What startups can learn from FreeCharge and Flipkart about growth hacking

Monday May 23, 2016 , 7 min Read

I was recently invited to a startup event where one of the panel discussions was on “growth hacking”. In case you don’t yet know what this concept means, here is the first search result on Google.

The members of the panel brought out several good points on the subject. The overarching theme of the discussion was around growth hacks creating or enabling rapid scale. At first thought, this would seem like a no-brainer. After all, growth and scale are nearly synonymous, especially in the world of startups and VCs.

Image credit- Shutterstock

However, I was having difficulty accepting that ‘scale’ is the most important aspect of growth hacking. After all, it directly conflicted with one of my favourite articles, Do Things that Don’t Scale, by Paul Graham of YCombinator. The article’s conclusion also serves as a synopsis:

… the unscalable things you have to do to get started are not merely a necessary evil, but change the company permanently for the better. If you have to be aggressive about user acquisition when you’re small, you’ll probably still be aggressive when you’re big. If you have to manufacture your own hardware, or use your software on users’s behalf, you’ll learn things you couldn’t have learned otherwise. And most importantly, if you have to work hard to delight users when you only have a handful of them, you’ll keep doing it when you have a lot.

As counter-intuitive as it might seem, is it possible that growth hacks have been the result of actions and things that are unscalable?

One of the examples discussed by the aforementioned panel was Airbnb’s integration with Craigslist – with good reason too. After all, since Uber’s Andrew Chen used Airbnb as an example to explain growth hacking, it has become one of the best case studies on the subject.

Image source

The Craigslist integration though was anything but trivial. It required visiting every Craigslist and scraping the names and codes for every region. Furthermore, there was the issue of the anonymous email assigned by Craigslist. This function had to be turned off and replaced with a link to the Airbnb listing. And to ensure that the listing stood out among the standard Craigslist fare, the platform’s limited HTML support had to be taken into consideration as well. As Chen observed:

This kind of integration is not trivial… I wouldn’t be surprised if the initial integration took some very smart people a lot of time to perfect. A traditional marketer would not even be close to imagining the integration above — there’s too many technical details needed for it to happen. As a result, it could only have come out of the mind of an engineer tasked with the problem of acquiring more users from Craigslist.

Indeed, who would be so maniacally focussed on the integration, obsessed to nail every single detail? Perhaps only someone who had to rent out their only apartment to strangers and sell special edition cereal boxes to make ends meet, as was the case with Airbnb’s founders.

Image source

Would Airbnb have executed on its Craigslist integration as flawlessly if they hadn’t lived through the experience of wooing the customer in such an intimate manner?

Hiring

I recently met someone who was formerly part of the senior leadership at an Indian consumer-Internet firm that is somehow always in the news and portrayed as a cautionary example for startups.The most obvious question that I asked him was, “What went wrong?” He believed that it was because of employees who got into the firm not suiting its culture. I thought to myself,

They didn’t ‘get in’ accidentally. You hired them!

The above episode reminded me of the first point that Graham discusses in his article: the unscalable ways in which startups go about hiring and how it contributes to their success. It takes just a little bit of digging to find out that all is not doom and gloom in India. There are indeed extraordinary examples of unscalable growth hacks in hiring that have proven extremely effective.

FreeCharge

Just how important is hiring to achieve scale? As Kunal Shah, CEO and co-founder of FreeCharge admitted,

We ran into a couple of roadblocks in trying to scale. The biggest challenge was recruitment — it was especially difficult to attract talent in Mumbai.

So how did Kunal overcome this problem? In September 2009, Naman Sarawagi wrote a guest post on the various prepaid mobile recharge services in India. Kunal liked his post enough to reach out to him. Naman eventually became FreeCharge’s first employee. A few years later, Kunal also voluntarily ceded the title of CEO (and the corresponding ownership that it comes with) to Alok Goel, in the best interest of the firm.

Would it be fair to hypothesise that FreeCharge’s success can be attributed, at least in part, to such highly unscalable hiring methods such as patiently reading articles to find potential hires or giving up control of the firm to non-founders?

Flipkart

These days, a lot of people have a lot of things to say about Flipkart. It has now become fashionable to bash Flipkart and point out that the markdown of its valuation was the result of injudicious spending and high volatility in its senior management. While there is much truth in these claims, Flipkart’s beginnings paint a starkly different picture.

For nearly two years, from 2007 to 2009, at a time when Flipkart was handling about hundred orders a day, it was a bootstrapped business run only by its founders, Sachin and Binny Bansal. When they finally hired Ambur Iyyappa, Flipkart’s first employee, they might never have guessed that he would also trigger a growth hack. As it turned out, Iyyappa had a photographic memory, one that was immensely useful in streamlining the order management process between the delivery boys and the vendors.

Flipkart-growth-hack — Image credit- Flipkart Stories

Iyyappa’s significance prompted Binny Bansal to admit,“He was our human ERP until we reached a thousand orders a day… Iyyappa would know exactly which books were pending to be bought, which customers were waiting for delivery, etc. When a customer called, he would know exactly what was happening with his or her order without looking at the systems. He had also found an effective way of pasting all this order information into Gmail and using that as an ERP / servicing search engine for orders!”

With an operational model that depended on human efficiency, the obvious question was about scale. In other words, how do you grow an organisation while maintaining the high standards established by an outstanding employee? Remarkably, for Flipkart, the most obvious solution to this problem was to build an automated system inspired by Iyyappa. As Sachin Bansal revealed:

Our current order management and inventory management systems are an inspiration and continuation of our previous order management and inventory management systems that Binny and I wrote… And the order management and inventory management systems that Binny and I wrote were basically made to replace Iyyappa! We were trying to understand what Iyyappa did on a day-to-day basis.

Would a generic, off-the-shelf (and therefore more ‘scalable’) process management system have served as well as the one inspired by Iyyappa?

In light of the above examples, perhaps there is reason enough to redefine the term ‘growth hack’, as follows: