like with customers—keep learning and improving based on their feedback.
Define the field you compete on. This is excellent advice from CJ. There are various competencies you need to have to be able to do your job, but, the more people they are doing what you do (i.e 5 PMs), then the more important it becomes to find your unique position “in the market”. So, like launching a product, carefully choose the vectors you will compete on. Find your two big talents that you can stack, and make that your niche.
Set your SLAs. Getting promoted is about doing the work, and part of that work is having a reputation for being consistent and reliable in how and when you work. AKA your hours, availability, and responsiveness. As CJ says, “ People will tell you this stuff doesn’t actually matter in your career. They’ll say that working harder and later than others isn’t a real way to get ahead. It’s not the end all be all; true. But it is part of a larger mosaic to getting promoted.”
Compete on pricing, and value. “Being able to ’span’ multiple price points in the org is a real thing. As a Manager I was willing to sweep the floors, water the plants, and make sure the headers in a presentation didn’t jump from slide to slide. I was also capable of building an M&A business case that would determine a multi million dollar outcome. My older colleagues were also eager to do the latter, but much less willing to do the former.” In the current startup environment (see that Carta chart), this becomes even more important.
Spend time on your packaging. If you’re a PM, you’re creating artifacts like PRDs, decks, roadmaps, memos, tickets, etc that people are going to see. When I joined Backstage in my first “formal” product role, I made it my goal to have the highest quality (at least look and feel wise) documents. I have a good eye for design, so this was a skill I leant into. Years later, pretty much every deck we use is built using some of my templates. Folks like the CPO, CMO, and CFO would come to me for help with decks. My job? Not entirely. But it built my brand, and 3 years later I became Director of Product.
Know the moment. Spend time preparing for big meetings. Even a 30 minute call with the CEO, which may not seem huge, is huge. Invest time, prepare, and make sure you’re ready to set a high bar meeting. The bigger the company, the more rare face time is with certain people. Make it count.
Plug the gap. Simply, be proactive in finding and closing gaps. Practically, this means taking the stuff your boss hates doing, things that are annoying them, or things they feels insecure about, and doing them. Remember, they’re your #1 customer in the company, and this makes their life better. This idea of The Magic Loop came up in a recent post on Lenny’s.
Be interested. Actively listen to what the people you work with say, especially your number #1 customer (your boss). The key is to engage with their interests and hobbies, and go the extra mile to forge a connection. They like hunting? Read up on some hunting stuff. This might sound like brown nosing, especially if you’re not exactly interested in the same things, but that’s just how she goes.
Be interesting. As CJ rightly puts it—people remember interesting people. So, have interesting and memorable stories and things to talk about. The more interesting you are, the more people remember, and the more likely you are to level up. Sounds mega lame, but if you’re working for a company and climbing the ladder, that’s the game you signed up for.
Swim in the right pond. “The ideal scenario is you enter as a big fish in a small pond, and that pond keeps growing due to the success of the business. But eventually you need to be real with yourself and look around to assess if the pond now has multiple people competing on your same vectors. That’s just what happens as a company gets bigger and people’s roles become more specific. It’s happened to me. And it sucks in the moment, but once you embrace it, you can go downstream again, with an updated playbook, take on a bigger role, and climb a new ladder.”
Ask for it. Everything above matters. But so does being honest with your boss and talking about a plan to get you there. Your boss should know that your goal is to move up so you can (1) have a leveling up plan to work against and (2) periodically check in on it. If you don’t ask, don’t expect to just get.
For more of CJ’s excellent writing—mostly about metrics and startup finance—be sure to follow his writing over here.
(#3) Why incumbents LOVE AI
In 1997, Clayton Christensen published The Innovators Dilemma. His thesis was simple. New technologies often cause great incumbent companies to fail because they are too slow to adopt it and change their business.
His book back then gave plenty of examples from the past, and has held true with plenty of companies that came after it’s publishing.
Fast forward to 2023, and the biggest new and disruptive technology is AI. This time a year ago nobody was going on about AI strategies like they are today.
