No one knows the Etsy story better than its Chief Product Officer, Kruti Patel Goyal. She joined Etsy in 2011 when the entire company was about 150 people with ~$500M in gross merchandise value. Today, Etsy has over 1,500 employees, with 150 people in Kruti’s organization alone. Last year, the company sold over $10B worth of goods.
The journey to Etsy’s success was a tumultuous one — as is the scaling journey of any startup. In Kruti’s own words, the journey at Etsy has been “a rollercoaster ride.” As the company has evolved, so have its product needs. Kruti shared the three lessons she learned from how Etsy drove step-change growth by transforming its product prioritization strategy.
The Core Business: The Vital Few
When a company experiences early growth, it’s easy to get into growth hacking mode — pursuing all the “worthwhile many” ways that could help the company grow even faster. However, leaning into growth too early can be a critical mistake, especially if your company hasn’t yet solidified its core business strategy. Instead, it’s important to focus early on the “vital few” initiatives that will move the needle of your business, and equally importantly, to decide what not to work on in service of the Vital Few.
In the early years, Etsy invested disproportionately in new growth opportunities. But, the company hadn’t yet developed the muscle to intentionally drive growth for its main product: the marketplace. Ultimately, investing in these growth opportunities too soon came at the expense of investing in the core marketplace which contributed to Etsy’s slowing growth.
To turn this trend around, Etsy committed focus to driving growth in its marketplace by defining a long-term growth strategy that consisted of four pillars:
- Best-in-Class Search and Discovery
- Human Connections
- A Trusted Brand
- Our Collection of Unique Items
At that point, it was up to the Product team to build a plan. To tackle the task, cross-functional leadership held a multi-day Product Strategy Workshop where they discussed, debated, and scribbled on countless post-it notes. The group ultimately identified and prioritized eight of the highest value initiatives that would improve the experience of its customers — both buyers and sellers — these were the “vital few”.
Each initiative was fully staffed (with Product Managers, Designers, Engineering Managers, and Engineers). Next, each initiative was given a customer-facing outcome statement to serve as the mission, and a set of quarterly goals to make that mission actionable. As a result, every team was equipped with a clear Context (connection to the business strategy,) a Mission (customer-facing outcome), and Constraints (resourcing and targets) which empowered them to make decisions and move quickly .
Investing in Growth: Portfolio Theory
From 2018 to 2019, Etsy was laser focused on strengthening its core business. By 2020, Etsy was ready to revisit new growth opportunities and innovate ways to expand the business. 2020 was also a transformative year for the company. As the COVID-19 pandemic proliferated, people flocked to Etsy to buy masks while traditional retailers struggled to keep up with demand, creating millions of new buyers for the company to manage. In fact, in 2020, Etsy sold more than $740M in masks. Even after mask sales leveled off later in the year, more people than ever were shopping online. And, alongside this cultural shift to general ecommerce, consumers also demonstrated a greater appreciation for small businesses. People were more interested than ever in finding unique items made by real people to fill the spaces that they were spending their time in — decorating their home offices, kids’ play spaces, and finding gifts for loved ones that they couldn’t see in person.
As 2020 came to a close, Etsy was in a very different position than at the end of 2018. The core marketplace was a lot stronger because of the investments that the team had made over the previous year and a half, and the company now faced a new challenge of winning the loyalty of all the new customers who had discovered Etsy in 2020. The core business was mature and stable enough that Etsy was ready to rebalance its priorities and explore new opportunities to drive growth. After studying several tried and true models, Etsy’s management team developed the following portfolio framework:
They defined investments into three categories with different time
horizons and different levels of certainty or uncertainty.
- Improvement: Optimizing existing experiences with the highest level of confidence in the near-term.
- Expansion: Building new products and experiences with lower certainty and a medium term impact horizon.
- New Business: Finding new business opportunities, which have a high potential impact but with many more unknowns and a longer term investment horizon.
Staying Focused: Focus Flywheel
Once Etsy strengthened its core business and created an intentional framework for product prioritization, they codified an operating rhythm to maintain focus and accountability in the form of meetings that occur on a weekly, monthly, and quarterly basis.
- Weekly Experiment Review: The weekly experiment review is the most granular review of the Product org’s work. The meeting is led by the Analytics team and is attended by senior Product and Engineering leaders. The focus of the weekly review is to discuss the learnings from the completed experiments from the previous week.
- CEO Monthly Metrics Meeting: The monthly metrics meeting serves as an accountability gut check across all functional areas of the business, and is attended by senior leaders across the company. At the meeting, the Product org shares progress towards goals across the full product portfolio as well as at a more granular initiative level.
- Quarterly Product Reflection: The goal of the Quarterly Product Reflection meeting is for the entire Product org to zoom out across the whole portfolio of priorities and discuss one key question: “Do we have more or less confidence in our ability to achieve the outcomes that we set out to accomplish at the end of the quarter versus at the beginning of the quarter?” The meeting allows the org to evaluate the effectiveness of their current strategy and decide whether to stay the course or pivot.
The benefits of this operating rhythm are two-fold. First, it gives Etsy’s leadership team visibility into the work that’s happening on the ground while maintaining decentralized decision making at the squad level. Second, this methodology creates a recurring accountability function in which the team must check progress against the “vital few” initiatives and assess any necessary tradeoffs.
Narrowing Your Focus
It’s easy for startups to get carried away with new and exciting ideas一after all, you never know which growth hacks may be fruitful. But at a certain point, implementing all the initiatives your company can imagine won’t be as effective as zeroing in on the few vital things that will significantly move the needle on your core business. Without a sound, focused product strategy to ground your efforts, your team will be pulled into too many directions and lose concentration on the things that matter. Instead, think about your product initiatives as precious investments that need constant monitoring and measurement to stay on track. And with the right accountability structures in place, you can drive towards profitable and sustained growth.
This piece was originally published on FirstMark’s Medium here. Stay up to date: click here to get the latest insights, news, and events from across the FirstMark community.