Growth Strategy

When new media technologies start out, their programming tends to be aimed at the mass market. It’s only when these technologies mature and their audiences grow that it becomes feasible to go beyond general interests and target segments of the audience with specialized content or commerce.

This evolution happened in the magazine industry, which exploded in the 1920s with new general-interest magazines like Reader’s Digest and Time but later targeted more specific interests with magazines like Jet, Sports Illustrated, and WIRED. This evolution also happened in television: As new technologies like UHF, cable, and then satellite emerged, programmers responded by developing channels like BET, Nickelodeon, and Zee TV targeted at specific segments of the population. Similarly, on the Internet, the early winners were “portals” that carried a broad range of programming. Next came e-commerce companies like Amazon and eBay that could address a long tail of interests—and now we’re seeing ever-more-targeted e-commerce companies such as Zulily, Warby Parker, and Julep.

What’s happening throughout all of these examples is a shift from broadcasting to “narrowcasting”, a term first coined by computing pioneer J.C.R. Licklider in 1967 about the “multiplicity of television networks aimed at serving the needs of smaller, specialized audiences”. Today, the Internet (and social media) enables us to target these segments more precisely. There’s an important nuance here, however: This targeting is not about narrowing per se, but about reaching and including segments that weren’t addressed before.

That’s why our newest investment is e-commerce company Walker & Company, which was founded by Tristan Walker to build a modern personal care brand for people of color. Globally, this is not a narrow audience given that a giant percentage of the world’s populations are people of color. But we believe Tristan is on to a big idea, because in the U.S., this segment appears woefully underserved—even though it is growing.

Brands catering to this segment are badly dated, and customer needs aren’t being met

I’m a huge basketball fan, and one of my favorite players when I was a kid was Walter “Clyde” Frazier in spite of the fact that he played for the hated Knicks (I grew up in Philadelphia and Washington, D.C.). Clyde epitomized cool, and he helped lead the Knicks to NBA championships in 1970 and 1973.

No offense to Clyde, but I think it’s a symbol of how neglected these markets are that one of the leading selling brands in the category hasn’t updated its spokesperson or its packaging in multiple decades…

People of color also have specialized personal care needs that are often not served by the global CPG (consumer packaged goods) brands.

For example, 80% of black and Afro-Latino men—and 30% of other races—suffer from Pseudofolliculitis Barbae (PFB) or “barber’s itch” due to curly hair follicles. The resulting razor bumps are not only annoying, but also can be unsightly and painful. Current leading selling shaving products tend to exacerbate this condition.

The market is large and growing

The population of people of color is growing in the U.S. and “over-indexes” significantly on beauty and personal care CPG products. For example, black consumers spend 2x the general population on cosmetics and 1.8x on skincare (Essence Communications, Inc.). And black women represent approximately 7% of the population but 30% of hair care spend.

We believe Walker & Company is extremely well positioned to build a big business catering to this market:

• Their first product, the Bevel shaving system for men (which they designed and manufactured), is impressively designed and executed — but more importantly it works. Clinical tests show that shaving with Bevel reduces razor bumps among men of color. More importantly, customers perceive that difference too: “Last razor I used had my face looking like nestle crunch. Been using @Bevel for some days now and my face still feels like a baby’s bottom”. “You guys did it! The first shaving system I’ve used that actually works as advertised. I will be a life long customer… Thank you…”

• The Internet enables efficient marketing to previously difficult-to-reach segments, and Tristan is quite adept at social marketing. He was the first business development person at Foursquare, and personally has 280,000 Twitter followers. Walker & Company takes customer satisfaction and feedback so seriously that he and his employees personally reply to and engage with every customer on Twitter.

• Results are early, but Bevel is off to a great start. They have gone to market with a five-part shaving system sold through a subscription format—and sales as well as customer retention have been strong out of the gate.

• There are numerous other huge segments in this market with under-served needs, and Tristan already has an extensive product roadmap for adjacent markets.

Yet it’s important to note that Tristan’s mission goes beyond profits. For the consumer, it’s hard to feel like a first-class citizen when you’re only able to buy second-class products. That’s why Walker & Company focuses on developing brands that solve acute physical problems (beginning with PFB) in the community—they won’t be making shampoo just to make shampoo.

