The advent of advertising on Avvo has brought up a lot of internal discussion around product goals and how they relate to revenue. I like to think about product and revenue as a walk in the mountains. Elevation is revenue (higher = better) and each step you take is a product change. If you want more revenue, walk up hill. Sound familiar?
Large companies out there… let me know if this rings a bell:
Say you run the product team for a site (retailer, directory, whatever). You ship an initial version. Early on you probably go through two or three major site design overhauls (could be to increase revenue or just for usability). As your traffic and revenue scale so does your organization. You adopt an even greater focus on conversion. Each change that is made is A|B tested. Poor performers are immediately backed out. With increased revenue comes increased risk of failure – the penalty for making a mistake is much larger. With increased penalty for failure comes increased fear to change. You are still walking up the mountain, but you’re taking very small steps. Eventually you reach a point where you’ve invested so much time and money iterating on a single site design and business model that you can no longer improve it. The design has run it’s course and you’ve reach the local maximum of site performance – the top of the mountain, the summit. Good for you. The problem is, you don’t know if there’s a taller mountain out there and the only way to find out is to walk down hill, which no one is willing to do. You can, of course, use your position at the top of a tall mountain to shoot at people trying to climb up your mountain or other nearby mountains, but expedition-wise, you’re kind of stuck.
This seems to happen to all the biggies. EBay, Amazon, Expedia (sorry guys). Their core products are more or less exactly the same as they were 6-8 years ago. Is this because they’ve all managed to find the absolute best of all possible site designs for their respective verticals (ie: the top of Mt. Everest)? Or is it because they’ve climbed to a point where they can’t really climb any higher without first going down hill? Their core product can’t be improved without first being rebuilt. They can of course grow horizontally, but they will forever be defending their hill and they will always have more to lose than the people trying to push them off.
Is this avoidable? What’s the lesson? Can a growing company avoid this trap? Can an established 800 pound gorilla get themselves out of it? Beats me. All I know is that once a hill climb algorithm reaches a local maximum, it has a choice: it can give up and declare a solution, or it can move to a random spot and start climbing again.
You can take that to mean one of two things:
1) As an employee of a company at the summit of a mountain, you can quit and join a startup which has just started climbing.
2) As the CEO of a company stuck at a summit, you can build your own competition. Invest in a team that tries to knock the legacy site off its pedestal. If that sounds too risky, don’t worry too much, sooner or later someone else will do it for you.
What do you do when Burger King runs out of lemonade? Call 911 of course. I couldn’t stop chuckling while listening to this and had to pass it along. Possibly more amazing is how much time the 911 operator invested in the call. It must have been a slow night for everyone.