Wouldn’t this be another classic example of the innovators dilemma? Wouldn’t the big dogs be slow in the face of hungry and nimble AI-native companies?
Well, you know this couldn’t be further for the truth.
Microsoft has been very quick to build on AI (also acquiring OpenAI)
Google has been incredibly responsive
Meta has tons going on
Adobe is baking AI across their products
Okay, so why this time and with this technology are the massive enterprises able to move so quickly?
It’s a good question thatfrom answers well.
He gives 2 reasons. I add a third of my own.
1. LLMs are not a new platform
Many believe—as the vibe certainly makes it feel that way—that we're entering into the AI age.
It’s somewhat true, but it’s not a true platform shift like it was with the mobile and cloud shifts. Those changes required not only huge technological adjustments to build the platform, but also massive organizational shifts to support it. For a company to move to mobile, folks had to learn new knowledge, adapt and create processes, and generally just do a lot of table stakes work.
For a multi-billion dollar company with thousands of employees, figuring out costs and ROI was a serious exercise. That’s why these platform shifts were slow.
The same will be true with AR/VR if Apple and Meta get their headsets to go mass market.
But…AI is not quite a new platform. In just 10 months, look how many incumbents from all industries have shipped products or utilized Open Source & proprietary models to create content.
Why? As Shomik wrote:
There is not a massive platform shift occurring but instead an enablement shift. It allows enterprises to look at the data they already have and figure out how to best utilize it. In many cases, folks are simply paying whatever OpenAI asks to get self-hosted model access to train models on their own data without exposing it to others. When it's as simple as utilizing an API and putting down enough money to buy your own instance, that actually benefits incumbents a whole lot (who have more data, money, and resources)!
In other words, AI is relatively quick/easy/and affordable to bring into your product.
2. AI is a retention tool
Everyone loves to work on exciting new stuff. AI is exciting stuff. Hence, AI is a retention tool.
At many incumbents you can imagine employees have been there for awhile, stock prices have gone down, and folks may start to wonder what’s next and is this current job the best use of their time. Now incumbents get to tell those engineers, “hey go explore LLMs and figure out how we can use them to augment our product”.
3. They know AI is here to stay
The moment AI came out, everybody knew this was transformative. It was easy to think about how an AI version of something could disrupt the traditional way of doing it, and what’s more, the appetite to try AI—and hence the market for it—was there very quickly.
Google instantly saw generative search was going to be a thing. They had no choice but to invest and deploy more rapidly.
Often with the innovators dilemma, enterprises are slower to adapt because the market for the new disruptive technology isn’t there yet and it’s not attractive enough to risk their current profits and model. But not with AI. It was very clear, and still is, that if you don’t do it, someone else will come and risk making you obsolete.
So, how does that affect the market opportunity for builders outside of incumbents?
If founders are going to build for what’s hot now, then focus on how utilizing LLMs can create a different architecture to attack incumbents. Is there something that incumbents fundamentally build around that you can change? If so, you then have a product that truly takes advantage of the Innovator’s Dilemma!
For more bite size weekly posts on enterprise software trends, check out Shomik’s newsletter.
Go deeper 🧠
(#4) A look inside Snyk's biggest growth loop, and the power of sidecar products
If you’re not an engineer, you might not know about Snyk— the $8B developer security company that makes it super easy for devs to stay secure while still moving fast.
Snyk is an awesome example of a company that has whole ecosystem of creative growth loops working together to drive developer acquisition. For instance:
Naturally collaborative personal viral loops (e.g. team invites)
Artificially incentivized personal viral loops (e.g. referrals)
Branded/billboard viral loops (e.g. Snyk auto-generated Pull Requests)
That last type of acquisition loop is super interesting. So let’s talk about it.
I found this post by Ben Williams (who was VP of Product at Snyk, and writes the PLGeek newsletter) the other day, where he spoke in detail about the growth loop that Snyk Advisor creators. What’s fascinating is that it’s built off the back of a sidecar product.
A sidecard product?
These are free, ungated products that offer value in the same or closely adjacent space to your core product.
The idea of sidecar products is simple: you attract visitors from your audience with free value, and some will then hopefully funnel into your core product.
