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The Four-Way Fit — Chapter 17: Minimum Viable Traction (Part 3)

At first, it was a trickle. Then a rivulet. Suddenly all of your hard work has come to this: a steady and rising stream of new customers pours into the pond of existing customers. The pond will soon be a lake. At last, the boat that is your startup is afloat — ready to sail towards greatness.

The Minimum Viable Traction stage is perhaps the most rewarding of all company-building stages to traverse. Yes, you have already achieved a product value and business model breakthrough. But here, in this MVT stage, you take your business model to a whole new level. You need a scalable business model; get through this stage and you will have one.

Market, Product, Model and Team

Market

  • As sales rise and become repeatable in your top priority segment, you consider expanding into other adjacent segments — especially if doing so does not require product customization
  • This requires immersion into the unique attributes of these segments and their personas — are there meaningful variations in the specific problems and needs these people encounter as they seek to complete their jobs to be done?
  • As you broaden the segments of interest, you will expand your exploration of the competitive set — do any competitors serve these new segments, and if so, what is the degree of value advantage you deliver vs. them?
  • Do new segments exhibit different LTV profiles than your original top priority segment?

Product

  • At this stage, you begin to expand your product feature footprint consistent with the product vision, characterized by “fix, finish and fill” work
  • Product development work begins to formalize, as the high-level product strategy translates into themes and epics and the sequential product road map clarifies
  • The product development team begins to adopt more disciplined agile delivery methods
  • With value breakthrough confirmed, it comes time to begin the refactoring of your technical environment into a microservices architecture
  • Leveraging a PLG approach, your development team continues to tighten its focus on the “first mile” of the prospect experience — with the emphasis on increasing speed to prospect vision lock (“I get what you do and why it’s relevant to me”), and speed to prospect-perceived value (“OK I’m convinced. Sign me up!”)
  • With a rising number of prospects and customers, you can now conduct research to validate the value proposition
  • It’s time to develop variations to the value proposition for each segment of interest

Model

  • Now that you serve multiple segments, it’s time to refine the pricing scheme — will pricing vary by segment?
  • Investors begin to expect your company to trend towards healthy unit economics (LTV/CAC≥3)
  • Customer acquisition methods (from top to mid to bottom funnel) are chaotic and inefficient; it becomes important to rationalize and mature these methods (at the intersection of people, workflows and technology)
  • Customer acquisition teams begin to scale in size
  • Now that the cash flow impact of the average sale has clarified, it becomes possible to project cash flows and more precisely define funding requirements
  • With value breakthrough proven, it now becomes key to build sustainable competitive advantage by making investments to pursue all available pathways
  • As proof of traction builds, you can now raise significant additional funding to power growth

Team

  • With ample cash, the organization grows and diversifies
  • As roles specialize, it becomes important to formally define and assign responsibility, and to delegate authority
  • As communication, alignment and coordination become more challenging, organization design rises in importance
  • Domain driven organization design emerges as superior to a function-centric, siloed design
  • This work to design the enterprise is systems thinking work, though the other three competencies remain important

The Story of Airtable

I have been fascinated by the elegance of Airtable as a productivity tool for some time. When I began considering which companies to feature in these chapters, Airtable came right to mind. While I have never met Airtable’s CEO, Howie Liu, my respect for him has grown through the secondary research I conducted to write this chapter.

Airtable is already a global success story. The company is well on its way towards its vision to democratize software creation worldwide. From its very outset, its founders decided to take on a monumental, universal problem: “How can I get better organized, to get things done better, without spending tons of time and money building traditional software?”

To get something done, you need to first think through all the sequential steps and dependencies. You need to map out the workflows. At each step you need to marshal the necessary data, or inventory, or photos or other assets. You need to coordinate work between multiple people. You need real-time insights, so you can know whether the work is being executed effectively. These foundational problems have spawned decades of brilliant software development, resulting in CRM systems, ERP systems, accounting systems, content management systems, design platforms, business intelligence tools and the like. The world has benefited greatly from these breakthrough innovations.

But with every digital tool you subscribe to comes a certain rigidity. You must conform to the limitations of the tool. The fit between business need and the tools available on the market is never perfect. And so it’s common for workers to augment out-of-the-box digital tools with custom-built tools, usually built into spreadsheets. Checklists, event calendars, project plans and more find their way into Google Sheets or Excel; these hacked tools help workers manage the things out-of-the-box tools don’t address.

