1. All Businesses Share a Common Universal Goal.
All businesses, irrespective of business model type (b2b, b2c, digital, hardware, services, etc.), share a common universal goal:
To make happy customers.
2. Making Happy Customers vs. Making Customers Happy
Making happy customers is NOT the same thing as making customers happy.
Making customers happy is easy. Just give them lots of stuff for free. But that doesn’t lead to a working business model.
Making happy customers, on the other hand, is not just about making customers feel good. It’s about making customers achieve results (desired outcomes).
Happy customers get you paid.
The work of making happy customers happens in a customer factory.
Every business has one.
3. Throughput (aka Traction) is The Goal
Throughput in a customer factory is the rate at which you create happy customers. This is synonymous with traction.
Traction is the only thing that matters.
4. The Customer Factory Blueprint
At a basic level, a customer factory takes in unaware visitors as input (raw material) and turns them into happy customers (finished product).
This process can be further broken down into 5 macro steps that can be found in all businesses: acquisition, activation, retention, referral, and revenue.
The customer factory represents everything inside your business: Your marketing, sales, customer service, and product.
5. The Activation Step is Where You Make Happy Customers
The activation step is where happy customers are made. While all the steps are needed to make your business model work, the most important step is the activation step.
This is where value is created for your customers. When you create value for your customers, they reciprocate — allowing you capture some of this value back in the form of monetizable value.
Notice how the activation step has the most number of lines leading out of it. This is what makes activation a causal step.
Making customers happy at this step causes customers to
The inverse is also true.
- buy from you,
- keep coming back, and
- refer others.
6. The Customer Factory Isn’t Just A Cute Metaphor
The manufacturing reference in the customer factory is intentional. Metaphors are quite powerful when they enable us to transplant and adapt ideas from one domain to another.
We have been running real factories for a long time and have learned how to model and optimize them as systems.
Your business model is also a system.
7. Focus on Systems vs. Goals
A lot of us are taught to set goals. While there’s a place for goals, simply setting a goal is never enough. It’s way more actionable to focus on building systems that move you towards a goal.
Goals focus on outputs.
Systems focus on inputs.
Example: Goal: Losing 10 lbs.
System: Learning to eat right.
The problem with goals is that they don’t tell you how to achieve it or what to do when you achieve it. In the example above, a number of people can brute-force losing 10 lbs once through sheer willpower. But once that wears off, the weight comes back on.
Systems on the other hand, like learning to eat right, help you focus on key activities or routines that move you towards the goal. Once these key activities turn into habits, you not only achieve your goal, but shoot past it.
The best way then is to use goals for ballparking your desired outcome, and systems for formulating key steps to achieving the goal.
You still need to size up your goal because the effort that goes into losing 10 lbs is quite different from losing 100 lbs. But once a ballpark goal is set, like losing 10 lbs, does it really matter if you lose 9 lbs or 11 lbs ?
Focus your energy instead on building systems for helping you achieve the goal.
Systematizing the 5 macro steps in the customer factory blueprint is how you achieve your goals in a business model (aka growth).
8. Establishing Repeatability is a Prerequisite For Growth
A key attribute of systems is that they are repeatable. When a factory manager wires up his machines on the factory floor, he first establishes a predictable throughput baseline (give or take a small expected tolerance for variability) before undertaking any optimization steps.
Your customer factory is no different.
You can’t scale a business model that isn’t first repeatable.
Getting to your first 10 customers, while an achievement, isn’t repeatable if you don’t know where you next 10 customers will come from.
Random isn’t repeatable, which means it isn’t scalable.
When is the right time to start prioritizing for repeatability?
Right after your first sale.
If you don’t focus on establishing repeatable sales quick enough, you start getting pulled in many different directions, can easily lose focus, and hit a brick wall.
9. Grow Your Customer Factory Systematically in Stages
A lot of entrepreneurs try to prematurely scale their business models by going fast on everything.
They often end up wasting needless time, money, and effort on the wrong things at the wrong time.
Going fast on everything is a recipe for getting lost faster.
The counter-intuitive mindset here isn’t speeding up to rush scalability, but rather slowing down to focus on building a repeatable customer factory in stages.
Every product goes through 3 stages:
- Problem/Solution fit,
- Product/Market fit, and
- Scale.
Each stage is essentially a customer factory.
The difference across the stages is the amount of throughput (i.e. number of happy customers) that you repeatably generate.
In other words, each stage is essentially a smaller-scale version of the next stage.
Optimizing your customer factory in stages helps you focus on the right actions at the right time.
10. Systematic Growth Comes From Focusing on Constraints
The steps in the customer factory are like links in a chain.
At any given point in time, there is always a single weakest link or constraint. Growth comes from correctly identifying, prioritizing, and breaking this constraint.
80% of your entire team’s effort should be focused on your weakest link and nothing else.
Once a constraint is broken, search for the next constraint, and repeat the process.
How do you know when a constraint is broken? When your customer factory throughput goes up as a result of something you just did.
Yes, this is the Theory of Constraints applied to the Customer Factory.
11. The Customer Factory is non-linear
It’s important to always keep in mind that systems (like a customer factory) are made up of a series of interconnected steps where the whole is often not equal to the sum of its parts.
Sometimes 1 + 1 + 1 can equal 5. This is when every step in your customer factory is aligned for customer value creation (making happy customers) — creating a compounding effect.
Other times, 1 + 1 + 1 can equal -2. This is when you attempt to brute-force or game a step at the expense of making happy customers.
Examples:
- Using sleazy or aggressive sales tactics to close,
- driving low quality leads into your customer factory.
Optimizing your customer factory in stages helps you focus on the right actions at the right time.
12. Focus on the bigger context
Features, benefits, costs, and revenue live in the product (or solution) context.
Your customer’s desired outcomes live in the bigger context.
Your customers don’t care about your solution but about achieving their desired outcomes.
If you continuously focus your efforts on removing the obstacles standing in the way of your customer’s desired outcomes, you systematically build a repeatable and scalable customer factory.
You win.
