The 3 Accountability Rules That Drive 108% YoY Growth

[00:00:00] Luke: The more alignment that we have in that of someone being responsible for more things that were tied to the contribution margin target that we're co building together and operating against our experience is that allows for the most effective workflow and the highest chance to be able to achieve that outcome.

[00:00:18] And what we're after is two to 3% an aggregate of hitting forecast to target across our data set. Right? Like that's, that's our acceptable range of what this looks like. That's the game that we're, that we're after. 

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[00:01:12] Richard: Hey folks. Welcome to the E-Commerce Playbook Podcast. I'm your host, Richard Gaffen, director of Digital Product Strategy here at Common Thread Collective. And I'm joined today by Mr. Luke Austin, who's of course our VP of E-commerce strategy here.

[00:01:26] For the last couple of weeks we've been talking through our profit system in terms of particularly what the component parts are, what are the levers that we have to pull, how exactly does it function in order to produce the significantly better outcomes that we believe it produces for clients.

[00:01:39] But one of the factors that we haven't, we've touched on a little bit, but haven't really delve. Deeper into is the matter of accountability. So we talked last time or last time I talked with Luke and Tony. We talked a little bit about how much clarity is provided by only having one person kind of in charge of calling the shots, right?

[00:01:55] That person has specific sort of. The function as functions in a more executive manner, where instead of having to go through a process of making sure everybody sort of agrees on what comes next, this person is able to make decisions based on the clear, clear data that they have with the system. But another element of that that's kind of a corollary is the accountability that this person is held to.

[00:02:17] So, Luke, I know you wanted to talk. Through a few elements here around accountability, but let's, let's sort sort of jump into it here with kind of the first piece of the puzzle as far as the accountability goes in the profit engine system.

[00:02:28] Luke: Yes, so. I think there's three, three buckets here that we can talk to as it relates to accountability and as we talk through them, I think it's helpful to think about the people on your team, whether they're employees internally at the company, other vendors, other agencies, other software or service providers that use, right?

[00:02:47] And how these three pieces of accountability show up or don't show up in your relationship with those various groups of people because these are. Birthed out of the hundreds and hundreds of conversations that we've had with all different brands doing all different sorts of workflows to see what's, what's necessary to really lead to the outcome that we're all after in terms of the accountability and the team structure.

[00:03:13] Right? And so as we think about this role, this is like where the, the accountability piece of it has been, has been created out of design of what we've seen be necessary within. The the space and across, across hundreds of customers. So, three things. One, we are creating the forecast and executing against it.

[00:03:32] We're not being handed one. Two, we're spon, we're responsible for the whole workflow, not just a process or piece of it. And we're responsible for the outcome. So all levers are at our disposal and we're responsible for the outcome. And then third, we have skin in the game. So we're gonna talk through each other those things sort of briefly.

[00:03:49] But I think important as we, as we talk through how these actually show up. How, how do you think about how these map against your current team workflow and, and other partners? So the first we are creating the forecast and executing against it. This is. This is really in most businesses, this is really novel where the forecast tends to come from.

[00:04:09] A third party finance department. Maybe you're using a forecasting or planning tool or service provider and it's being handed to the people that are doing your work on a day-to-day basis. Right? Here's the forecast, here's what we want to do based on the inventory levels that we have available based on visitor conversionary, a OV math, you know, based on like if we comp traffic year over year like we have been, this is where, where we should land.

[00:04:33] So. We all good, let's go get it right, like some, some version of that. But the core piece is that the plan is being handed by someone to another person. So what's what, what's the issue with that? One is the inputs and lever levers and methodology of the forecast are going to be, it's gonna be at a different language.

[00:04:53] It's not gonna map to the actual outcomes that you're taking on a day-to-day basis. Right? So, for example, very common that a, that the finance department in an organization might be looking through the things of. Traffic conversion rate, holding a OV as a constant and then creating a daily plan based on sort of daily run through rates with the tick up on weekends or the sale promo periods.

[00:05:15] And it's backing into like this traffic conversion rate based forecast. Right? And so if that's handed down, then what becomes the lever is like, okay, let's say a oovs gonna remain constant. The things that we need to do to increase the outcome is like. Increase traffic or increase conversion rate. Right.

[00:05:31] And that's like a very nice and simple way to look at things like look at Google Analytics rolled up by channel traffic conversion, A OV. The thing that we all know is that those aren't actual levers that we can control in isolation. If you want to increase traffic, like you can do that in, in a split second, right?

[00:05:47] Like through don't a traffic campaign or whatever. Or, or even outside of that, like. Create a very a conversion rate based campaign. That's a very hook, hook, beatty click Beatty ad, you know, and, and drive it through. And the conversion rate off the back of it is not because you're not telling anything about the product or even the price point or anything to qualify the buyer, like all sorts of things when you try to isolate these things.