Tristan feels he has found his life’s work at Walker & Company, and he is hell-bent on building the modern health and beauty brand for people of color. We’ve known Tristan for years, and consider him to be a charismatic, talented, and passionate leader. We look forward to joining him on this journey.

Many folks make the observation that it’s challenging to run a fast-growing technology start-up.  I personally think that’s a dramatic understatement.  It’s the hardest thing I’ve ever done…as well as the most rewarding.

I’d had very modest experience actually running a business when I got to eBay in 1999.  Most of my management experience had been in running functional groups within organizations, such as being the CFO of The Disney Stores.  I had a very brief stint running a business as CEO of, the now defunct movie superstore that Amazon steamrolled once it expanded beyond books.  But that doesn’t really count as it wasn’t really a business—for example, no viable business spends something like $40 million in marketing to sell something like $40 million in DVDs at a gross margin loss. went from filing to go public in December 1999 to being closed down in June 2000, ostensibly a casualty of the end of the “Bubble”.  I saw the writing on the wall and left as they were preparing to file.

But Meg Whitman was willing to take a chance on me in spite of this lack of operating experience.  Meg had been my hiring manager at The Walt Disney Company in 1990 when I joined their Strategic Planning unit.  Nine years later, after we both had departed Disney, she reached out about my joining eBay.  Frankly, my impressions of eBay going into those conversations was that it was a quaint website that sold lots of collectibles like Beanie Babies, and it was already public so that most of the potential upside had already been realized.  But Meg is quite compelling, and she successfully disabused me of those notions and convinced me to join—no small feat given the Bubble was still alive and well at that point and I had lots of other offers (companies in the Valley in the late ‘90’s were hiring anyone with a pulse!).

My first role at eBay was managing a fledging “Services” unit whose charter was to develop partnerships with companies to facilitate trade on eBay, such as bulk auction management tools or electronic postage.  And she gave me a whopping two employees to manage, one of whom it turns out was plotting to start a Baja Fresh franchise and soon left.

But I had joined eBay as part of a management “bench”, in the hope that a bigger job would materialize down the road.  And one quickly did when Meg decided to split eBay into two divisions with the launch of the International unit, and in early 2000 she appointed me as head of the legacy eBay North America business.  Fast forward, I ended up running that unit for about five years during its period of hyper-growth.  During that time I championed eBay’s acquisition of PayPal, and in 2005 I moved over to head PayPal during its hyper-growth period.  Having started my eBay career managing effectively one person when I joined, seven years later I was managing something like 5,000 people.  What a ride!

Over the course of my seven years at eBay, I discovered the experience and requirements of successfully running a hyper-growth business changes dramatically over time.  The best analogy I have for it is a sports analogy:

Employees = 1-10.  Player:

When I first started managing eBay North America, I recall I was managing about a half dozen people.  At this scale, I found myself involved in pretty much every decision.  Heck, I found myself making pretty much every decision.  It felt like I was on the field of play during a high stakes game, my adrenaline pumping as the action crashed all around me.  It was unbelievably exhilarating, and it seemed to be working—the business was growing like crazy!

Employees = 10-100.  Coach:

…Until it wasn’t working any more.  It turns out the number of decisions to be made scaled tremendously, seemingly even faster than the business.  The line of people outside my cube waiting for decisions kept growing longer, and it quickly became obvious that the old M.O. wasn’t going to scale.  I found I needed to hire talented people to supplement my efforts and delegate more and more decisions to them.  And I needed to manage these daily decision makers as a team, giving them high-level direction and coordination but watching from the sidelines as they executed the plays.  I had to become a coach.  I found it a bit less exhilarating, but it scaled a whole lot better and at least I was able to make it home at night.

Employees = 100-1,000.  General Manager:

And then almost just as quickly coaching wasn’t working any more.  The business continued to explode, and the folks I was delegating the daily decisions to soon found out they couldn’t make all of the decisions themselves either.  They now also needed to become coaches, building out their teams and delegating their decisions to their players.  And I found I now needed to coach these new coaches differently.  I still needed to give high-level direction, but other tasks soon became required such as setting high-level organizational goals, coordinating their efforts, and tuning the organizational relationships of these rapidly growing groups.  I had to become the general manager of this rapidly growing team.

