Red Queen company death

When Innovation means chance of survival

Your market can outrun you. And it happens quicker than you think. Even if you don't do anything, innovation is the only thing saving you.

PMF, GTMF and Scaling are all connected to each other

You need to reestablish product and go-to-market fit all the time:

Over time changes in acquisition behavior and targeting:

It's just natural that you start to run out of easy-to-acquire users. Marketing scales just like any other silo and we widen our net.

This brings in suboptimal users which retain less and are overall a worse fit for our product. It might still be worth it due to our unit economics but the change is subtle.

It's natural to want to target more and different people. The bigger your current customer group is the less you will notice the slow erosion. That happens because it's buried in a bigger data set. It's very easy for bad customers to creep back in.

Follow user cohorts. Different behavior in engagement and retention are early warning signs that things are about to go very wrong.

Good user/ICP tracking is not optional.

Commoditizing Markets

An indicator in commoditizing markets is your free-to-pro rate going down. While maintaining product quality, your product is becoming too expensive for your markets.

Pricing change or extra product value needs to be delivered.

It's easy for PMF, GTM, or your scaling motion to go out of balance which in the midterm deteriorates the other 2. Especially as you grow, monitoring for warning signals becomes crucial.

While you are small, it's easy to defend your current growth model. There isn't much to defend. As you grow it becomes an additional cost.

Monitor conversion rates.

Overoptimizing

If you don't innovate the red queen effect can materialize. The rate at which your product deteriorates is becoming equal to or bigger than the rate at which you improve it

This usually means slow company death. Understanding these mechanics is crucial for anyone in product. It requires different skills in product managers.

Innovators become more essential than optimizers generally speaking.

Product-led growth models are in tendency seeing these dangers earlier because they depend more on tracking. Sales-led companies tend to rely too much on “product sense”.

Today's crazy markets don't allow that anymore.

Realistic Expectations in Practice

I learned in advising and leading product that this effect has to be prefaced rather than reacted to: