Aim for 10x Growth, Not 10% (10x not 10%)
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This post is a translation of Ken Norton's "10x not 10%". There may be some paraphrasing or mistranslations. Feedback is welcome if you spot any errors.
For over half a century, Kodak dominated the photography market. From Hollywood and the Apollo project to family gatherings, Kodak was there to document our lives. Known as a groundbreaking innovator, Kodak was the Google of its time. By the mid-20th century, Americans were buying billions of rolls of film, and Kodak enjoyed profit margins of over 80% on film sales. At one point, it captured 90% of the U.S. film market and over 85% of camera sales. But by 2012, revenue had plummeted. The company went bankrupt, and 50,000 jobs disappeared. All that was left were patents, largely because Kodak failed to adapt to changing times.
What happened? The digital camera. The rapid rise of digital cameras decimated the film market. And it didn't end there. Smartphones soon took over and wiped out the digital camera market. In 2015, smartphone sales are projected to hit 1.5 billion, which means 1.5 billion portable cameras (about 40 times the sales volume of film cameras in their absolute best year). People will take trillions of photos this year alone.
Did Kodak not see the digital camera coming? Was this an unpredictable, unexpected event for them? Let's take a look. The photo below is from 1975, showing Steve Sasson and the very first digital camera he built.
Sasson was an engineer at Kodak, and the digital camera was invented right in Kodak's labs. When Sasson showed the digital camera to executives, they told him, "That's cute—but don't tell anyone about it." As Sasson later recalled, "Every time you sold a digital camera, you wouldn't sell a film camera, and we were making a ton of money on film. The problem was that you wouldn't be selling film." Kodak's engineers saw the future and invented the digital camera. But Kodak's management threw the opportunity away.
Fear of impacting the film market prevented our invention from being approved. — Steven Sasson
In case studies, it's always easy to criticize with the benefit of hindsight. But from that perspective, Kodak is an incredibly interesting example because they were acting completely rationally to protect their highly profitable core product line. A closer look at Clayton Christensen's "The Innovator's Dilemma" explains exactly why this happens. It's one of the most important business books of the last 50 years.
Why were Kodak's executives so worried about the digital camera? Psychologists call it loss aversion. Kodak was terrified of losing the film market. Generally, the pain of losing is much stronger than the joy of winning. This is why people double down at the casino when they're down, or hold onto a tanking stock. Humans hate losing things. And by extension, companies hate losing things. To prove this, let me pose a simple experiment.
Imagine your company has to choose between one of two projects. Both cost the same and require the same number of people. The first project is a sure thing, with a 99% chance of making $1 million. The second project is riskier, with a 1% chance of making $1 trillion. Which one would you choose?
If you're like most people, you'd pick the first project. It's a sure bet. Why take the risky path when there's an easy $1 million sitting right there? From a decision theory perspective, you should pick the second project because a 1% chance at $1 trillion gives it an expected value 10 times higher. Even so, most companies won't do it. The fact that the world doesn't play out perfectly proves this. And even if the world did work exactly as imagined, people still wouldn't make the big bets.
Modern companies and management structures are designed to avoid loss. At best, your boss's job is to help you succeed; at worst, it's to make sure you don't screw up. This tendency only increases as a company grows. The more complex the management structure, the lower the tolerance for risk and failure. Just think of the idioms we use: "Under-promise and over-deliver," "Haste makes waste," "A bird in the hand is worth two in the bush," "Nobody ever got fired for buying IBM." Just like these expressions, most companies are obsessed with growing 10% rather than 10x.
Kodak was a company that chose 10% growth, but what they needed was 10x growth. 10x growth is a groundbreaking leap—adding another zero to your growth. If you're only thinking about 10% growth, you are clearly going down the same path as everyone else. 10x growth requires an entirely new mindset. If Kodak's management had asked what it would take for people to shoot billions of photos a year, new ideas would have surfaced. One thing is for sure: it could never be done by selling film.
History is full of examples of 10x growth. For centuries, Swiss watchmakers competed to improve the accuracy of mechanical watches. The competition was exhausting, requiring countless artisans, sophisticated tools, and microscopic refinements. Yet, the improvements in timekeeping accuracy were measured in tiny fractions of a percent. What would make a watch 10 times more accurate? A completely new way of thinking was needed.
It's often easier to make something 10x better than it is to make it 10% better. — Astro Teller
This new mindset started with Seiko, which successfully commercialized the world's first electronic quartz movement watch. Quartz watches took over the market the moment they launched. Electronic watches were at least 10 times more accurate than the most precise mechanical watches, and they cost less than 10% to produce. Even today, a $10 Casio watch you buy off the shelf is more accurate than a $10,000 Rolex. Having heard Steven Sasson's Kodak story, it probably won't surprise you to learn that the first quartz watch was actually invented by a Swiss engineer, but it took way too long for the company to embrace it.
