Case Study: The strategy behind e.l.f.'s growth to $1B.

Photo by Kelsey McClellan via Harvard Business Review

Meet Tarang Amin.

Tarang is the CEO of e.l.f. Beauty and the man who's orchestrated the company's rise to over $1B in net sales for the first time in 2024.

This year, e.l.f. Beauty became the company with the top-selling mass cosmetics brand in the United States.

As I read Tarang's story in the Harvard Business Review, it wasn't just e.l.f.'s success and growth that caught my eye, but the intentional strategies behind their success.

What does this have to do with scaling a professional services firm? Well, everything. I often talk about the importance of looking outside of your four walls to find inspiration—this is exactly what I mean.

Today, I want to go inside e.l.f.'s success as a case study demonstrating many of the principles we talk about here.

I'll share the most important elements of their strategy that stood out to me and what we can all learn to be better leaders and create outsized results for the organizations we lead.

5 Takeaways from e.l.f Beauty's Growth Journey

1. All roads lead to/from strategy.

e.l.f is driven by a clear mission, vision, and values.

In my mind, these things are the foundations of your strategy as an organization.

Strategy = the future state that will guide all decision-making

As Tarang wrote, "Being clear about mission, vision, and values allows us to push decision-making down into the organization."

Any time a team member is faced with a decision, they know that if they can answer 'yes' to the following questions, they should feel empowered to move forward:

• Will this delight our community? (relevant)

• Does this build or leverage our existing strengths? (sustainable)

• Is this doing the right thing? (values)

• Is this helping us execute better and faster? (strategy)

• Is this making us more innovative, inclusive, and accessible? (relevant)

When organizations have a clear strategy, it allows every decision to be made with that strategy in mind.

"Does this align to strategy?" can be applied to all levels of the organization.

This makes for faster and better decision making which leads to better results, faster.

2. Working future-back.

You read a book front to back. You run a company back to front.

The most relevant and sustainable organizations start with an end goal in mind and work backward to define the steps to achieve it.

In the case of e.l.f, the founders knew nothing about cosmetics but couldn't understand why prices in the beauty category were so high.

So they started with a goal in mind: sell products for the eyes, lips, and face for $1 each.

With that goal in mind, they could work future-back to figure out the manufacturing process to create the necessary margins.

So often I see companies work present-forward. They try to solve for the next step to take without a clear end goal in mind.

As e.l.f. demonstrates, when you work future-back, it will illuminate the path of what steps need to be taken in order to get there.

3. Embracing collaboration.

Two things stood out to me about Tarang's approach to compensation and collaboration within the company:

1) He built a financial incentive system that makes everyone an owner as soon as possible.

Rather than have ownership and the biggest financial incentives only available to people at the top (a common setup in professional services), Tarang intentionally freed up equity to offer to employees.

The result: The company's value increased more than 6x.

2) All bonuses at e.l.f. Beauty are tied to enterprise performance, not individual performance.

Professional services firms are often built as a sum of the parts.

Partners build their book of business and at the end of the year, everything is added up and we see where we end up. I call this operating vertically.

If you want your firm to scale faster through collaboration, change the way people are incentivized. I call this operating horizontally.

4. Prioritizing intentional development.

Standardized buffet-style development plans aren't as effective as tailored plans.

I'm not saying development needs to be 100% bespoke to an individual, but the companies that are intentional about developing each team member will come out ahead.

In particular, 3 things e.l.f. does stood out to me:

1) Members of their executive team conduct orientations for new hires.

2) Everyone takes a Myers-Briggs Type Indicator test to create a conversation around work preferences with colleagues.

3) The company provides training on how to give effective real-time feedback and manage healthy conflict.

In today's world, we have to go beyond traditional onboarding and leadership training if we want to maximize team member engagement and performance.

5. Enabling innovation.

Innovation is a result, not an action.

As an example, whenever the e.l.f. Beauty team saw a new competitive product for $49, they asked, "What will it take to sell the same thing at a significantly lower price?"

Questions like this lead to bold ideas and new ways of thinking.

In another example, after overwhelming requests for a new product on a TikTok live event, Tarang asked his team what it would take to cut their typical 3-year product development time in half.

As a result, they were able to launch this new product in just 6 months.

Companies don't set out to innovate.

Innovation is a result of asking the right questions, paying attention to cues, and being willing to challenge the status quo.

With the right strategy, results result.

Photo via Harvard Business Review

e.l.f. Beauty's growth story is an example of how when the right strategy is defined and executed, incredible results can result.

It's why I focus so much time with my advisory clients on their strategy.

I continue to find too many organizations mistake plans for strategy or think that strategy is a revenue number they seek to hit in the future.

Your strategy should define who you are, what you stand for, and how you are going to deliver value to the marketplace.

It's the backbone of your organization and as Tarang Amin and e.l.f. Beauty have shown us, executing strategy can lead to outsized results.

If you’d like to read the entire HBR article about Tarang Amin and e.l.f., you can find it here.

With intention,
Alan D Whitman