User Growth System Theory

What are we talking about when we talk about user growth ? WeChat fission, private domain traffic, advertising, attracting new users and promoting activation, conversion and retention, these are all within the scope of user growth.

User growth is complex, and it uses a variety of complex methods to achieve product user growth goals. However, user growth can also be simple, which requires us to switch to a systematic perspective to look at user growth and use the knowledge of system dynamics to evolve user growth.

I first came into contact with system dynamics through the sharing of Liu Xinhua, partner of Gaorong Capital and former chief growth officer of Kuaishou. He suggested that students who have a deep interest in user growth should learn about system dynamics. Since then, I have studied the main theories of system dynamics in many aspects, combined with user growth experience, and gained more knowledge and experience.

In the future, I will share with you the theoretical knowledge and application methods of system dynamics and user growth through multiple articles, and discuss with you the system logic and potential energy of user growth. As the first in a series of articles, this article will first introduce you to the system.

1. System Dynamics and User Growth

System dynamics is a young discipline. It was proposed by Professor Forrest of the Massachusetts Institute of Technology in 1956. It was initially used mainly in industrial production. Later, through research and development, its application scope was gradually expanded, and it plays an important guiding role in commercial development.

The system dynamics class advocates the system science idea that "every system must have a structure, and the system structure determines the system function". According to the feedback characteristics of the causal relationship between the internal components of the system, the root cause of the problem is found from the internal structure of the system, and then the response decision of subsequent problems is guided.

So what is a system? Simply put, a system is a set of interconnected elements, and the main content is the system elements and connection relationships. Systems are everywhere. Ecosystems, human systems, and business systems are all systems. The power of system dynamics lies in abstracting the main characteristics and laws of different systems to help us understand and change systems.

User growth is the long-term goal of Internet products. The core is to understand and change the system composed of products and users, influence the user growth system to optimize and evolve in the expected direction, and achieve continuous growth in user scale and value. The application of system dynamics is very suitable for user growth. How to disassemble the product and user elements in the system and discover the connection between products and users, and the connection between users, is the key to applying system dynamics knowledge to evolve user growth.

Moreover, user growth is built on the product system, the product system is built on the company system, the company system is built on the industry system, and the industry system is built on the market system. The ubiquitous system has a relationship of inclusion and influence, which also makes the understanding and application of the system have unlimited value and potential. We can use the system to explore the nature and potential of user growth, and we can also go beyond user growth and find external trends and macro dividends of user growth from higher-level systems.

2. Continue to understand the system through multiple splits

As mentioned earlier, a system is a set of interconnected elements. All systems can be abstracted into system elements and connection relationships. Elements in the system have uncertainty and will change as the system runs, and can be called variables; and connection relationships include four types: causal chain, reinforcement loop, regulation loop and hysteresis effect.

The system is composed of five parts: variables, causal chains, growth loops, regulation loops, and hysteresis effects. Fully understanding the system is the premise and foundation for utilizing and changing the system. Let’s take a look at it in detail.

1. Variables

Variables are elements of a system that change over time. There is not only a single variable in the system. The variables in the system may vary greatly in different time dimensions and different observation levels. Grasping the core variable elements in the system you are concerned about is the first step to understanding and changing the system.
In user growth, the most important variable is the user. The changes in the number of users and the value of users determine the results of user growth. The user variable can be further divided into existing users and traffic users. Internet products pursue traffic maximization, but in most cases, existing users bring more value to the product. Short-term traffic users can be converted into long-term stock users, but stock users will also be lost.

Increasing the scale of traffic users and conversion retention, tapping into the value and life cycle of existing users, and taking into account both existing users and traffic users are the principles that should be adhered to in user growth.

2. Causal Chain

The causal chain is the strengthening or weakening connection between the variable elements in the system. Cause is the reason and origin, and effect is the result and goal.

Under the established outcome goals, there are reasons that can enhance the results and promote the achievement of goals, as well as reasons that weaken the results and deviate from the expected goals. Analyzing and identifying the reasons for enhancement and weakening in advance, strengthening the "reasons for enhancing results" and solving the "reasons for weakening results" are the key to ensuring the achievement of the expected outcome goals.