The quartz watch story offers a provocative lesson. Seiko's engineers achieved something brilliant, but it's hard to argue they worked 10 times harder than those striving for a 10% improvement in mechanical movements. Google X's Astro Teller noted that "it's often easier to make something 10x better than it is to make it 10% better." This counterintuitive observation is based on the fact that 10% improvements rely on existing tools and methods. All the Swiss watchmakers were pouring resources, money, and effort into the exact same tools. A 10x improvement comes from courage and creativity. Rather than just thinking outside the box, completely upend your way of thinking.
Failure must be an option
Winning big means getting comfortable with failing miserably. Alphabet CEO Larry Page said, "It's natural for people to want to work on things that they know aren't going to fail. But incremental improvement is guaranteed to be obsolete over time. Especially in technology, where you know there's going to be non-incremental change." Doing something extraordinary entails failure, and failure is learning.
If you aren't experiencing failure, then you are making a far worse mistake: You are being driven by the desire to avoid it. — Ed Catmull, Pixar
To see how we learn from failure, let's turn to a story about a ceramics teacher shared by two artists (Ted Orland and David Bayles). A ceramics teacher noticed his class was split perfectly into two halves on different days and decided to run an A/B test. He told half the students they would be graded the traditional way, based on the quality of their finished pots. In other words, they were to submit their single best piece at the end of the term. He told the other half something entirely different: they would be graded strictly on the quantity of pots they produced, regardless of quality. Essentially, they had to churn out as many pots as possible by the end of the semester.
What you need to know about your next piece is contained in your last one. — David Bayles & Ted Orland
At the end of the term, the highest quality pots—both technically and aesthetically—didn't come from the group focused on quality. They came from the group focused on quantity. By continuously cranking out pots, those students learned and adapted. They didn't set out to make the perfect pot from the beginning, but by just making them, they ended up making the best ones. Meanwhile, the group focused on quality spent the whole semester agonizing over perfection, and their work fell far short compared to the quantity group. You only truly learn when you try and fail. Moreover, these lessons set you up to make a better next attempt. As Bayles and Orland put it, "What you need to know about your next piece is contained in your last one." The more last pieces you produce, the more you learn. We don't succeed by striving for perfection; we succeed through trial and failure.
People want to do great work, let them
The people you hire are professionals, and they want to do great work. When they make mistakes, it's usually out of good intentions. But (as cliché as it sounds) most companies don't see it that way. As a company scales, employees become risk-averse. They worry more about not failing than they do about aiming for greatness.
People do their best work when they're solving problems they're actually interested in (Google's famous 20% time policy, where employees work on passion projects, was built exactly on this premise). Give people fluidity. In other words, allow them to move to projects they find more compelling. Create an environment where they feel comfortable discussing topics that aren't strictly necessary for their immediate tasks. This means you need to share everything with everyone. If you believe you've hired good people, you have to trust them. When everyone knows what everyone else is working on, you create more opportunities for unexpected 10x breakthroughs to emerge. Transparency and openness keep you from settling for a mere 10% growth.
Use data, not opinions
Even if you aren't a CEO or founder, there are plenty of ways to foster 10x thinking.
Netscape CEO Jim Barksdale famously said, "If you present facts based on data, we'll accept them. But if you simply present opinions, we won't." Drive your decisions using data, not opinions. Be someone who seeks facts over intuition. Doing this might bruise our egos (especially for PMs). We like to think we were hired for our brilliant intuition. But a lot of good things happen when you start relying on data rather than the opinion of the highest-paid person in the room. Namely, you move faster. Instead of arguing for weeks, you can test assumptions and see what actually works.
Another huge reason to be data-driven is that the biggest enemy of a 10x idea is someone saying, "That won't work." If you rely purely on opinions, you'll inevitably end up dismissing 10x ideas as impossible. If you use data, you won't make that mistake.
Measure impact, not effort
John F. Kennedy set the challenge of landing an American on the moon before the end of the 1960s. He didn't say, "Let's launch 20 rockets (maybe 25)." He emphasized the impact of walking on the moon, rather than the effort required to get there. As PMs, we often fixate way too much on the effort involved along the way. How many bugs are left to fix, how many engineers are on the project—that's the problem. Achieving 10x growth isn't built on knowing exactly what effort is required upfront.
Instead, figure out what impact you want to have. Say "We will achieve this," not "We have to do this."
Be bothered by limitations
We frequently give up on things because of external roadblocks. The computer doesn't have enough memory, the user's internet is too slow, the CPU is sluggish, it's too expensive, it takes too long. We hit these obstacles and turn around.
People who think in terms of 10x don't give up because of these limitations. They're just annoyed by them. They figure out ways to obliterate those constraints or work around them. Two-thirds of the world's internet population still lacks reliable access. Scientists and engineers at Google formed a team called "Project Loon" to try to provide stable internet connections to underserved populations using weather balloons. Whether Project Loon succeeds or fails remains to be seen, but they are trying. People who think 10x don't surrender when they encounter roadblocks.