[00:06:08] And so. What's not gonna happen is like a, we're down on traffic. Let's go increase traffic tomorrow. It's not an action that's going to lead to an outcome that you want, but when you hand a forecast to someone that has a different, that, that you don't align the inputs and the leverage to the actual outcome, it's gonna lead to that sort of disjointed behavior.

[00:06:24] And then the second piece of why this is problematic is, is the level of ownership involved in the process too, right? So get handed a forecast. It's like, all right, well this is what finance thinks we can hit. Let's see. Don't, we're not really gonna be pulling traffic conversion rate levers, right?

[00:06:39] That's not a thing. Like you, you have a budget on a meta campaign and a bid on a meta campaign, and you're Google and you have another campaign in Klaviyo to send, like, you don't have a tr increased traffic button that you're gonna push each day, right? So like, this is what they think. So like. We'll have our plan and we'll sort of see how it aligns with this other plan.

[00:06:56] And, you know, maybe weekly when we meet, but there's no ownership involved in it, where what the profit engineer is doing is creating the forecast, aligning on it with, we align on the forecast with our customers, and the forecast is built around inputs that we can actually impact on a day to day basis.

[00:07:11] Right? So the marketing calendar, the email. Calendar the email plan that we're building out the daily targets across every single channel, every single day, every campaign mapped out, bid budget, the levers that are actually gonna be pulled, that's what's laddering up into the forecast that we build. We align with the customer on what the outcome is, and then we go and execute against it.

[00:07:30] So it's not something being handed to us that then we're, we're hoping sort of maps to the activity or that there's enough buy-in because we're the ones bringing it forward to. You, the customer, and aligning on it together, and then we're responsible for going and achieving the thing that we built and just increases the level of ownership too to a different level. 

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[00:08:40] Richard: Yeah, exactly. So I think like there's a couple points here that we've, we've hit on before and that have been sort of consistent philosophical themes here at CTC and one of course is the idea of or, or the fact that sort of pro proxy metrics are ultimately a damaging thing, right? So if, if you're not in a position where.

[00:08:57] You're giving your agency sort of full control and ownership of the overall target of the business. They're forced to use proxy metrics in order to. For you to judge whether or not like they're succeeding, right? And so that tends to be things like, yeah, it could be like traffic, conversion rate, rate, roas, whatever.

[00:09:14] And those things are all well and good in and of themselves, but they don't necessarily ladder up to the goal. And so before we hit record, you had sort of like talked about the scenario where you have maybe four different partners and all of them are hitting their KPIs and then the overall business is failing.

[00:09:27] And so this avoids that by having kind of the single metric and the ownership of that metric. 

[00:09:32] Luke: That's right. And I think, yeah, just to sort of, to build off that. And I, that's, it's a great point 'cause it's, this overlaps with the second piece of, of accountability and why it's so important, which is. Which is just that, which is that we are responsible for the whole workflow and not just a pro, a piece of the process.

[00:09:50] So we're responsible. One, we deliver the, we deliver and align on the outcome, and we're responsible for delivering that. So the step one, right? Like we, we have the level of ownership that's tied to it. We're not being handed the thing, it's the thing we created, thing we aligned with you on. And it's the thing we're, we're going to deliver.

[00:10:05] And then we are responsible for a. Large part, if not the majority of the workflow that goes into achieving that outcome. Right? Building the forecast, setting the targets, allocating your media mix across every single channel based on the highest incremental impact, creating the creative strategy and create a demand plan necessary to hit that forecast.

[00:10:26] And then buying the media on meta on a day-to-day basis to be able to, that that gets at a very high portion of the workflow that's gonna go into achieving that. That outcome rather than it being 2, 3, 4 people that are responsible for this. And, and the way that it would be, that it might be delegated in other ways, which is like, okay, the, this, the creative person is you have to make a creative plan across x number of products that helps us to deliver 85 ads this month.

[00:10:58] Right? And so like. That's clear. It's defined, it's an outcome. Well, what if the 85 ads doesn't get you to the goal? What if the, the spend on meta at that level is not high enough to achieve the volume outcome? You need more, you need more creative, right? You need to adjust the plan. So you're not actually after the, the, the process output of the workflow.

[00:11:16] You're, you're, you're after the outcome. And so what you need is one person that can. That has all levers available at their, their disposal in this core workflow of forecast to media mix, to create strategy to meta, to be able to achieve that outcome. And not disparate folks. Because yeah, to the, to the example you brought up, like you get to the end of the month, you're four different people across these four different work streams.

[00:11:38] They did their thing, they built a media plan, the other person built the creative strategy, created a man plan, the other person bought the media on meta, and then the, the final person right. And they all achieve their goals, but you're sitting there looking at your contribution margin that's 15% lower than you expected.