Employees 1,000-10,000.  Commissioner:

By the time I moved over to manage PayPal, the size of the team had grown into the thousands.  And I quickly discovered that I needed to supplement my just discovered and nascent general manager skills substantially.  The organization was so big that the players on the field were now two or three levels below my direct reports.  I continued to set high-level direction, but I quickly found that the organization performed best when I executed a set of administrative tasks that I came to refer to as the “-tions” (pronounced “shuns”) such as vision, motivation, communication, organization, simplification, and coordination.  If I performed these “shuns” well, then the team was freed to devote most of their energies to the game.  With my sports analogy, I’m not sure now whether I was the team owner or the commissioner of the league, but I do know that I felt like I was in a Sky Box near the top of the stadium, squinting down trying to see what was happening on that distant field of play.

The most important discovery I made in this process was the recognition that I needed to quickly and continually develop entirely new sets of skills to manage the business effectively as it very rapidly scaled.  And given the rate of scaling, that required massive learning and adaptation at a ridiculously fast pace.  And given eBay/PayPal was a high profile business and I had a high profile role, any failures on my part to deliver would be widely known.  This was really, really hard work that needed to be done at a break-neck pace amidst very high levels of stress, much of it self-imposed.

I heard G.E. chief Jeff Immelt speak to a small group of executives during this time.  He said something that stuck with me, that leadership requires high levels of self-awareness and requires an intensive journey into knowing oneself.  Becoming a great leader requires you to know yourself, your strengths, weaknesses, and idiosyncrasies.  And it requires you to understand how others experience you, perceive you, and respond to you.

In looking back, I think he was precisely right.  Here are some of the tools I used on that journey to self-awareness that enabled me to scale from managing one to thousands of employees:

– Periodic 360 feedback from the organization.  It’s really quite straight forward: If you ask people for feedback and typically respond to it in a constructive way, then they will typically give it to you.  I usually awaited this periodic feedback with a sensation somewhere between dread and abject terror each time it was coming.  But done right this feedback was almost always constructive, and it invariably gave me a roadmap for what was working as well as what wasn’t, which led directly to the new skills I needed to develop.

– Working with a talented coach that I trusted.  My buddy John Donahoe, the current CEO of eBay, turned me on to the concept of using a coach in a session during my eBay tenure when I was pulling my hair out in frustration.  He observed that if world-class athletes like Tiger Woods (recall this happened last decade) utilized swing and strength coaches, why shouldn’t executives who aspired to improve use a management and leadership coach?  I ended up using a number of coaches over the years and one that helped me tremendously was a wonderful woman named Jane Creech.  Jane’s efforts in helping me develop my management and leadership skills made me better…and probably had an indirect impact on improving the lives of thousands of people at eBay and PayPal!

– Find a mentor or mentor(s).  I eventually made the realization that I wasn’t the first person who had gone through this situation.  One of the things that makes Silicon Valley unique is that it’s one of the few places in the world where hyper-growth companies are spawned with fairly high regularity.  So over time I developed a few close relationships with people who had “been there, done that” that proved very helpful to me.  John Donahoe was one of these people, as were a few members of my Young Presidents’ Organization who were in my forum.

The keys to success to using these methods are a hunger to learn and improve, a willingness to be vulnerable and share weaknesses as well as strengths, and often owning up with your organization to shortcomings that you’re working hard on improving.  And for me, these were the heavy-lifting parts of the process.

That said, it was an incredibly gratifying journey to be able to scale effectively from running a small start-up to leading a huge organization.  Personally, I found the early days to be a whole lot more fun.  I recall a conversation late in my eBay tenure with Scott McNealy about how I was becoming more effective but having less fun over the years as the business scaled.  He said something to me along the lines of “You idiot, don’t you realize that your job is to do the shit stuff so that everyone else in the company can be productive and happy?”  I didn’t then, but I do now.

