Think Like An Engineer To Scale Your Business

TL;DR (1 min summary)

Want to unlock growth? Think like an engineer.

• Think like an engineer - Bring a systematic, data-driven approach to growing your business. Core principles include:
  • Break down problems into smaller components
  • Use data to drive decisions
  • Iterate where it's cheap
  • Implement systematic, high-velocity testing

Here’s a quick summary of each principle

• Break down problems into smaller components - Treat everything like a problem you're trying to solve and break it down to manageable chunks.
• Use data to drive decisions - Create a strong pipeline of data, both quantitative and qualitative. Map and track everything. Check it regularly.
• Iterate where it’s cheap - Optimize processes to ensure efficient use of resources. Resources = dollars, time, people, reputation, etc.
• Implement systematic, high-velocity testing - Create processes to run high quality tests, regularly. Optimize your processes to improve quality and quantity of tests you run.

Below we dive into the details so please keep reading if you think this might be helpful to your business!

What does it mean to think like an engineer?

Applying engineering principles to business sounds odd, but it can be a difference maker when it comes to reliably scaling.

Break down problems into smaller components

Treat everything like a problem you’re trying to solve and break it down. Take the example below “Make Ads Profitable”. How would you break this down?

• Map out the steps in the funnel
  • Ad → Landing Page (CTR)
  • Landing Page → Product Page (CTR2)
  • Product Page → Add to Cart (AC)
  • Add to Cart → Checkout (CKT)
  • Checkout → Purchase (CVR)
• Identify your main KPI and target
  • Profitability = For every $1 invested in ads we get >$1 back after we pay COGS
  • Example target = $80 CAC
• Set goals for each step in the funnel
  • Make reasonable assumptions based on data and set goals for CTR, CTR2, AC, CKT, CVR

Mapping out an example funnel and calculating targets

Now we know exactly what we need to solve. We need to hit very specific targets for each stage of the funnel and we’ll know very quickly where we are off once we start running ads.

Use data to drive decision making

Data is the backbone of business growth in 2024 and AI has unleashed the entrepreneur’s ability to process data. Using both is crucial to scale. Here are some key principles to use:

• Don’t rely on your gut - Traditional marketing often relies on creativity and gut feelings. I talk to a lot of marketing teams in my day to day and I’m often shocked with how a lot of what people are doing are based on “gut” and “intuition”.
• Remember that data trumps intuition - Gut is a fine place to start when generating ideas, but ultimately data trumps intuition when it comes to driving growth and scaling your business. Thinking like an engineer is about bringing a systematic, data-driven approach to growing your business. Below I’ll walk you through the core principles:
• Collect data on each step in your funnel - We want to know how our ads are performing at each stage. As a result, you setup conversion events associated with each step and pass it back to your ad platform.
• Collect qualitative data on user behavior to enrich insights - Setup tools like SmartLook so you can observe user behavior on your site (see below). Obsess over the session data and see how far people scroll, where they click, where they get stuck, what they read and use that to enrich your quantitative data.

Example screenshot of tracking user behavior on your website

• Run usability tests to get first party data - We have tons of blindspots and blindspots kill you. You can only glean so much from shadowing sessions and looking at numbers. Usability tests are where you setup interviews with your target customers and have them walk through your funnel thinking/speaking out loud. This is a great way to enrich your insights with first party data and see how people react in real time.

Running a usability test  via zoom

• Track obsessively to speed creativity- You should be porting over all of your data into a spreadsheet where you can look at results daily. Here’s the rationale for daily. If you look at something monthly you get 12 opportunities per year to correct course, weekly - 52, daily - 365. Imagine you have three teams. Team A looks at results and makes needed adjustments monthly, team B weekly, and team C daily. Team C gets 7X more at bats. Who are you betting on?

Dashboard that pulls in results daily for the entire funnel

• Use burn up charts for accountability - "What gets measured gets done, what gets measured and fed back gets done well, what gets rewarded gets repeated." - John E. Jones. Make reporting out on progress part of the lifeblood of your organization. Have one person own it (if everyone owns it, no one owns it), and in the spirit of course correcting report out on progress frequently. Decide on cadence based on urgency (daily = high urgency, weekly = steady state).

