There’s something special about working for a great, small startup—the work that you do matters, you understand exactly how it connects to the business objectives, and you feel mission-critical. If a new project or initiative launches, you probably had something to do with it.
Unfortunately, the role and uniqueness of the individual can get lost during periods of rapid growth.
Lemonade managed to grow from 10 to 200 team members without too much structure or friction. This was because of our great people and a collaborative culture, but also the fact that we only had two products in market during that time period.
The real challenge has been scaling from 200 to 1,000—while now offering five products—without losing the special fabric that defines our culture.
As Lemonade’s COO, I spend a lot of my time thinking about the various facets of the “autonomous organization,” a vision Lemonade’s cofounder and co-CEO Shai Wininger articulated back in our very early days. The question I mull over, is how org architecture can support scaling gracefully versus simply growing.
One solution? We’ve adopted and modified the Company Model, initially popularized by Spotify. It’s a way of structuring our organization that helps us become as autonomous as humanly possible.
Under the broad umbrella of Lemonade, you’ll now find discrete “Companies”—one for each product line, from renters to homeowners, pet health, term life, and car. Each Company is composed of all the teams and functions necessary to run its business. The goal is simple: achieve our business goals, while also optimizing for speed and agility.
And while many brands have applied this model’s organizational principles of squads, tribes, and so on to engineering and product teams, we’ve gone several steps further—applying them across the board, from Growth to Claims Experience, and beyond.
The Company Model isn’t suitable for everyone. But if your organization is multi-product, and scaling rapidly, it has clear benefits.
Why change? What wasn’t working?
Standard hierarchical structures lead to interdepartmental dependencies. They slow execution. They introduce red tape and inhibit innovation. Sound familiar?
Old ways of organizing a company produce what we might call “matrix mania,” a general inability to steer the ship.
In a traditional corporate structure, you’ll find multiple teams all charging toward the same goals, but from different perspectives. It wastes time and resources, since they’re all scrambling for the same, limited resources to advance those goals.
What does the Company Model look like, in basic terms?
While Lemonade’s Company Model owes a lot to the Spotify model, we’ve taken elements of that structure and pushed them forward in unique ways. Without getting too into the weeds, let’s briefly sketch out the structure and define some key terms.
What’s unique at Lemonade is that we’ve taken the model’s basic principles of autonomy and clear objectives, and applied them well beyond our Product and Engineering teams. The structure at Lemonade encompasses Growth, Customer Experience, and Insurance disciplines, among many others.
Let’s take a quick look at how the Company Model is organized at Lemonade, from the bottom up.
Central to the entire experience is a Lemonade Maker (our term for every employee). Each Maker at Lemonade directly contributes to and impacts on our business objectives. They understand exactly what their specialty and focus needs to be.
Makers are grouped together into Squads—multi-functional, autonomous teams that have clear objectives and scope. A squad is nimble and capable of having a massive impact; it’s “designed to feel like a mini start-up,” in the words of Spotify’s Henrik Kniberg & Anders Ivarsson.
Above that, we find Tribes—a cluster of several squads, all operating under unified leadership.
Climbing a bit higher in the structure we find the Company. In Lemonade’s case, that means Pet, Car, Homeowners, and so on. A Company is an autonomous group within Lemonade focused on achieving its distinct goals, derived from Lemonade’s overall business goals.
Companies are composed of Tribes, Squads, and individual contributors (ICs)—Makers who contribute to the company as a whole, but not in the context of a squad. A BizOps Specialist or a Data Scientist are both examples of ICs.
Makers who work for multiple Companies
In order to make sure we “don’t do things twice,” and have consistency throughout the companies in terms of how they’re run, we maintain separate, horizontal departments that support all business lines.
These groups are classified as either “support functions” (Finance, Comms, Office Ops) or “platforms” (cross-functional groups—like Growth or Data—that build the infrastructure, products, and tools that help support multiple companies).
What the Company Model provides
The Company Model helps align our internal structure with our broader values, both from a professional and cultural perspective. As always, we’re focused on autonomy, accountability, and high-quality execution—all while designing magical customer experiences.
There are many benefits we’re already seeing after almost two years of implementing the model, while launching a few new products along the way:
- A less rigid and hierarchical structure means room for creative, agile problem solving
- Flexibility and speed are enhanced—it’s possible to rapidly implement new ideas with a minimum of friction. Lemonade Car was conceived of and launched within the same year!
- Process and dependencies are both reduced
- Individual Makers have clear domain ownership, as well as a defined path to grow within the organization.
You’ll notice the emphasis on agility, flexibility, and speed here. Adaptability is key.
