The Knowledge-Creating Company: Benchmarking Your Social App for Lasting Competitive Advantage

The Knowledge-Creating Company: Benchmarking Your Social App for Lasting Competitive Advantage

In today's rapidly changing economy, the only certainty is uncertainty. Markets shift, technologies proliferate, competitors multiply, and products become obsolete almost overnight. In this landscape, the key to lasting competitive advantage is knowledge. Successful companies are those that consistently create new knowledge, disseminate it throughout the organization, and quickly embody it in new technologies and products. But how can companies achieve this in practice? And what can social app developers learn from the concept of the knowledge-creating company?

To start, it's important to recognize that a company is not a machine but a living organism. Just like individuals, companies can have a collective sense of identity and fundamental purpose. This shared understanding of what the company stands for, where it is going, and how to make that world a reality is the organizational equivalent of self-knowledge. It is the foundation for personal commitment and employees' sense of identity with the enterprise and its mission.

Similarly, the essence of innovation is to re-create the world according to a particular vision or ideal. This process of re-creation starts with individuals within the company. It could be a brilliant researcher with an insight that leads to a new patent, a middle manager with an intuitive sense of market trends that sparks an important new product concept, or a shop-floor worker drawing on years of experience to come up with a new process innovation. Making personal knowledge available to others is the central activity of the knowledge-creating company.

Now, let's shift our focus to social app development and the concept of benchmarking growth. When benchmarking growth for a social app, it's crucial to define the core metric that aligns with the app's purpose. For most consumer social apps, this core metric is daily active users (DAUs). The goal is to have people using the app every day. If the app has a less frequent use case, weekly active users (WAUs) can also be a starting metric. Eventually, upgrading to DAUs is necessary for securing a coveted slot on users' home screens.

When it comes to monthly user growth in seed-stage consumer social companies, benchmarks differ. An okay growth rate is around 20%, a good rate is around 35%, and a great rate is around 50%. The ideal scenario is to achieve organic growth, as social apps often can't monetize until later stages. If more than 10-20% of users are coming from paid sources, it may be necessary to rethink the acquisition strategy. No amount of marketing dollars can fix a product, so ensuring that growth comes from the product itself is crucial.

Another important metric to consider is the DAU to monthly active users (MAU) ratio. An okay ratio is around 25%, a good ratio is around 40%, and a great ratio is 50% or higher. Best-in-class social apps have an L-ness curve that "smiles" or has a "crooked smile" that skews right. This means that users are making the app a regular part of their lives. For example, looking at L5+ performance, which measures the number of users in the app five, six, or seven days a week, a good rate is around 30%, a good rate is around 40%, and a great rate is 50% or higher.

Retention is another crucial aspect of social app success. One primary metric for retention is n-day retention, which looks at what percentage of an original cohort enters the app on specific days. Benchmarking n-day retention, with a focus on d1, d7, and d30, an okay rate for d1 is 50%, d7 is 35%, and d30 is 20%. A good rate for d1 is 60%, d7 is 40%, and d30 is 25%. A great rate for d1 is 70%, d7 is 50%, and d30 is 30%. It's important to note that the "slope of the line" starts to flatten between d7 and d14, and hits a plateau by d20. For companies transitioning from a tool to a network, weekly retention can be relevant. A good rate for w1 is 40%, w4 is 20%, a good rate for w1 is 55%, w4 is 30%, and a great rate for w1 is 75%, w4 is 50%.

While point-in-time numbers provide valuable insights, evaluating cohorts over time gives a more comprehensive view of app performance. Stable metrics or even improving metrics from cohort to cohort indicate strong network effects. As more users join, the product becomes more valuable, creating a positive feedback loop.

In conclusion, the concept of the knowledge-creating company can offer valuable insights for social app developers. Creating new knowledge, disseminating it throughout the organization, and quickly embodying it in new technologies and products is the key to lasting competitive advantage. Benchmarking growth and retention metrics is crucial for social app success. By defining core metrics, focusing on organic growth, and ensuring strong user engagement and retention, social app developers can create lightning in a bottle and build apps that become an integral part of users' lives.

Three actionable advice:

1. Foster a shared understanding of the company's purpose and mission. Encourage personal commitment and a sense of identity with the enterprise among employees.

2. Prioritize organic growth and ensure that your product itself is the driver of growth. Rethink acquisition strategies if a significant portion of users are coming from paid sources.

3. Continuously evaluate and benchmark growth and retention metrics, focusing on point-in-time numbers and cohort analysis. Aim for stable or improving metrics over time to indicate strong network effects and increasing product value.