This is part four of a five part series. If you haven’t already, start with the Introduction to Priority Mapping.
If you’re looking to scale, the quality of your revenue matters. Imagine you’re looking at two different companies. Both are doing $10M in revenue, one looks like the company on the left and the other like the company on the right. Which would you rather invest in?
Squares can help improve the quality of your revenue, but you need to be specific on how you define what’s working, what’s kind of working and what’s not working yet.
How to define what’s working
Everyone is looking for a repeatable business model and a large market share. That’s how you know your company’s working and that’s how you’ll know if your Squares are working.
Which is really just two sides of the same coin. A repeatable business model is looking from inside your company and a large market share is looking from the outside in.
Which you can also think of it as two questions. How well are you doing in each Filter? and How well are you doing in the market defined by those Filters?
And how well you’re doing in each Filter is based on your ability to deliver value and win customers. So a large market share starts with a repeatable business model, which starts with repeatable Habits.
What do you have that’s Repeatable?
For a Square that works, you want the ability to deliver value and win customers in a repeatable way. But simply calling something a Habit doesn’t make it repeatable. So you can have Habits that are repeatable, some that are kind of repeatable and some that aren’t repeatable, yet.
It doesn’t really matter how you define repeatable, it just matters that you define it if you want your team on the same page.
For me, you need to do something at least 10 times just to start considering it repeatable, at least 3 times for kind of repeatable and anything less is not repeatable yet. These are just starting minimums. Your threshold will ratchet up as your company grows.
Where are you seeing success?
As you start delivering value and winning customers in a repeatable way, you’ll start seeing success in different Filters. You can think of your Filters as buckets filling up with water. They’ll fill up at different rates and the ones with the most water are your Filters that work.
Success can be defined as revenue or usage rate, depending on the Lens you’re looking at. But don’t worry if you don’t have the data. You’re just trying to get your team on the same page by documenting your assumptions.
I find it’s easier to just start with where are you having the most success? where are you having the least? and how does everything compare?
Obviously having data is the best and sometimes you’ll get creative on how to get it. But documenting your assumptions and spot checking them with customers also works. Don’t let data slow you down.
Defining Squares that work, from your perspective
Running through all of your Lenses and Filters, you’ll be left with the building blocks needed to define your Squares so you can figure out which ones are working, kind of working and not working, yet.
Squares are defined by turning on and off different Filters. So in the simplest form, you can define your Squares by all the Filters that work, that kind of work and that don’t work, yet.
Does the market agree with you?
Even with Squares that have all green Filters, you’re still only looking from your perspective. You need to see if the market agrees with you by looking at your market share.
Just like Filters, it doesn’t matter how you define your target market share, it just matters that you define it.
My target for a Square that works is at least 10% of the smaller segment so there is room to grow, kind of works is more than 1% of the market segment and anything less isn’t working, yet.
Every Square has a different market size
Squares are defined by different Filter combinations and so each will have a different market size. I find it easier just to think in orders of magnitude. Is the segment in the tens of millions, hundreds of millions, billions?
From there, you can estimate your market share. More than 10%? More than 1%? And like with Filters, you’re not trying to be data perfect. You’re trying to capture your assumptions and get your team on the same page to what you think is working, kind of working and not working, yet.
Now, just because you’re seeing success in your Filters doesn’t mean the market agrees with you.
You can have all green Filters and still be in a yellow or grey Square. It just means you still have some work to do.
There’s two ways to a larger share of the market
You can build your way with new products and processes to add more value and win more customers. Or you can split the market into smaller segments where your current products and processes already work. Splitting is always cheaper than building something new.
All Squares can be broken down into a set of smaller Squares. As bigger Squares becomes smaller ones, the market size of the bigger Square is just all the smaller ones added together.
Essentially, you can think of your entire market as just your biggest Square. And you can start splitting your way to a larger market share by turning on and off Filters to find something that works.
Why are smaller Squares are better?
Being specific means it’s easier to get everyone on the same page. Properly set boundaries give your team the freedom to work together and make decisions without you. Poorly set and you’ll be constantly asked to clarify, triage and prioritize.
Imagine if Uber broadly defined their market as improving transportation in North America when they were starting out and had limited resources.
Marketing might say we need more customers, let’s run campaigns in Toronto. Operations might say we’re dying, we need to onboard drivers in San Francisco. Support might say our iOS app keeps crashing while executives keep saying we need to support all platforms, we need an Android app.
Geography makes it ridiculous I know. But how often does sales sell something that the product doesn’t do, to customer in your broadly defined market and you have to step in to triage priorities? It’s not their fault if you weren’t specific in defining your segments.
How small is too small?
You want to give your team enough detail to execute without feeling suffocated. My target is to get the combined total of your short term Squares down between 10x and 100x your revenue goal so you’re defining Squares that already work and kind of work.
It might sound small, but consider Uber’s first segment. North America, US, San Francisco, affluent riders and only Apple iOS users interested in better transportation. My guess is that’s a market in the tens of millions.
When they were only making a few million dollars, it was still 10x their revenue. So how small is too small is relative to your short term revenue goals. Uber’s strategy is obviously based on much larger segments now.
Smaller Squares doesn’t mean turning away customers
They just help your team prioritize. Sometimes things like geography means saying no to customers. Most times, you’re happy to take money from customers outside of your target Squares. In fact, watching the Squares that are filling up can give you hints on where to focus your efforts next.
Smaller Squares just helps your team know when to say yes and when to say not right now. Or at least know when to have a larger conversation to see if the priorities have shifted.
Defining the status, size and repeatability of each Square will help you put together your strategy and understand the different sized bets you want to make. But eventually you can’t split your Squares any more and you have to build something to drive up your market share.
A Square is kind of working when you still need to deliver more value to reach your goals or still need to figure out how to win customers in a repeatable way. If you can’t go smaller, then you need to build new features or processes to close the gap.
So how do you put everything together?
As you build your strategy, you’ll find Squares that work, some that kind of work and others that don’t work yet. All that’s left is to break down your Habits for each Square and align your team on what to do more often, where to get better and where to build something new.
Let’s explore the last and final Part 5 – How to turn your Strategy into Execution with Squares (Coming soon).