David Weinberg, in his excellent survey of technology and business, Everyday Chaos, discusses the concept of “transient advantage.” To do so, he discusses Rita Gunther McGrath’s The End of Competitive Advantage (2013):
“McGrath argues that competitive advantage is no longer sustainable…because digitalization, globalization, and other factors have made the environment far too dynamic….So companies must be always alert to changes anywhere in their environment and have in place the organizational structure and the culture that enables them to disengage from the current strategy and to create a new one.”
Benefits for the individual employee
The Company Model isn’t just about reducing friction and improving autonomy for the business as a whole.
When a company is small, it’s common for an individual employee to feel like a big fish in a small pond. You might be the only person who possesses your area of expertise; you feel special, connected. But then, when an organization scales, you start feeling like a very small fish in a very big pond.
One primary goal of the Company Model is to avoid this pitfall—to make every employee continue to feel like a big fish within the context of their Squad, even as the pond grows. (No more fish comparisons! Promise.)
In general, this opens the door to clearer growth pathways, which in turn boosts productivity and satisfaction. It gives employees the breathing room to develop and elevate their own skills, while still making sure everyone’s goals are aligned.
It’s silly to launch a new organizational design for its own sake. But one primary goal of an organization’s structure is always whether or not it’s keeping people motivated.
I strongly believe there’s 3 key criteria that motivate employees: connectivity to business goals, autonomy, and clear path development.
If that’s broken, your organizational design is no longer sufficient. So what do you do to re-motivate your teams?
Blindly throwing money at the problem isn’t going to solve it. An organization’s employees need to feel like they’re developing and making an impact. In our case, the Company Model helps create that framework on an individual level.
Room, and resources, to succeed
Thinking of product lines as their own “Companies” also makes sense in other ways, and opens up new horizons.
For instance, when Lemonade launched Lemonade Car, it was able to imagine itself as a distinct, almost standalone business. In some ways, it could operate almost as if Lemonade and Lemonade Home didn’t exist. But it was a “company” that didn’t need to go out and hunt for office real estate, or hire new employees to perform foundational, shared functions (like finance, or comms).
At the same time, Makers within each company’s squads and tribes are able to focus and specialize.
Think about what a typical “company” in this sense would contain: a product, customer experience experts, claims experts, growth specialists, and so on. The idea is to take all functions necessary to drive an individual business, and align them functionally under a single general manager who determines the strategy and execution plan for Homeowners, or Renters, or Car, or Pet.
Of course, at the highest level, Lemonade isn’t just an assortment of loosely affiliated, siloed companies all doing their own thing. Lemonade Car and Lemonade Home have much more in common with each other, obviously, than Warby Parker and Patagonia. Which brings us to…
Some challenges of the Company Model
While the Company Model frees Lemonade Car or Lemonade Pet to blast full-speed ahead toward their own Objectives and Key Results (OKRs)—utilizing shared departments and functions to make magic without redundancies—there are a few challenges to keep in mind.
Cross-selling
A core element of Lemonade’s strategy is to grow with our customers and meet their insurance needs as they go through predictable lifecycle events. Ultimately, this means a customer can toggle between their pet, homeowners, life, and car policies—all through a single app.
But one potential pitfall of a Company Model, if it’s not addressed, is that it can inhibit such inter-company cross-selling. For instance, it doesn’t make any sense if a member of our CX team is speaking with a homeowners policyholder and hears a dog barking in the background…but doesn’t think to tell this policyholder about Lemonade Pet and the resulting bundling discounts they’d be eligible for.
That’s why we have dedicated teams who focus on the crossover between Lemonade products, allowing the individual Companies to charge ahead on their product-specific OKRs without getting bogged down in cross-sales.
A balancing act
If you have distinct “companies” all pursuing distinct goals (which ladder up to shared OKRs), how do you monitor resource allocation? Where is the overall accountability in terms of metrics like expense ratio?
The Company Model is not static. It requires vigilance, monitoring, and a constant elaboration and recalibration so that the structure does not shift out of balance.
If you’ve got multiple Companies, each running in its own direction, how do you ensure things aren’t diverging? Horizontal departments become very critical.
We heavily depend on the OKR framework and a deep understanding of available resources to drive priority calls and alignment between initiatives and what we’re trying to achieve.
If you don’t have stabilizers in place, each Company could potentially go off and do its own thing.
In one sense, you want this to happen. You want your Company leads to be super ambitious, thinking about their own customers, loss ratio, growth targets, and so on, so that they can be off to the races. But from the standpoint of Lemonade as a whole, you need to make sure that everything has a cohesiveness on a horizontal level.
At the end of the day, though, it’s important to keep one key fact in mind: Your customers don’t care about your organizational structure—they care about having a streamlined, delightful, unified experience.