[popover_trigger handle=”Right-Above-It”]Facts are simple and facts are straight
Facts are lazy and facts are late
Facts all come with points of view
Facts don’t do what I want them to
—Crosseyed and Painless, Talking Heads (written by Brian Eno and David Byrne)


[popover_content handle=”Right-Above-It”]Artist: Talking Heads
Track: Crosseyed and Painless
Album: Remain in Light
Released: 1980
Label: Sire[/popover_content]

[single_grooveshark code=”″ width=”150″]

Business growth at established companies tends to fall relentlessly over time in the absence of inspired innovation, an impact I affectionately refer to as “gravity”. If a CEO wants to fight this gravity and improve the long-term growth trajectory of his or her business, he or she needs to take proactive, concrete steps to make it happen.

As CEO, I was always trying to develop and test a portfolio of potential new initiatives to support business growth, targeted at both optimizing the core business as well as adding new layers of growth (see my last post on this topic about Adding Layers to the Cake). I wanted to identify completely new initiatives that would boost business growth—things we weren’t already doing. Things you are already doing are largely yesterday’s news, and their impact on future growth tends to wane over time. Implementing completely new innovations can help your business fight gravity.

At OpenTable, one of the most highly leveraged examples of an innovation to optimize our core business was developing a rigorous methodology to pursue and assess potential site improvements. A while after I became CEO of OpenTable, my predecessor Thomas Layton (who did a spectacular job positioning OpenTable for long-term success) sent me a fascinating video of a guy named Ron Kohavi talking about Amazon’s approach to something he called data-driven product development. Here’s an old link to one of his presentations (FYI, it only works sporadically):

The video details how Amazon rigorously deployed A/B testing to optimize website efficiency. Kohavi starts the presentation by showing a number of different executions of the same feature that they had tested over time, and he asks viewers to vote on which they thought had performed better. The results suggest that the folks in the audience—all website geeks—were not able to consistently pick the winning execution. That was mildly surprising. But what was astonishing was the delta between the results driven by different executions of the same feature: what often appeared to be subtle changes could drive huge improvements in performance!

In the video, Kohavi also talks about the impact of the “HiPPO” (Highest Paid Person’s Opinion) in the product development process. Not surprisingly, most HiPPOs believe that they know intuitively what will work best (spoken by the former HiPPO at OpenTable). But pretty much none of us have the product instincts of a Steve Jobs, and Kohavi makes a very compelling case for letting the data and not the HiPPO make the decision.

So we resolved to test data-driven product development as one of OpenTable’s potential core business optimization initiatives. We tasked a talented product manager, Julie Hall, to lead the effort and we procured tools to inform the effort. For the art side of the effort, we found the low-cost and highly efficacious service that enabled us to get qualitative user feedback literally overnight to inform what we planned to test. And for the science side, we bought the overpriced but also highly efficacious “Test & Target” system from Omniture (developed by Offermatica, now owned by Adobe) that enabled robust quantitative measurement of a number of simultaneous A/B tests.

These two tools worked together marvelously. One time, we literally stumbled upon a big “improvement opportunity” (a.k.a. a nasty usability problem on the site). We used to task a handful of unregistered users with making a reservation. But we watched in horror as a significant minority of the test users got trapped in our “Sign-In” functionality and couldn’t complete their online reservation. In the real world, they would probably get pissed off and simply pick up the phone (OpenTable’s biggest competitor for consumers) and call the restaurant, a disaster for our user acquisition, brand affinity and OpenTable economics.

Here is the offending page:

The problem we encountered was that non-registered users would set the radio button that said “I am a new OpenTable customer” and then fill in their email address and select a password….which sat under the “I am an OpenTable member” section. This combination caused the page to return an error message.

In response, we developed alternative treatments of our Sign-In functionality and tested them via Test & Target. The winning executions presented non-cookied users with a form tailored directly to new users, with clear visibility of a link for existing members to “Sign In”:

After the user hit the “Complete Free Registration” button, we then presented them with a popup that prompted them to register to become an OpenTable member:

These simple changes boosted our reservation success rate by 10% over the prior implementation. And a 10% improvement in the revenue stream that comprised well over half of the company’s total business due to one simple change was a monster win for the business.

