#73: The Hypergrowth Curve

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This is a podcast episode titled, #73: The Hypergrowth Curve. The summary for this episode is: If you liked this episode, we bet that you’ll love our blog content. blog.drift.com/#subscribe Subscribe to never miss a post & join the 20,000+ other pros committed to getting better every day. ----- Why do some companies achieve Hypergrowth while others only seem to capture a small portion of a market? And what does that have to do with our decision to invest so much in our brand? David breaks down why we're in the third phase of SaaS and what that means for the future. -- Here’s how you can support Seeking Wisdom if you’re a fan of the show: 1. Subscribe on your favorite podcast app. 2. Leave us a five-star review. Here's how: bit.ly/5-Stars-Only. 3. Follow David (twitter.com/dcancel) and Dave (twitter.com/davegerhardt) on Twitter. 4. Learn more about Drift at Drift.com. PS. Get your HYPERGROWTH tickets using the promo code SEEKINGWISDOM and save $600 at hypergrowth.drift.com Yes.

Dave: Okay. This one.

Amy: Wait, can I pick?

Dave: Oh, we caught him off...

David: I'm just playing with My phone in this inaudible.

Dave: Yeah. crosstalk. We caught him off guard. Just like that Inaudible?

David: inaudible, Nah.

Amy: She's giving you the eye.

David: Yeah, she's giving me the eye, I like that.

Dave: Just don't do that. Good.

David: Respect. I was like...

Dave: We need to give her... crosstalk. You're in the talent too. You need a buzzer.

David: Yeah. My inaudible is going like that too.

Dave: It's hard, it's really hard not to do that. All right, can I go?

David: Are we recording?

Dave: Yeah, we're always recording. Triple check time. Okay. The other night, we were out.

David: Uh-huh(affirmative).

Dave: We were having a drink.

David: Yeah.

Dave: With this guy Paul, what's up Paul?

David: Okay.

Dave: The brand master.

David: Wizard.

Dave: Wizard.

David: Don't give out the last name.

Dave: No, I won't. I won't give out his last name. I can't even say the last name.

David: Too many secrets coming out.

Dave: We're at this dinner, having a drink, hanging out, and you started telling a story and I pulled out my phone under the table. I was like," I got to write this down, we got to do this".

David: Yeah.

Dave: I want to have you tell this story on the podcast, and we're going to turn it into something else, but I want, the seeking wisdom community... Give them the first taste, and we're going to talk about it.

David: I don't give out too many secrets on this.

Dave: It's okay. They don't do it... Seeking wisdom people do, but most people...

David: Okay.

Dave: Actually, if you think about it, we get almost 20,000 downloads of seeking wisdom and there's only been 255 star reviews.

David: Yeah.

Dave: So there's still a lot of people that...

David: Yeah, don't take action.

Dave: Don't do it.

David: Yeah.

Dave: All right.

David: This was amazing because I was... It's not often, it's very rare that Dave just turned to me after I said something that's like," that's a good story", and i was like," what, really?".

Dave: No, that's because most of them I've heard at least three times.

David: Oh yeah. You're like," here it goes again".

Dave: You don't always hit me with original content. That one, is all right...

David: That's cold.

Dave: I've heard this...

David: Do you hear this, do you hear this guy?

Dave: I'm like,"this is a new flavor". He just changed the person's name, he changed up the punch line.

David: Oh no.

Dave: All right. But wait, before you go.

David: inaudible.

Dave: My question though.

David: Yeah.

Dave: Is this... Sorry, I won't touch anything. Is this about... And If you're watching on YouTube right now, you'll see what we're talking about.

David: DHDs enforcing. Yeah, lets go.

Dave: Is this about where SAAS is going? Or is this where marketing is going? What do you see this?

David: No.

Dave: Okay.

David: We were talking about this in the context of SAAS.

Dave: Okay.

David: Right, and it's definitely where SAAS has gone.

Dave: Okay.

David: The more that I look at things, the more that I see that, everything follows the same trajectory.

Dave: Okay.