The problem is that these spreadsheet-based hacks fast become unwieldy. Constrained by the limitations of a spreadsheet, they lack software’s robust capabilities and user interface elegance.

Howie Liu knew this problem was gaping; users screamed for it to be solved. Spreadsheets were not created to become organizational tools. They were made to manage calculations. If he could figure out how to help people create software simply — without the need to subscribe to our build from scratch traditional software — it would change the world.

Background

Liu founded Airtable in 2012, along with fellow Duke graduates Andrew Offstad and Emmett Nicholas. As all smart founders do, Liu and the team first dedicated themselves to deep immersion and ideation. In other words, they didn’t skip the first stage of company-building. Liu had learned a lot from his first startup, which he sold to Salesforce for low seven figures. This company, Etacts, was a lead management solution that captured, related and organized data for marketing and sales purposes. It was just the type of organizational tool he would some day help non-technical users custom build, using the Airtable platform.

During his short time at Salesforce, he made a critical observation: throughout the company, workers were using spreadsheets as organizational tools to fill gaps enterprise software didn’t address. He noted how these spreadsheet hacks fast became cumbersome, brittle and prone to failure. As tools for collaborative, multi-step organizational problems, spreadsheets were flawed. Organizational workflows required a relational database, with a flexible and intuitive UI above it.

As it stood, companies faced a Faustian choice: either buy out-of-the-box software that only partially met company needs, accepting faulty spreadsheet hacks to fill the gaps; or spend precious time and money to build and maintain custom software. Liu was convinced he could crack this riddle. He would build a Legos-like toolkit non-technical users could leverage to create whatever they needed — without the time and money software development requires.

He knew this would require solving huge technical problems — especially at the data layer. He also knew that the product would need to be strikingly intuitive. And so he and his co-founders entered into a period of intensive research. He slogged through academic papers on collaborative software theory, studied the data-intensive and real-time capabilities of Node.js, and studied how to minimize latency in data-intensive applications. He studied design theory and philosophy. He researched the impact of color within empty spaces.

As the vision began to emerge, he spent the time to think it through comprehensively, in terms of the Market, the Product, the Model and the Team: in Four-Way Fit terms, he entered the Minimum Viable Concept stage. “In the short term, you can fake it,” Liu has said. “But … In the long-term, what really matters are your business fundamentals.” ¹ Liu spent the time to think it all through.

Facebook follows the mantra, “move fast and break things”. Liu saw things differently. As he moved into the Initial Product Release stage, he chose to progress at a slow and careful pace. He knew the technical foundation of the product and the user experience were both critical, and he wanted to get them right. The journey from company inception to initial product release took three years.

That dedication of time, and attention to detail, paid off. The invite-only beta version of Airtable was based on the idea of a grid. It was a spreadsheet / database hybrid: similar to a spreadsheet in its design, but leveraging the power of a database. The grid enabled the representation of multiple data types, including files, contacts and events. There were preset templates that made everything easier.

Impressively, an elegantly designed IoS app was even included in the initial product release:

The beta launch was an immediate success. Users loved Airtable’s intuitive feel and the drag-and-drop simplicity. For the first time, non-technical users could leverage relational database capabilities within a simple-to-use, spreadsheet-like platform. Because multiple types of data could be manipulated within a single grid-based format, users found it easy to build simple applications for common organizational tasks.

Here is a quote from the Airtable blog from June, 2015:

“We’re seeing people using our tools in ways we could never have imagined — preserving ancient languages, tracking scientific equipment, managing construction projects, and even planning a US presidential campaign.” ²

Subsequent product iterations built upon these early features, fueled by robust user feedback. Airtable’s attention to user needs and its passion to simplify user workflows was and is evident in the product. Users frequently use the word “delight” to explain their experiences using Airtable.

Word spread and early adopters began to flock to the product. By the time the company had reached the Minimum Viable Traction stage, the product had emerged as a powerful tool for organizing and managing a diverse array of tasks — without the need to write a single line of code.

Heads Up: Update Four-Way Fit Spreadsheet

As always, the first step at this stage is to return to the Four-Way Fit Spreadsheet. As you enter your claims, you will ponder their certitude. Which of these are you sure are true — your settled assumptions? Which of these do you think are true, but you’re not sure? Of these, which ones would have the highest impact on your capacity to grow if proven wrong? These are the types of assessments you will make inside the spreadsheet. As you do, you will discover which claims must be tested, and in which order.