[00:11:54] And you're like, no, this is not, this is not what I had in mind at all. That's, that is the thing that needs to be rooted out as much as possible is how can we get, how can we make the whole workflow available to someone that's responsible for the outcome so that there's no excuse, right? There's no excuse because every lever is available at their disposal.

[00:12:13] Richard: Right. Yeah. Yeah. So, so I think it's like there's, to kind of track back what we've been saying here, there's like the, the actual. The plan is being built by the people who can then go out and execute the plan. So that, that's one sort of innovation here. And then the second piece of it is that every part of that plan is executable by one entity as sort of the profit engineer and at al, like the kind of the CTC general system, right?

[00:12:40] So there's sort of this like radical level of. Clarity in terms of the forecast, but then the, the connection between plan and execution becomes really, really tight, which is super unusual. Right. So let's, let's kind of roll on then to our third point here, which is around, and, and the way we've been kind of setting it up, it's like.

[00:12:59] This third point is already maybe kind of a given, which is that we have skin in the game. Now, of course, that has to do with the way we're compensated and the way our profit engineers are compensated, but as you can see, we already have sort of co-ownership with you of almost every part of the kind of like planning and executing process for your business.

[00:13:15] So let's talk then about like the kind of piece of the puzzle, the final piece of the puzzle here, which is the way that we have skin in the game.

[00:13:22] Luke: So you have a high level of ownership because the plan's been delivered. You have someone that is responsible and has every lever at their disposal in the workflow to be able to create it. The final piece you need is consequence on whether the outcome was achieved or not, and consequence to the upside or the downside, right?

[00:13:36] There has to be pain or gain related to achieving the thing. Otherwise that, that's what makes it, that's what makes it real for all of us, right? And so skin in the game, how we work in a profit engineering capacity is we have a portion of our of our billable and the service tied to achieving, mutually agreed upon performance targets that are tied directly to the forecast.

[00:13:57] And so there we are. We are taking it, taking a hit and taking lower margin on how, what these deals look like to be able to give us the ability to earn it back through a variable performance mechanism. That's tied to hitting the target that we all agree upon together as the, as as what the thing that we're marching after.

[00:14:16] And so the skin in the game directly impacts. We align with, we align together on the forecast that we pre-built. We're responsible for the whole work workflow. And then there's consequence, there's monetary consequence tied to achieving or not achieving that thing that flows, that impacts us. The profit engineers and their upside is directly tied to that as well as the same thing.

[00:14:35] That all flows back to your contribution margin target. Was that thing actually hit or not? And so for us, like what we want is to have the highest level of. Responsibility and capacity within this system so that we can have a higher chance of hitting that thing. So what we're gonna do, continue to do over time is equip our profit engineers more and more with more tools, more data, additional services that they're going to be able to take under their wing and be responsible for because it's going to give us a higher chance of giving the forecast that we align on, right.

[00:15:10] More levers to pull, to be able to hit the, hit the thing. So that's like sort of like. The, the focus for us is how do we continue to learn from the data set of what we see working across all the brands that we work with, help to create the tools, build the team to equip the profit engineers to have more and more impact over the outcome, which is going to allow us to grow your business and hit your contribution margin target more of the time, which then tied to the upside that we have in that pursuit as well.

[00:15:38] Right. So the, the. There's what I think comes across in this conversation and the conversation we had asked around capacity is we sort of this idea of like how we collapse. Roles within an organization. They like. We've used the metaphor, I think in some other conversations of how the full stack engineer, full stack developer came about, right?

[00:16:00] You have, you have front end back and you have design and became full stack developer, right? Like the same thing's happening here. This is the profit engineers, the full stack developer, the e-commerce marketing growth team. It allows that person to function more efficiently, more effectively to be able to achieve the outcome because they have everything under their level of responsibility and capacity.

[00:16:17] And so. The more alignment that we have in that of someone being responsible for more things that were tied to the contribution margin target that we're co building together and operating against our experience is that allows for the most effective workflow and the highest chance to be able to achieve that outcome.

[00:16:36] And what we're after is two to 3% an aggregate of hitting forecast to target across our data set. Right? Like that's, that's our acceptable range of what this looks like. That's the game that we're, that we're after.

[00:16:49] Richard: That's right. No, I think that that's, that's a good way to wrap it up here. So, folks, if this is something that you're interested in, if you are a seven or eight figure business, and even if you're a six figure business, just sort of a soft, put that out there, come get in touch with us. We would love to build this for you.

[00:17:05] And the idea here, of course, is to not only take a lot of the day-to-day stuff off of your plate, which I think honestly on, on a, the most practical basis is one of the. The biggest kind of benefits of this. We wanna be able to do that, but also sort of demonstrate the accountability that we have towards taking co-ownership of that with you.

[00:17:22] So, check it out common thread co.com. Hit that high risk button and let us know you wanna work with us. We would love to talk more. Alright, I think that's gonna do it for us. Until next time, take care everyone.