There are two steps to applying the causal chain: 1) accurately determine the cause and effect; 2) intervene in the cause in advance. A common misunderstanding when judging cause and effect is to mistake correlation for causality. Correlation between two variables means that they appear at the same time in a regular manner, but they are not directly related. Causation between two variables means that they are directly connected, and one variable causes the change or appearance of the other variable. The sales of watermelon and ice cream increase at the same time, which is a correlation but not causation. The increase in temperature and ice cream sales are causal. The temperature and ice cream sales form a causal chain.

The work of user growth is to find certain causality among uncertain correlations, and then intervene to achieve user growth.

3. Reinforcement loop

A reinforcing loop is a cause-and-effect chain that forms a closed loop. The cause strengthens the effect, and the effect further strengthens the cause, forming a positive reinforcement loop, and the cause and effect cycle continues to reinforce each other. Conversely, there is also a negative reinforcement loop, where the cause weakens the effect, and the effect weakens the cause.

The reinforcement loop is an extremely critical connection in the system and has a wide range of application cases in the business world. On the C2C e-commerce platform Taobao, the more merchants there are on the platform, the more shopping options there are for users, leading to more shopping users; the more shopping users there are, the more consumer demand there is, and the larger the scale of consumption is, leading to more merchants settling on the platform. The growth loop formed by merchants and users has driven the development of Taobao.

Whether it is the development of an enterprise or an individual, as well as the user growth that will be discussed in the future, we need to discover the core reinforcement loop and then persist in driving the reinforcement loop to achieve rapid and sustainable development. The “growth flywheel” often mentioned in the Internet industry is essentially a positive reinforcement loop, in which multiple core services/products promote and enhance each other, driving the sustainable development of the business.

4. Regulation loop

The regulation loop is the opposite of the reinforcement loop. The cause strengthens the effect, and the effect in turn weakens the cause, forming a regulation loop that inhibits the development and change of the system.

If the reinforcement loop is a powerful tool to drive development, then the regulation loop is the ceiling that limits development. Taking the Internet industry as an example, Zhihu's early days brought in new users due to its high-quality question-and-answer content. However, the growth in user scale led to a decline in content quality, which in turn inhibited the increase in user scale. The regulatory loop formed by content quality and user scale became a dilemma for Zhihu's development.

There is no reinforcement loop that runs indefinitely, but there will be a regulatory loop that will eventually appear. The limitations of resources and capabilities make development full of frustration and will also encounter bottlenecks. However, if we foresee the regulatory loop in time, respond to avoidance, or even break the restrictions, the regulatory loop will not stall our development.

5. Hysteresis effect

The lag effect refers to the time difference between cause and effect, which means that the result cannot be seen immediately after intervening in the cause.

Studying hard will not make you eloquent immediately, and working hard will not immediately help you get a promotion or a raise in salary. The lag effect between cause and effect increases the complexity of the system and makes causal intervention full of uncertainty.

The existence of hysteresis effect requires us to treat cause and effect more cautiously and be wary of the unknown and confusion brought about by hysteresis effect. Shortening the lag effect is the correct way to deal with it, but the specific methods are full of challenges. However, it is of primary importance not to ignore the hysteresis effect.

The variables, causal chains, reinforcement loops, regulation loops, and hysteresis effects under the system are rich in connotation and have great application value. This article will not discuss them in detail and will continue to discuss them with you in conjunction with user growth.

3. A systematic look at user growth

After understanding the composition of the system structure, how do we look at user growth from a systematic perspective?

The method is to find the elements and connections in the user growth system, use variables, causal chains, reinforcement loops, regulation loops, and hysteresis effects to build a user growth model, and disassemble and restore the product and user system. Find the core user variables, explore the growth causal chain, form the basic user growth driver, explore the growth enhancement loop, break the regulatory loop that limits growth, and deal with uncertain lag effects.

A systematic review approach can guide user growth in the right direction from a high level. The systematic response method can ensure the healthy and sustainable practical operation of user growth. I will continue to share with you the charm of exploring system dynamics and user growth!

Author: Wu Yijiu

Source: Wu Yijiu