We saw this with Shopify who have a ton of free tools, like their Logo maker.
Snyk, like Shopify, use a few of these sidecar products very effectively.
Take their free Advisor product, which allows developers to find and evaluate the best open-source package for their projects. It has a database of over 1 million open-source packages that devs can query and compare across a few important factors.
As Ben says:
It’s incredibly powerful for Snyk from an acquisition perspective because it serves a general-purpose development use case that is high frequency - developers searching for, comparing, and deciding which open-source packages, libraries and images to include in the apps they are building. Millions of developers do this daily, and Snyk Advisor elegantly solves that problem for them.
A word of caution: when a sidecar product caters to an adjacent, wider use case than your core product serves, you create a gap between the value promise of the acquisition channel and the value realised by the core product. In effect, you’ll get some signups with much lower intent who you should expect will not activate or retain as well as others.
Now the power of this sidecar product is that it drives a content-led growth. Specifically, a Company Generated, Company Distributed (CGCD) content loop, where Snyk creates optimized pages for the content, and people find those pages when searching.
And Snyk drives this CGCD loop via programmatic content (vs human written). The benefit of programmatic SEO is that if offers the potential to generate indexable content in the range of millions of pages. This allows you to capture the long tail of search queries, but to do so effectively means you need reliable differentiated data and templates to create high-quality resources that genuinely solve a user problem.
Basically all job search sites also use programmatic SEO.
The takeaway here is to think about the adjacent needs and problems in your core audiences life. Think about the broader journey or tasks your users undertake when using your core product. Is there a sidecar product in there you can build?
⚠️ Keep reading…
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(#5) A Problem vs. The Problem
Talking about problems, assays, is problematic. Consider something even as simple as the distinction between “a problem” and “the problem”.
Just last week we were stuck in an Uber, running a few minutes later to our friends wedding. Why? Traffic going through the side roads of Philly.
Not so fast though. Pun (unfortunately) intended.
Sure, that was a problem. A contributing factor for sure. A proximate cause that was easy to say was the problem.
You know where this is going.
There’s a story behind why we were time crunched, and why being in traffic was problematic. There were underlying factors—the root causes—that contributed to the surface level problem.
Changing lanes from traffic to a product context (again, pun unfortunately intended), these ideas and definitions of problems often get mixed up in everyday work.
Someone asks for a "clear definition of the problem." Are they talking about the adverse effect, the immediate cause, or an underlying factor? Meanwhile, a person makes a flippant statement like "THE problem is that we have no accountability!" Are they suggesting that a lack of accountability is THE root cause of an implicit adverse effect? Or are there underlying factors contributing to the apparent lack of accountability?
And then my favorite: "It is a leadership problem!" Does that mean that unskilled leaders are the root cause of the problem? Or that a problem exists—caused by something else—that only more skilled leaders (or differently skilled leaders) can fix? Also, who hired the leaders? And who onboarded and coached them? And what about the environment is making it impossible for leaders with more diverse leadership styles to thrive?
I know these distinctions may seem incredibly pedantic, but they aren't! Companies move massive sums of money, energy, time, sweat, and tears based on their shared understanding of "problems," yet the language around "problems" is often flawed.
I have a theory about why this is the case.
Most conversations about problems (and causes) are negotiations—negotiations about identity, reputation, controlling the narrative, and spheres of influence and control. People look for the "definition" they can live with and process. Deciding how much to constrain the collection of root causes—from one cause to a whole graph of related causes—is as much a political (and cultural) decision as a factual or solution-oriented one.
So, what can you do about it?
For starters, always hunt for ambiguity. Ask clarifying questions. Use the 5 Why’s framework. Push your own, and others, thinking. Be crisp when talking about problems. Lead by example.
🌱 And now, byte on this if you have time 🧠
In light of the recent iPhone 15 release, I thought this essay by Matthew Ball would be a fun one to share.
It doesn’t need much of an intro…the title tells all.
And that’s everything for this week, folks.
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Thanks as always for reading and being part of this project. It means a lot.
I hope you all have a wonderful weekend!
Until next time.