David: Whether it's, in this context, SAAS, or whether it's building, some other type of product, or movement, or service or what have you. I see everything follow the same trajectory.

Dave: Okay. You broke it down into three, I'm just going to help guide it. inaudible.

David: I'm going to whiteboard this later, right?

Dave: Yeah.

David: Now I've got this called.

Dave: Oh, you do have it called? I was going to just, refresh you.

David: Okay.

Dave: DC is going to white board this.

David: Okay. But only available on our YouTube video.

Dave: Yeah, if you're not there already, go there.

David: Uh-huh(affirmative).

Dave: DC's going to break this whole thing down on the white board.

David: We accept likes, on YouTube.

Dave: And comments.

David: and comments.

Dave: Comments are where it's at.

David: Yeah.

Dave: Yeah. Likes and comments. We're going to put a video up with this podcast, DC's going to actually get in front of the whiteboard and break this down.

David: Mm-hmm(affirmative).

Dave: This is how we give away stuff for free, you don't often get to get a lecture in front of a whiteboard from this guy.

David: Amy, do we have a slimming lens, for the YouTube.

Dave: Take us up on that. We have some filters.

David: We have a filter, filter slim?

Dave: We'll be all right. All right.

David: Yeah.

Dave: Break it down, tell me.

David: We were talking about SAAS.

Dave: Yeah.

David: And we were talking about, why, as we've talked about in the past, that we choose to invest so much in brands.

Dave: Mm-hmm(affirmative).

David: Right. But we've never given you the context for why we do this, and actually, why we do this and why I think about this flow that everything goes through, is why we focus on the product that we are focused on now. It's all super meta, everything's meta, and intertwined, and twisted inside this head here.

Dave: Mm-hmm(affirmative).

David: All right. What I was describing was in SAAS, the phase that we're in, there's three phases, We're in the third phase right now, we're in the beginnings of the third phase. I feel like everything follows the same path, and the first phase is, I call it" the Thomas Edison phase".

Dave: Okay.

David: And that is the phase around pure invention, can it be done, can something be created. And this is the hard science, or the hard thinking part of things where you're just like, it's the breakthrough moment.

Dave: Yup.

David: That's the first phase that SAAS went through, right in the early days. And SAAS stands for, what?

Dave: Software As A Service.

David: Okay. There you go.

Dave: Even if you're not a SAAS person, we have a lot of marketing people listening to this.

David: Yeah.

Dave: Another example is, early nineties, there were no blogging platforms, there were no website platforms. If you wanted to build a website, you had to do it all by hand.

David: Why don't we use that example.

Dave: Okay. Sure.

David: Easier for the people. We use the blogging example.

Dave: Yeah.

David: I've been blogging for a little bit now, long time.

Dave: Long time.

David: My wife, the super OG of the OGs.

Dave: Yeah.

David: Boss level 11. My wife had a company when she was in grad school, at NYU. She studied film and media and what have you, for her master's there, and she started a website that at the time was called," Girls on Film".

Dave: Okay.

David: It was basically, movie reviews by like 20 something, her and three of her friends.

Dave: Yup.

David: And, then that morphed into this bigger thing that was a network of websites, and it was called" Girls on Film"," Girls on Books"," Girls on TV", et cetera, et cetera. It was ultimately bought by a company called Oxygen Media, which is a cable TV channel, and what have you. And then she went over there, wrote a book, TV show, and all that kind of stuff. Anyway, when I described what the website was to people, it was effectively a blog. Except for; at the time that she was doing this, a long time ago, was that there was no software, this was the Edison phase. The way that you would put up reviews, every single day, her and her three friends, three co founders was to open up an FTP program.

Dave: Mm- hmm( affirmative).

David: Old school FTP program. Code and entire review in HTML, upload that file, up to a web server, push all the images, do all that kind of stuff by FTP. This is an old school Mac, back in the day. Fetch, she was using fetch FTP, for the OGs out there. And That's how she blogged every day, it was a super manual process. That was the Thomas Edison phase. Then we went on to the second phase, which we just passed recently, which I called the model T phase.

Dave: Right.