Over time, the data-driven product development methodology at OpenTable matured into a highly disciplined testing regimen. Hundreds of tests have been run in the past few years. Not all were homeruns like the change above, but lots of singles and doubles supplemented the occasional home run to have a highly material impact on the business. I can’t recommend a rigorous data-driven product development process enough to managers of website businesses—it’s extremely low-hanging fruit in the pursuit of growth.

Other examples of core business optimization initiatives that helped OpenTable boost growth included:

  • Developing a new version of our enterprise software used by restaurants that improved search-to-reservation conversion by having the software better mimic the decision-making process of the person at the host stand
  • Redesigning key pages of the site to improve their efficiency, such as a complete overhaul of our search results pages (tested thoroughly through A/B testing)
  • Focusing dedicated resources on optimizing the percentage of OpenTable restaurant customers who had “make an online reservation” links on their own websites, as well as improving the visibility of those links
  • Applying concerted product and engineering efforts to boost our ranking in search engine results
  • Hiring a lot more sales people to accelerate the acquisition of restaurants using OpenTable (not product, but highly effective)

The key takeaway here is that all of the above were new, concrete initiatives that were not yet part of the company’s arsenal. Their successful deployment helped fight off the impact of gravity and led to accelerating growth for the company.

Businesses don’t grow themselves.  One of the most important jobs of a CEO is to aggressively define and pursue a growth agenda for his or her business.  Why is this important?  Growth typically improves a company’s competitive position and provides increased scale and leverage, and investors clearly value growth.

The pursuit of growth continues to be important regardless of the lifecycle of the company.  Obviously it’s critical early in a company’s life… or it won’t be a company for long.  But it continues to be important as a company develops.  Virtually all businesses, even hyper-growth ones, inevitably experience slower growth as they get larger, with their growth rates falling relentlessly back down to Earth over time.  I call this effect “gravity” and it will weigh down even the most promising of companies—unless a CEO can find a way to accelerate growth and positively change the long-term growth trajectory of the business.

The first real operating job I had was managing eBay’s U.S. business in mid-2000, which included the website.  Virtually all the revenue—and more than all of the profits—of the eBay company came from the U.S. unit at the time, and despite the bursting of the bubble, EBAY was still trading at highly robust multiples.  So you can imagine the terror I felt when the U.S. segment failed to deliver month-over-month growth for the first time ever in my first month on the job.  The heavy weight of sky-high growth expectations was showing the first signs of a potential collision with the brutal effects of gravity.

It was clear we needed to quickly define a growth agenda that had the scale to fight gravity’s impact.  We quickly narrowed the options down to a few: spend more marketing or spend it more efficiently, innovate the product, or buy a company to help us grow.

Marketing had some leverage, but it was limited.  eBay was already one of the biggest marketers on the Internet and efforts to optimize spend were already underway.  M&A, on the other hand, felt both desperate and was controlled in a separate part of the organization.  So we quickly turned our attention to focusing on product innovation.

One of the first places we looked for growth was in buying formats. at the time enabled the community to buy and sell solely through online auctions.  Many in the community thought this was the magic of the site, and it clearly helped propel the company to a very strong start.  But auctions intimidated many prospective users who expressed preference for the ease and simplicity of fixed price formats.  Interestingly, our research suggested that our online auction users were biased towards men, who relished the competitive aspect of the auction.  So the first major innovation we pursued was to implement the (revolutionary!) concept of offering items for a fixed price on, which we termed “buy-it-now”.

Buy-it-now was surprisingly controversial to many in both the eBay community and in eBay headquarters.  But we swallowed hard, took the risk and launched the feature… and it paid off big: Buy-it-now complemented auctions well, brought new users and new listings to the site, and became a very important driver of growth for many years.  These days, the buy-it-now format represents over $40 billion of annual Gross Merchandise Volume for eBay, 62% of their total.

With an initial success, we doubled down on innovation to drive growth.  We introduced stores on eBay, which dramatically increased the amount of product offered for sale on the platform.  We expanded the menu of optional features that sellers could purchase to better highlight their listings on the site.  We improved the post-transaction experience on by significantly improving the “checkout” flow, including the eventual seamless integration of PayPal on the eBay site.  Each of these innovations supported the growth of the business and helped to keep that gravity at bay.

