Traction is the Goal. Everything Else is Distraction.
How to focus on what matters at every stage of your product roadmap.
What is the one thing that both investors and entrepreneurs care about? It’s growth or traction.
The problem is that traction means different things to different people. And, it’s not enough to pick any metric for the y-axis of your hockey stick curve that conveniently happens to be going up and to the right and pass it off as traction.
Instead, you have to pick a single metric that serves as a reliable indicator of business model growth.
This begs the question: How do you measure traction?
In today’s issue, I’ll share how to reliably define and measure traction for your business and show you how to use it to drive focus on what matters at every stage of your product.
What is traction?
While it is tempting to measure traction in terms of revenue or, better yet, profit, the problem with both of these metrics is that they are trailing indicators. They tell us that the business model did indeed work in the past, but they don’t necessarily tell us why or how to grow the business model in the future.
A better definition of traction focuses on leading indicators that can predict future business model growth.
Future business model growth comes from past customer actions.
We can model these past customer actions as macro steps in a Customer Factory:
Traction, then, is the output (or throughput) of your Customer Factory. Unlike relying on revenue, this approach converts revenue into something more actionable — customers and their actions that lead to traction.
For example, traction in a coffee shop is better measured by the weekly coffee cups sold. Even better is turning that metric into the number of customers that bought those cups of coffee (probably not one-to-one) and understanding leading metrics like traffic per week, repeat visits per week, and referrals per week, which will do a lot more to understanding how to grow this business than just watching weekly revenue metrics.
If you have a multi-actor model like Facebook with users and customers or Airbnb with buyers and sellers, you’ll need to build two customer factories — one for each side that plugs together.
The universal job of any business is to build a repeatable and scalable customer factory.
The Customer Factory isn’t just a cute metaphor. The reference to a factory is intentional because it opens the door to systems thinking.
The slowest machine on a factory floor always constrains throughput. Identify and improve that step, and you improve throughput (theory of constraints).
Business models are no different.
This is the key insight for focusing on what matters and ignoring the rest.
In the following sections, I’ll highlight how to use the Customer Factory metaphor to define your go-to-market strategy by product stage.
1. Business Model Fit
Before building out a real-world factory, it would be smart to run some quick numbers to test feasibility and viability. If the factory doesn’t have a chance of turning a profit, why would you build it?
You can do the same with any idea.
Starting with a minimum success criteria goal and target pricing and customer assumptions, you can test the feasibility and viability of your Customer Factory.
Mindset: Simple models help us understand the complex.
For how to do this, check out the Business Model Design masterclass bundled with a newsletter subscription.
2. Problem/Solution Fit (Demand Validation)
Next, we need to get the factory running. But before buying expensive equipment, wouldn’t it be prudent first to study, then test demand — and even better to get some orders in?
That’s the deliverable from the Problem/Solution Fit stage - Validate demand through repeatable sales.
More specifically, you acquire “qualified” early adopters (raw materials or leads) into your customer factory. A qualified early adopter is someone who has taken a tangible action, like expressing strong interest or preordering, toward becoming a happy customer.
Contrary to conventional belief, you almost never need a working product to acquire users (and customers).
Mindset: Sell before you build.
Another point to emphasize here is repeatability, a fundamental system property. Simply acquiring X customers to declare problem/solution fit isn't enough. You need to build a system that can repeatedly acquire X customers/week to keep your customer factory running.
Mindset: The Customer Factory never sleeps.
3. Solution/Customer Fit (Value Delivery)
After validating sufficient demand, as defined by your traction model in step 1, you turn your attention to converting your newly acquired users into happy customers by moving them through the steps: activation, retention, realizing (keeping) revenue, and asking for referrals, in that order.
As before, it’s important to emphasize that the factory doesn’t go to sleep at this stage. In other words, your Customer Factory needs to acquire new users continually. But you shouldn’t move everyone through the factory at the same pace.