David: The model T phase is about, you've gone beyond invention. You're now in the second phase, the second inning, and the second inning is about how do you stand up the factory? How do you measure the factory? How do you build the process? How do you get efficient at that? And that was the beginnings of WordPress, blogging platforms, content marketing, inbound marketing, whatever you want to call it. That was that phase, and we've been going through that phase.

Dave: Yeah.

David: SEO mattered, content optimization mattered, companies like Moz came around.

Dave: And they use technology to make that early nineties stuff easy. Right?

David: Easier, yeah.

Dave: People like your average Joe, like me, could figure out how to build a website.

David: Exactly.

Dave: Because of things like, WordPress, Squarespace, whatever the tools are.

David: Exactly. That model T phase was all about enabling masses of people to do something, to make it accessible. AKA, the model T. Model T, Henry Fraud bought the car, which existed before him, into everyone's hands.

Dave: Yup.

David: So everyone could buy one. So at that point, it was easy to stand out in the model T phase, because there's not much competition in any given market. Your early adopters really win in that phase, and those companies that enable the early adopters really win.

Dave: Yeah.

David: They're able to start movements around, content marketing, inbound marketing, WordPress, what have you.

Dave: Well they're so many things that we've talked about on this podcast. That's a great example of the companies, or the people that won back then, simply, oftentimes just won because they were first.

David: Exactly.

Dave: They're the first person to do it.

David: Exactly. crosstalk.

Dave: First person to have a blog about Nike sneakers. Okay, boom. You win.

David: Or the first blogging platform, or the first person to rename a movement.

Dave: Yup.

David: Or any of those companies. And this exists over every single category, whether it's SAAS, with Salesforce or a blogging here with WordPress and inbound marketing, what have you. Then at some point, you enable enough people in the world, and it becomes noisy, a saturated market. And you can still grow and it is still effective, but then you move into the third phase. The third phase is where we are at with, in this example, content, content marketing and where we are with SAAS, I believe. That third phase is the P& G phase. If you don't know P& G, it stands for" Proctor and gamble", and there's CPG, consumer packaged good products that sells everything that you can think of in a supermarket. That is the phase where you have to figure out, why am I going to pay 20 cents more for Tide laundry detergent, then, Cheer... I think it's called Cheer.

Dave: Yeah.

David: Cheer laundry detergent, or insert another name there.

Dave: Or even still, most of those are owned by the same damn company.

David: Yup.

Dave: So it doesn't matter, you're just picking.

David: That third phase is where we are in content today in terms of written content. It is the third phase is where we are at with SAAS. What matters there is investment in brand, and standing out. You have only two choices in that market. Because you've gone through the second shift and there's massive amount of people and competitors, just like in SAAS there's hundreds of competitors there in your category. In that phase you have two choices, the first choice is you have to figure out how you are going to be top 1% overall in a massive category, super hard. That's about becoming Tide, that's about becoming Starbucks, that's about becoming McDonald's.

Dave: Yup.

David: That's about global brands, Global domination top 1%. And it's a really winner take all market at that end. The other option that you have in that same category, is to niche down into the smallest possible niche, that is still massive. Because now you're global, but that you can become, again, top 1% in your niche. And those are the two ways to win, and what you don't want to do is be anywhere in the middle, or be 99% in, at the global level, or down at the niche level.

Dave: And you see this so many, especially say that with SAAS companies, you see this everywhere.

David: Mm- hmm( affirmative).

Dave: I'll just use email marketing as a category.

David: Yes.

Dave: That's a well- known one, right?

David: Yup.

Dave: Everybody knew there's MailChimp, there's Constant Contact, there's every... A million of them, right.

David: Yup, a million.

Dave: But then what happened is then, these other came on. They said," oh, well we are the email marketing platform for, E- commerce".

David: Yup, E- commerce. Or for Shopify, or for this exact same thing.

Dave: Right.