Filling out your claims inside this sheet forces you to think holistically about the company across the four domains, and to further clarify the things you know versus the things you think are true but need to be tested.

In terms of Market, Liu’s choice to stay horizontal — serving a diverse array of use cases — was reaffirmed. This horizontal play exploded the size of the market. As Liu has said, “It’s a profoundly large opportunity, not unlike the scale of Amazon, or Facebook, or Google.”

In terms of Product, Liu’s choice to build Airtable’s own relational database customized to the company’s unique needs was both ambitious and bold. The vertical integration decision ensured total control over the capabilities of the system. He did make one notable exception to this: the decision to partner with Zapier to enable API integrations. Zapier already had implemented hundreds of integrations with B2B SaaS tools, and so could deliver Airtable instant access to an array of new use case scenarios. But with that opening came a key product dependency. It was a critical and non-obvious decision.

Liu also called upon his product development teams to deliver exquisite UI design and workflow simplicity — knowing full well that simple is hard.

The price of these two choices (to build a customized relational database and to sweat the details of the user experience) was time. Liu chose to crawl and walk slowly, until the basic building blocks of the product were set in place, enabling him to run. He describes it this way: “Instead of trying to rush a new product out the door, we introduce a period of forced delay, so people have a chance to sleep on an idea. It’s a concept we call the simmer.” ³

In terms of Model, Liu adopted a freemium approach and began to think through the product use thresholds that would trigger paid services. Freemium enabled him to build a strong and loyal user following. As to messaging, tests showed that he could best describe his product by explaining the problem with spreadsheets. Here is an early Airtable ad seeking new users:

As to Team, Liu’s founding leaders brought to the table a strong combination of design thinking, lean thinking, strategic thinking and systems thinking. As his company began to scale, he developed a plan that would retain and enhance the company’s user-centric, product-passionate, collaborative culture.

In the progression through this company-building stage, Airtable’s Liu exhibited great discipline — methodically expanding the circle of features his product delivered, in pursuit of his steady bold vision. In the domains of Market, Product, Model and Team, his original assumptions were largely validated.

Formalize Pricing Scheme

At this stage, Liu settled on the details of his pricing scheme. The paid “Plus” subscription would cost $12 per month per user, and a “Pro” subscription for larger enterprises would cost $20. To drive subscriptions, he established free limitations such as:

  • Maximum free file storage of 2GB
  • No more than 1,200 records per base
  • Snapshot backups and revision history can only go back 2 weeks

The “Pro” subscription would trigger at over 5,000 records.

Some free users complained especially about the 1,200 record limitation, but the company remained firm on the limit and subscription revenues began to build.

Product Priorities: Fix, Finish, Fill; Address Dependencies; Optimize First Mile

In 2015 and 2016, Airtable cemented its relationship with its community. To build a comprehensive no-code software development platform for non-technical users would require release of a daunting list of features. Everything depended on the user experience, so this feature expansion would need to be executed in a way that did not create clutter. On the contrary, the entire experience would need to remain simple and intuitive despite the rapidly expanding range of features available to the user.

To accomplish this magic trick, the company married itself to its community. Most companies talk about customer-centric product development, but Airtable lived it (and still does). The company extols simplicity in everything. Product features need to do more than just function — they need to delight. Features are not released until they have gone through a period of optimization that stretches far longer than most companies (a phase in the development cycle they call “simmer”).

The first version of the product introduced the grid, which helped users easily organize diverse types of information. From there, Airtable began to introduce new ways of viewing this information. 2015 was a big year. To ease the ingestion of data from external sources, it introduced its API builder in April, 2015. Later that year the company introduced Forms, which could, for instance, enable a user to execute a survey to people listed in Airtable — and ingest their responses to the survey back into Airtable. And in the Fall they introduced Airtable Integrations, powered by the Zapier partnership. Calendar view came in early 2016:

Along with Kanban boards, calendar view opened up many new use cases — including the ability of traditional software developers to use Airtable as a planning tool. An iPad app launch and a slew of other features (grouped records, gallery views, updated apps for iOs and Android) came later.

Each product update made Airtable more adaptable — more capable of solving more use cases, more completely.

