Experimentation and paid search

The next time you do a web search take an extra moment to see how the paid results compare to the top organic results. Sometimes the top link is the same for both.

This article, from the authors of The Power of Experiments, drives it home with this excerpt:

“Evidently, users who Googled ‘eBay’ (or another eBay-related search term), who had been clicking on the ad because they saw no reason to scroll down to the organic link just below it, were now instead clicking on the first organic search result. For these searchers, eBay essentially swapped in free organic clicks for each advertising click lost,” explain Luca and Bazerman. “In other words, much of the money eBay was shelling out to Google each year was a waste.” After the results of these experiments were published, 11 percent of large companies that were buying search ads in the same way as eBay discontinued that advertising.

It reminds me of that classic quote: "Half my marketing spend is wasted...I just don't know which half."

More importantly, it illustrates the need to continuously monitor and analyze data, all the while maintaining a strong culture of curious experimentation.

I wonder how much of Google's income is derived from advertisers who never bother asking if their high organic ranking might perform just was well as the results they're paying for...


The Acorn Method: How Companies Get Growing Again, by Henrik Werdelin

When I first met Henrik Werdelin he was a founding partner of Prehype, a "collective of entrepreneurial people who help each other build new ventures." My employer at that time had an agreement with Prehype to help us ideate and develop a new strategy for the organization's future. I always came away from those meetings with Henrik feeling both inspired and challenged; he forced us to look at our business in a completely new way.

When I learned that Henrik recently published a book called The Acorn Method: How Companies Get Growing Again, I immediately bought the e-version and started reading. I encourage you to buy a copy as well -- you won't be disappointed.

This quote from one of the first few pages provides the main concept behind the book:

I believe mature companies are like tall trees; they grow until gravity constrains them. They may shoot up rapidly, generating tiers of new branches and reaching great heights, but eventually, new growth can no longer successfully compete for resources with older branches higher up the tree.

The Acorn Method is a very quick read and, if you're like me, you'll end up with plenty of highlighted pages and notes to follow-up on. Highly recommended.


Experimentation Works, by Stefan H. Thomke

I can't remember who recommended this book but I'm glad they did. I'm talking about Experimentation Works by Stefan H. Thomke. The subtitle sums it up quite well: The surprising power of business experiments.

I'm still fairly early in this one but here are a few of my favorite highlights so far:

At Booking.com all employees can define a hypothesis and launch an experiment on millions of users without permission from management.

Even though the business world glorifies disruptive ideas, most progress is achieved by implementing hundreds or thousands of minor improvements that can have a big cumulative impact.

The serendipitous breakthroughs may be more likely to occur when managers are clear that understanding what does not work is as important as learning what does.

True experimentation organizations not only appreciate surprises, they cherish and capitalize on them.

I encourage you to take a few minutes to stop and think about each of those points individually. I'm particularly hung up on the last one. Why? Like a lot of people, I tend to view surprises as bad, mostly. An experiment that doesn't turn out the way I expected it to means I didn't know as much as I thought I did. I need to get past that though and embrace those surprises as the author suggests.

The book can feel overly academic at times as you'll sometimes think you're stuck in the middle of a textbook. If you skim through those sections and focus exclusively on the company success and failure stories I'm confident you'll find it worth the price of admission.


Secrets of Sand Hill Road

I decided to read Secrets of Sand Hill Road after hearing an author interview on one of my favorite podcasts. The VC market can be so mysterious and this book helped bring clarity to many aspects of the startup fundraising process. Here are just a few of the many excerpts I highlighted along the way:

Most VCs assume that the product that is initially conceived of and pitched is not likely the product that will ultimately prevail.

Max Planck, German scientist, put it best by saying "Science advances one funeral at a time." Simply put, it's hard to get people to adopt new technologies.

Products are either vitamins (nice to have) or aspirins (need to have); VCs want to fund aspirins.

How much money should you raise? The answer is to raise as much money as you can that enables you to safely achieve the key milestones you will need for the next fund-raising.

If you allow yourself or a VC to overvalue the company at the current round, then you have just raised the stakes for what it will take to clear that valuation bar for the next round and get paid for the progress you have made.

VCs love infinite learners.

Companies are definitely staying private longer, resulting in more of the appreciation of startups going to those investors in the private markets, at the expense of those in the public markets.

[Beware of becoming] the most advanced dinosaur, where you may think you look differentiated relative to others but are at risk of being the last generation in the evolutionary chain...