I came to call this process of layering in new innovations on top of the core business “adding layers to the cake”.  Much of the natural effort in the organization is spent on chasing optimization of the core business.  This makes sense, as small improvements in a big business can have a meaningful impact.  But there is huge potential leverage to adding layers of new, complementary businesses on top of the core (aka “cake”).  In the case, buy-it-now, stores, features, checkout and PayPal integration were all new initiatives that layered on top of the core business but added something new to it.

The eBay company in its first decade is a good illustration of the impact of “layers on the cake”.  eBay U.S. was the company’s original business, and my team worked tirelessly to optimize it and add layers on top of it.  And at the company level, the eBay Inc. management team also looked to add layers.  Our first was international expansion, which started in earnest in the early 2000’s.  We followed with payments, facilitated by our acquisition of PayPal (and worth noting here that PayPal’s early growth was primarily as the payment functionality on the eBay marketplace).  Here’s what the result looked like at the company level:

Source: eBay SEC filings

eBay U.S. clearly was a fantastic business in and of itself, and it demonstrated strong, sustained growth.  At the same time, the international and payments layers grew from virtually nothing in 2000 to around 60% of the company’s revenue by 2005.  As a result, the overall company grew dramatically faster than its original core business and successfully fought off the impact of gravity for a decade.

And the market rewarded the company handsomely for this growth.  Here’s EBAY’s stock price during the period:

Source: monthly closing price for EBAY on NASDAQ

After eBay, I continued to deploy the layers-on-the-cake approach at the other Internet companies that I’ve managed.  At PayPal, the key layers we implemented there were international expansion, improving PayPal’s offerings for merchants who wanted to sell outside of the eBay platform (called “Merchant Services”), and starting to offer credit on top of our payments business.  We even trialed a text-based mobile payments product in 2006, although the market wasn’t quite ready for it at that time (I’m convinced the product’s developers and I were the only people who ever used it).

During my time at OpenTable, the key layers we introduced included building a robust set of mobile applications that expanded diner use cases, expanding internationally (again), introducing a new “Connect” product that meaningfully increased the addressable market of restaurants, and developing yield generation products that helped restaurants attract additional diners.  These initiatives helped OpenTable overcome gravity.  For example, year-over-year revenue growth rates accelerated from 23% in 2009 to 44% in 2010.

Two other illustrations of the success of this layering approach are provided by two of the most successful growth companies of the past decade: Apple and Amazon.  Steve Jobs and the Apple team relentlessly added new layers at Apple that sat on top of their original core business of computers, including the iPod, iTunes, the iPhone and the iPad.  And Amazon in recent years has innovated incredibly skillfully beyond their core physical merchandise business, adding layers such as Prime, digital goods, Amazon Web Services and the Kindle and now Fire digital devices.  These very large companies demonstrated explosive growth pretty much entirely through brilliant innovation.

Innovation clearly is THE success model on the Internet.  It explains how Google emerged as the dominant player in search, despite being relatively late to market and competing with established companies like Yahoo and Microsoft.  It explains how PayPal buried the other online payment sites that started around the same time, including and, despite these companies having preferred access to the massive eBay and Amazon platforms, respectively. And it explains how Facebook has come to dominate social networking, even though it was very late to market relative to Friendster and MySpace.

These winning Net companies are incredibly strong at product innovation.  They invest in it, they create cultures that support it, they prize it and they reward it.  The companies above that failed to capitalize on their early success arguably did not.  The best innovations improve and compliment the core business of a company, taking advantage of and enhancing its most valuable assets.  Diversification outside of the core business is a much more challenging strategy.  The further a company strays from its core in its innovation, the longer the odds of success.

I’m a huge believer in the potential for innovation to drive results for all companies, but particularly for technology companies.  Core to the CEO’s job is to rise above the day-to-day requirements to keep his or her vision far out on the horizon, proactively delivering new innovations today that have the impact to materially boost the long-term growth of the business in the future.