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Rocket GTM 🚀 - Frameworks vs Playbooks
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Frameworks vs Playbooks
Sheep follow playbooks. Winners learn frameworks.
There are two ways to tackle strategic problems. Using playbooks. Or using frameworks.
Frameworks are better.
When I moved to Silicon Valley it became clear that there is an obsession with playbooks.
"The playbook for hiring A+ talent".
"The fundraising playbook".
"The SaaS sales playbook".
The "insert whatever problem here" playbook.
Simply put, playbooks are a set of recommendations based on a previous success.
And I get why they're popular. Silicon Valley has the broadest and deepest knowledge on what's worked and what's not. If a startup has done it, Silicon Valley has seen it.
That's why Tier 1 VC's have leverage. They can offer founders the collective wisdom earned through their portfolio companies past successes and failures. They love reciting these playbooks but founders too often take them as gospel.
Everyone wants a playbook. They're simple, easy, and "proven" to work. All that's left to do with a playbook is execute, right?
The problem is playbooks offer advice under very specific circumstances. This context is rarely clarified. Startups are highly unpredictable and every market has its own unique nuances so context is king. What worked for them is not necessarily going to work for you.
Frameworks on the other hand don't offer prescriptions. They offer structured ways to think about problem solving. Frameworks are adaptable and malleable. They offer guidelines on how to think rather than solutions for you to copy. Playbooks ignore context. Frameworks leverage context to guide your decision making.
Let's say you are hiring your first sales person and you ask your VC what's the typical playbook to run, they tell you:
For your first sales hire, always hire two sales people at once.
Now this might be sound advice. But be cautious. You don't know the reasons why its sound advice and those reasons may only be applicable to their previous experience. You don't yet know which variables this playbook is optimizing for.
The smarter question to ask would be"what context made this playbook true for you, and how does that apply to me".
If your VC was offering a framework it would look more like this:
When hiring your first sales you need to mitigate the risk of mistaking poor sales performance for a lack of product-market fit. If you hire junior salespeople you could hire two at once, but another way would be to hire someone more experienced with a proven track record.
The framework offers you a model for thinking. It does not prescribe an answer. It offers you a criteria to help make your decision.
In this case making sure that you don't mistake poor sales performance for a lack of product-market fit. Clearly that's important in the early stages of building your startup. You don't want to invest in building new product when the issue is you've got a bad salesperson.
The Spendesk Revenue Machine
We've built an outbound sales machine at Spendesk. But we sell to SMEs, which under traditional Silicon Valley playbooks means we should have built an inbound sales machine.
The logic behind building an inbound machine is because the contract values you earn when selling to SMEs are smaller, thus making it too expensive to hire a sales team.
But the problem with this playbook is its void of context. For example two critical pieces of Spendesk's success are a) super low churn and b) super high net retention rates.
Instead of blindly copying the status quo we used a framework that took into consideration our SaaS metrics and the pro's and con's of different acquisition channels.
Let me explain.
If your customers stay for longer and they spend more each year, it means the lifetime value increases. This means you can spend more to acquire each customer and play with more expensive acquisition channels. Which in our case was necessary because we're selling a complex product that requires a salesperson to explain our value proposition well.
Take these two hypothetical scenarios for example.
A customer stays for two years and pays $10k each year. Their lifetime value is $20k. You can spend no more than $6k to acquire them.*
$6k isn't huge. There are a limited set of acquisition channels that work under $6k, outbound sales isn't one of them. You're more likely to stick with inbound channels like organic SEO, and some paid demand generation.
*A SaaS company with a LTV/CAC of less than 3x is not considered scalable
A customer stays for five years because the product is sticky. Since the customer is a fast growing startup they're growing quickly and so does their usage. They spend 40% more each year with you. This means your Net Retention Rate is world class at 140%.
Thanks to the low churn and high net retention the lifetime value is now $50k. You can now spend a whopping $16k to acquire each customer ($50k/3).
You still sell to SMEs, but thanks to the unique nuances of your business model you can pay a lot more for them. With $16k to spend you can leverage more expensive acquisition channels like outbound sales, and live events.
As you can see the problem of the "inbound sales playbook" is that it doesn't take into consideration the context of your market, churn rates, net retention and so on.
It's far more important to understand why a playbook has worked previously, than to blindly copy it in the hope you share mutually identical contexts.
Wrapping it up 🌯
People who ask for playbooks are seeking the easy option. They don't want to do the hard work. I get it. And in an established business or market this would be smart. Why bother wasting time and effort to do something that's already been done?
But it all breaks down when you realize how unpredictable, volatile, and non-recurring the startup world is. Businesses that were founded in the 90's went bust, only to be relaunched in the 2000's with success. The business models were exactly the same but the market timing was different.
There are just too many changing variables for playbooks to work effectively. When the only constant is change, you need something that's anti-fragile and frameworks offer just the remedy.
Sheep follow playbooks. Winners learn frameworks.
P.S If you want to see a recent example of frameworks I've enjoyed check out this video on product-led growth by the Winning By Design team.