Raw thoughts from Alex Dong

Startup = growth * quality

The most important job as a founder is to build a healthy growth-quality ratio into the company’s culture. A startup with great software but small number of users has only modest success. A company enjoying a dominate market share with poor quality products will gradually see its users shifting away.

From a businessman’s perspective, quality is only one of many factors that determines whether the company will succeed. The quality needs to be good, but not necessarily great. The quality should be good enough so that the middle of the bell curve is happy. Any further investment in quality is a waste of opportunities. Market share growth can fix quality problems because the company will have time to go back and refine the product. Microsoft and Cisco are two companies who are famous for their continuous improvement approach. They would bombard a new industry with shitty 1.0 products and then keep releasing better quality every release. PG’s essay on startup = growth is a good argument for this point of view 1.

From a craftsman’s perspective, quality is the most important factor. Growth is the natural next step. If you build an excellent product, people will come 2. The product will mostly sell itself. It will help you to focus on doing what you’re really good at. The craftsman’s reputation would accumulate slowly over the years and this “branding” will gradually deliver a very nice compound interest 3. 37signals’ products are great but not 100 times better than their competitors. It is their reputation from RoR and the clear stance that catapult them to such a high level.

It is naive to say one approach is better than the other. Although given the constraints of resources, startups usually have to pick one at the cost of the other.

The best companies are the ones who have an excellent and healthy execution on both growth and quality.

Apple has a few products that are good enough to be collected by MOMA, yet its quarter-by-quarter growth has given it a tremendous scale advantage to build a highly optimized supply-chain. When people says “if it weren’t for Tim Cook, the iPad would cost $5,000”, they really meant that it’s the growth that allows Apple to cut down their cost that much.

As a artistic software craftsman, this is a reminder to myself to have more businessman’s view in our company.

  1. It’s a good article but as a 3rd time entrepreneur, I have a significant different view on this. The essay is looking at startups from an investor perspective. It ruthlessly optimizes the efficiency of the whole ecosystem instead of focusing on individual’s happiness. It is happiness that I’m optimizing for.

  2. Let’s keep it simple and assume that the product is what the market wants.

  3. In his interview TWIS#E337, DHH mentioned that 37signals never had a hockey stick growth curve. Instead, they just “enjoy a year-to-year growth greater than inflation”.