David: That's where we are in SAAS. You have either two choices. And here's the dynamic that happens, that when you entered this brand phase, all of a sudden it becomes winner take all. In a way that wasn't clear before. So you see companies like, for example, MailChimp that you mentioned before, becoming bigger, and bigger, and bigger, faster. Even though there are more, and more, and more competitors in that market. Every day, there are more competitors in their market, but for some reason you look at them and they're becoming bigger, faster at this rate. And it's because they reached that top 1% in the market and they are dominating the brand. These people cannot come in.

Dave: Have both.

David: Yeah. They can't come in and penetrate this. They have to niche down and become top 1% in the niche.

Dave: Yeah. So I wrote a note. I don't even know if you remember that you said this.

David: I'll probably not.

Dave: But the reason I like this phase three, it's all about building an emotional moat.

David: Yes.

Dave: Right?

David: That is the motive.

Dave: That's what gets you today.

David: That's a thing that people don't understand. That first phase, in terms of technology company, let's say Software As A Service, as a category. That first phase, it's about novel invention, it's about patents, it's about intellectual property as your moat. Then you go into the second phase, the model T phase. It's not about intellectual property at that point. It might be about trade secrets, or things that you're doing, it's about your operational moat. Either you have a go to market advantage either, you have a cost advantage. That's what most companies do in that second phase, they develop a cost advantage. So they massively scale up so then no one can... They can be the lowest cost, they can be the Walmart in their category. But in the third phase, that Tide phase, there is no intellectual property moat. There is no operational moat, there is an emotional moat, that you have to build around.

Dave: Oftentimes what comes with that is people actually end up spending more to work, with you, or be a part of your brand.

David: Mm- hmm(affirmative). Because they self identify with that brand.

Dave: They self identify. People want a safe car for a family.

David: Mm- hmm( affirmative).

Dave: So they buy a Volvo.

David: Exactly.

Dave: Volvo's are expensive cars.

David: Yup.

Dave: They want a Jeep, a Jeep doesn't cost 10 grand like a Camry.

David: Yeah.

Dave: A Jeep is 30, 40 K.

David: Because there's and emotional moat that they've built up with a niche of people. That's where we are with SAAS. In any one of your categories, if you're in a SAAS company, you have a gazillion competitors. Now you need to invest. And this is why we invest heavily in brand, and we'll continue to. And why we think about building a global brand, not a technology brand, not a Boston brand, not a blah, blah, blah, boring B2B brand, but a global brand. Because we think this next phase is about, being top 1% in your market.

Dave: Yeah. What's your, lesson? Somebody listened to this, what is your takeaway for them, building a company in marketing, at a Company?

David: Yeah. In any category. Yeah. Doing anything that you're doing is... Understand which phase you're in. And then once you identify which phase you're in, phase one, phase two, phase three. That will dictate the tactics and strategy that you should build around, one, building your mode, and two, figuring out what are your advantages in that. Definitely if you're in a third phase... I need a name for that. Yeah.

Dave: Yeah. We'll come up with something.

David: Whatever.

Dave: Yeah.

David: The three phase, blah, blah, blah.

Dave: Yeah.

David: But, DC framework, three phase.

Dave: I think we've already used the DC framework for something, we'll come up with something else.

David: I just call it, inaudible. If you're in that third phase and you're trying to operate on cost efficiency.

Dave: Yeah.

David: Or go to market advantage, it's not going to work.

Dave: Mm- mm( negative).

David: Same thing if you're in that third phase and you're trying to invest in technical advantage, it's going to be rough. Vice versa, if you're in the first phase and you're trying to compete on brand, not going to work. So you have to understand what phase you're in, and that will dictate the tactics that you have to build and the strategy that you build.

Dave: And is the phase based on your business or is it based on the industry that you're in?

David: No it's based on the market.

Dave: Okay.

David: The phases exist outside of your company. Your company is not dictating the phase that we're in, it's just, where are we in? Just like, these are at third phase. I'm holding up an iPhone, this is the third phase technology. So this smartphone, I had first phase technology when I was... I had a touch screen thing like this a long time ago, before DHD was alive.

Dave: Yeah.

David: And it was based on Linux operating system. It was basically like the apple Newton almost, Linux- based.

Dave: Yeah.