A data obsessed organization will learn more effectively and derive better insights to drive decision making. It’s also pretty straightforward to implement!

Iterate where its cheap

A core principle of engineering is to iterate where its cheap, kill defects at the earliest stage possible, and generally optimize processes to ensure an efficient use of resources. It’s a core component of developing a lean, hungry growth process.

• Think of cheap in terms of resources - Resources could include dollars, time, people, reputation, etc.
• Identify the limiting step to save time and resources - In engineering the concept of limiting step it the step that shapes the entire production flow, it could be the slowest step or the most important.
  • When the limiting step is alignment - Often times, the limiting step is just getting on the same page about what you’re trying to do. You can use tools like a 5WH to align your team before investing time, energy, and resources into a project.
  • When the limiting step is prioritization - If the limiting step is identifying which idea to work on use a prioritization framework like ICE or PIE. If you treat different scenarios like problems you’re looking to optimize while minimizing invested resources you’ll get very creative and efficient.

Map out what you’re trying to solve and identify the limiting step

Implement systematic, high velocity testing

You only have to do a very few things right in your life so long as you don't do too many things wrong. - Warren Buffet

Expect failure when testing - It’s rare you get things correctly right out of the gate. We are wrong far more often than we are right. A strong testing culture solve for this weakness.

Learn to love failure - With a strong testing process you should learn from every failed test. Every failed test will move you closer to the truth.

Test systematically to drive growth - If you want to unlock growth you need a systematic, high velocity testing process. Systematic = done regularly with a strong process. As I’m fond of saying, consistency finishes what intensity starts. A diligent testing culture will help you win over time.

Trust in compounding - One of the most powerful forces in the universe is compounding, regularity in your testing process means you get more at bats, learn more, and as a result get more wins and deeper knowledge over time. Stay consistent with testing and you will reap the benefits of compounding.

What do we mean when we say velocity?

Velocity is a vector - meaning it has both magnitude and direction. Yes, we want to move fast, but we want to make sure that each move brings us closer to our goal. Thinking about velocity is all about increasing speed towards your goal.

Increasing velocity means moving faster towards your goal

So what are the principles of a high velocity testing process?

There are a few to cover:

To maximize velocity of growth you need to improve the quality AND quantity of tests you run

• Quality is about learning something useful from every test
• Quantity is about getting more data points
• The combination of both leads to faster growth

To maximize the quality of tests you need to learn from every test and run more tests

• Be an experimental scientist and collect observations.
• Use session recordings, customer interviews, and data analysis to inform observations.
• Use a hypothesis driven testing process isolate the variables you want to test to ensure your learning every time you test.
• Run more tests. This gives you more exposure to what works and what does not work.

To maximize the quantity of tests you need to improve execution, process, and quality

• Well-designed tests (strength) have a higher impact and get you signal faster.
• Efficient execution by the team accelerates the testing process.
• Leverage strong testing hygiene to ensure you run a great test:
  • Gather quantitative and qualitative data
  • Write down observations, form hypothesis, and come up with ideas based on those hypotheses
  • Iterate where its cheap to test your hypotheses
  • Identify the variables you’ll measure when testing
  • Put them into production and learn

You only need to be right a few times to unlock massive growth - By adopting high-velocity, systematic testing you’ll get a ton of strong at bats. By doing this regularly, you only need to be right 4/10 times. If you run a new test every 2 weeks, that means you’ll get 10 major unlocks per year on any part of the funnel you’re testing. Do that across your entire business and you’ll be doing pretty well.

Focus on KPIs that matter, not vanity metrics

We care about revenue and profits when it comes to growth. Don’t focus on vanity metrics like traffic, keyword rankings, CTR, etc. Those might be important leading indicators to help you establish confidence that you’re headed in the right direction, but ultimately what you care about are metrics that make a difference on the success of your business.

‍