In Amazon's early days, they didn't have their own warehouses. Instead, when a user ordered a book, Amazon would place an order with distributors, who required a minimum order quantity. If Amazon had just been trying to sell 10% more books, they probably would have accepted this reality. But Amazon was a company aiming for 10x growth, and this limitation was merely an annoyance. They found a workaround by ordering out-of-print books to hit the minimum quota.
Here's another example. In the 1960s, faster cargo ships and container shipping revolutionized international freight. A freighter sailing from Hawaii to San Francisco could now make the trip in days rather than weeks. But there was one catch: the ships had to sit anchored at port for days without unloading, waiting for customs paperwork to clear. A few clever entrepreneurs decided to solve this bottleneck. They packed the necessary documents into their luggage and put them on a morning flight to San Francisco. Customs officials could begin processing the paperwork before the ship even arrived, saving immensely valuable time. (Those clever founders took the first letters of their last names and created a company called DHL).
Bet on trends
Compare the Amazon of 1995 to the Amazon of 2015. Their growth has been astronomical. But during those 20 years, the number of internet users grew by more than 70 times. Amazon executed flawlessly and strapped themselves to a launching rocket. In short, Amazon bet on a trend and won.
To some degree, riding a trend is a neat trick. Find a trend, hop on, and let the momentum do the heavy lifting for you. In 2004, Google launched Gmail, offering 1 gigabyte of free storage. It might not sound like much now, but in 2004 it was massive—more than 250 times what Yahoo Mail offered. The Gmail team knew storage was expensive. Serving a 1GB hard drive in 2004 cost about $1.50. When you're building a service you hope millions will use, those user numbers scale up incredibly fast.
However, the Gmail team anticipated the trend. They assumed storage costs would plummet and gambled that by the time hundreds of millions of users needed gigabytes of email, the costs wouldn't be prohibitive. Sure enough, it's 2015 now, and a gigabyte of hard drive space costs less than a penny.
Trends aren't limited to Moore's Law or technology. The chart above shows life expectancy from 2000 to 2050, as projected by the UN. The world is getting older. In some countries, this shift is incredibly stark. In China, the median age will jump from 30 to 50 in just 50 years. Knowing that the world is aging, what would you do?
The ILC in Seattle is one example. ILC is a preschool located inside a nursing home. Today's kids can be cared for by parents, grandparents, and even great-grandparents. This creates an opportunity for children to learn about the aging process. As life expectancy increases, this opportunity gives seniors a renewed sense of worth and brings joy to their lives. Not all 10x ideas have to be tech-related. You don't necessarily need a scientist; just try thinking about problems in a different way.
In 1977, Charles and Ray Eames made a film called "Powers of Ten." If you haven't seen it, I highly recommend watching it now. It's only about 9 minutes long.
The film starts with a couple enjoying a picnic by a lake. The camera slowly pans backward, zooming out by a power of ten every 10 seconds. Soon, you can see the entire lake, the countryside, and the whole continent. Within a few minutes, the view leaves the solar system, shrinking the entire galaxy down to a tiny speck. It's a phenomenal way to easily grasp the concept of orders of magnitude in scale.
I mention this video because it can inspire you to keep 10x growth in mind today. The subtitle of the film is "The effect of adding another zero." My recommended approach is precisely that: "Add a zero." If you're building a car, don't think about how to make it go 50 mph; think about how to make it go 500 mph. How do you get 100 million users instead of 1 million? How can you cut costs down to a penny instead of a dollar? What would it take to use only 1% of the energy?
Instead of focusing on putting in 10x the effort, focus on the 10x impact the outcome will have. Daydreaming about what you could do with 100 more engineers might be fun, but it won't help you achieve a 10x impact. Ask questions that force you to think differently about your existing solutions. The way to achieve 10x growth is to take a step back from how you've always done things. Doing this also empowers your team to aim for 10x growth.
Not everyone is aiming for a moon landing, and not everyone works at Google or SpaceX. But that doesn't mean you can't think in terms of 10x. Even if you set wildly ambitious goals and fail to hit them, you'll probably still accomplish something incredible along the way.
The photo below is of a lunar exploration rocket launch:
This photo was taken by Apollo 11. Like all NASA photos of that era, it was shot on Kodak film (more specifically, Kodak SO-368 film). Lunar rocket launches didn't end in 1969. Here are some other photos.
On the left is the best photo of Pluto taken prior to 2014 (shot by the Hubble Telescope in 1996). On the right is the best photo taken today (2015) by the New Horizons spacecraft. This is what 10x growth is all about.
When NASA released these photos, an excited spokesperson called them the New Horizons project's "Kodak moment." But there was one difference: Kodak had absolutely nothing to do with this project. Forty-five years after the Apollo missions, Kodak has been reduced to nothing more than a catchphrase.