David: And I had that thing it was unusable. Then I had the second phase technology. And now we have third phase technology, which, there's technical innovation in this phone, but this is bought on brand.

Dave: Yeah.

David: This is bought because this is my ninth phone.

Dave: There are a million phones that do this.

David: Same thing.

Dave: Yeah.

David: But then why do I pay more for this thing? Because it's an iPhone, because it's apple.

Dave: Totally.

David: That's why they invest in brand in third phase.

Dave: I love that.

David: Stop giving away the secrets.

Dave: Sorry, That's too much. crosstalk.

David: inaudible Give these people, too many secrets.

Dave: That's good.

David: I still don't have a thousand five- star reviews.

Dave: No, not even close.

David: Not even close.

Dave: It's 250. We've sold more hyper- growth tickets than that.

David: Oh, my. sad. Come on, people.

Dave: Yeah.

David: We were going to film a video on how to leave a five star review. Okay?

Dave: Okay. That's going to be... That's That whiteboard video.

David: That's the next podcast. How to leave a five star review.

Dave: All right, well I can't. Before we sign off, I can't not shout out, shout out the fan love. So this is from MC pro 21, what's up MC pro. This one gave me chills. Hands down, this is the best marketing sales business podcast I've discovered in months, Dave and David never failed to deliver incredible value. You can expect consistent thought leadership and they always speak their mind, that's you, love everything you guys are doing. Keep crushing it. Hand raise emoji.

David: He must know us, hand raise, Let's go where's he from, or she?

Dave: US.

David: US, All right.

Dave: Yeah. Refreshing, thoughtful and practical.

David: Wow.

Dave: That's pretty nice.

David: That's nice. I don't know if that's me.

Dave: All right. We got to go record a video.

David: Okay, Five star review, leave it, leave six if you can or seven. But leave five star reviews. Remember, Amy, D H D shout outs. Danielle now goes by D H D.

Dave: D H D.

David: Like a G.

Dave: And I See All you people, I get the alerts. All the Seeking Wisdom listeners that are buying tickets for hypergrowth. There's going to have to be a whole like section of the crowd.

David: They should get everybody here.

Dave: They should.

David: We're going be giving out gear.

Dave: They should.

David: We haven't talked about this, but if you come, to hyper- growth

Dave: Now we have.

David: Okay. Now, I'll release the secret. Everyone's going to be leaving with some gear, they're going to be looking right. And maybe the seeking wisdom crew will be leaving with their own...

Dave: Maybe.

David: Gear.

Dave: FYI. This is how, this is a little sneak peek behind the scenes, this is how it always works. We'll be on the podcast, DC will say something that we haven't discussed before. Now, it is real. Amy and I are like, oh boy, we need customized swag For everybody this is great.

David: No just for Seeking Wisdom.

Dave: Just for Seeking Wisdom, yup.

David: And then everyone else.

Dave: The whole crowd is going to be seeking wisdom.

David: I don't know. I'm going to check those ticket sales.

Dave: All right. I keep bumping in the camera.

David: All right.

Dave: Sign us off.

David: All right, see ya, It's been great. Five star reviews only. We accept comments, likes, and gifts on YouTube.

Dave: Love it.


If you liked this episode, we bet that you’ll love our blog content. blog.drift.com/#subscribe Subscribe to never miss a post & join the 20,000+ other pros committed to getting better every day. ----- Why do some companies achieve Hypergrowth while others only seem to capture a small portion of a market? And what does that have to do with our decision to invest so much in our brand? David breaks down why we're in the third phase of SaaS and what that means for the future. -- Here’s how you can support Seeking Wisdom if you’re a fan of the show: 1. Subscribe on your favorite podcast app. 2. Leave us a five-star review. Here's how: bit.ly/5-Stars-Only. 3. Follow David (twitter.com/dcancel) and Dave (twitter.com/davegerhardt) on Twitter. 4. Learn more about Drift at Drift.com. PS. Get your HYPERGROWTH tickets using the promo code SEEKINGWISDOM and save $600 at hypergrowth.drift.com Yes.