Refactor Technology into Reactive Microservices

It took three years to get the technical platform to the point that a beta product could be released. The first version of the product was built on top of a MySQL database, but early on Liu committed to the development of a custom-built relational database — a vertical integration strategy.

To enable faster development cycles, more rapid feature launches and continuous UI improvements, Liu needed to ensure the underlying technical stack was built in a microservices architecture. He needed everything, including the front end, to be micro. In an interview with Jeff Meyerson at Software Engineering Daily, he described the technical challenge:

“I think there’s also a lot of the challenge of just building a performance-optimized UX. You’re dealing with a highly dense interface, right? With a lot of different things going on, especially if you’re building on the web. If you just did the naive thing, you would be rendering for a 10,000 by a 100 column spreadsheet, you’d be rendering a million de minimis DOM elements, and probably much more than that, because each cell would be represented by a few different DOM elements and so on. There’s a lot of performance that you have to do as well.” ⁴

Liu sweated over the database architecture, engaging in countless “heads up” and “heads down” cycles along the way. He dealt with complex technical problems such as addressing merge conflicts when two people are editing the table at the same time. He needed a relational database that could handle complexities such as foreign key relationships and different field types. But equally important was to build a technical environment that would enable an elegant and continuously improving user experience. This required attention to deep technical requirements, such as low-latency responsiveness, resiliency and back-end elasticity. It required message-driven microservices, so that teams could be organized around feature sets with sufficient autonomy to continuously improve their assigned software domains.

Liu saw a set of competitors in the no-code applications space who had solved many technical problems, but delivered users a clunky user experience. He knew the key to success would be an incredibly high-performing relational database, combined with an incredibly intuitive, continuously-improving user experience. So he set about to build the technical environment that would accomplish that.

Projects to Build Competitive Advantage

At this stage, a company takes its first steps in building sustainable competitive advantage. For Airtable, the primary focus was on the technology — which advanced the Systems Power pathway towards competitive advantage; and on the user experience and supporting the Airtable community — which advanced the Brand pathway.

Elevate the Maturity and Scale of the Revenue Engine

At this stage, Airtable’s revenue engine was primarily organic. Customers converted from free to paid via digital methods, inside the platform. The addition of enterprise sales teams would come later.

Ever Since

Up to 2018, Airtable had only raised about $11M. But in March that year, the company secured its first significant funding round — $52M. Another $100M was raised in November of that year. This flood of cash enabled Airtable to transform its marketing posture. Building on a successful 2017 campaign in San Francisco, which had lit up developer interest in Airtable as a team organization tool, the company ramped up its marketing capabilities and budget dramatically. Soon an entire revenue engine was coming together, with a rich, multidimensional, awareness-building marketing canopy providing air cover for rising enterprise sales teams.

Features continue to stream into the platform at a steady cadence. A major one, called Blocks, enables users to customize their bases with rich modules such as maps. Another big development the capacity for users to build software extensions in Javascript that can be appended to a base, increasing functionality. These user-built Javascript solutions can be posted to the Airtable Universe, a marketplace for Airtable extensions.

All of these product feature extensions build upon the vision Howie Liu had from the beginning: to democratize software development. Today, Airtable is a global success story with a huge future in front of it. Liu says without guile or exaggeration that he wants to build a company that can stand on equal footing with the likes of Microsoft, Facebook or Google. And he is well on the way towards doing it.

Summary

The story of Airtable is a powerful reminder that to create a great company, you must build “lightning in a bottle” value, and then convey that value to customers, and then build an unassailable competitive moat. At this critical Minimum Viable Traction stage, you make the transition from searching for a value breakthrough to extending, scaling and protecting that value. If you do it well, you will open the door to the entire global market. You will only be limited by the breadth of your vision.

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Notes

  1. Lee, David. 2019. No one understood our idea, but now it’s worth $1bn. BBC
  2. Airtable blog, 2015.
  3. Bartoni, Steve. 2018. Move Slow and Make Things: Airtable’s Howie Liu Built A $1B Software Giant Emphasizing Substance Over Speed. Forbes Magazine.
  4. Meyerson, Jeff. 2019. Interview. Software Engineering Daily.

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To view all chapters go here.

If you would like more CEO insights into scaling your revenue engine and building a high-growth tech company, please visit us at CEOQuest.com, and follow us on LinkedIn, Twitter, and YouTube.

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