Hockey stick growth is a term used to describe a line chart in which there is a sudden sharp increase after a period of relative dormancy. The chart displays the revenue growth pattern of a start-up company but can also measure related metrics such as bounce rate, customers, and sales.
Hockey stick growth has four stages: tinkering, the blade years, the growth inflection, and surging growth. Entrepreneur Bobby Martin discovered these common stages after analyzing 172 start-up companies.
The odds of hockey stick growth occurring can be increased by having a plan, committing to the company vision, creating an income plan, smart resource allocation, and creating an enthusiastic and invested team.
Hockey stick growth is a pattern where company growth is slow until an inflection point is reached and the growth becomes exponential. The line connecting the numerous data points resembles the shape of a hockey stick, which gives the concept its name. Hockey stick growth is, therefore, a term used to describe a line chart in which there is a sudden sharp increase after a period of relative dormancy. The hockey stick growth chart commonly displays the revenue growth pattern of a start-up company. However, it can also measure bounce rate, customers, sales, or any other growth-related business metric.
Author and entrepreneur Bobby Martin conducted a study of 172 start-ups to determine how hockey stick revenue growth could be replicated.
Martin, who analyzed companies such as Amazon, Netflix, and Google, found that revenue growth follows a typical pattern across four crucial stages:
Tinkering
The initial stage where entrepreneurs commit to taking a new idea seriously by developing it into a viable business.
The blade years
These are the first three or four years where the founders work long with little to show for their efforts.
The blade years are characterized by limited revenue growth, but Martin also noted that some companies may not be making any revenue whatsoever.
The growth inflection
Or the point where something in the start-up achieves critical mass.
The business model is refined, scalable, and there is a small yet appreciable increase in revenue growth.
Surging growth
In the last stage, the rate of revenue growth continues to increase as the business model starts to scale.
How can hockey stick growth be facilitated?
Martin also acknowledged that stage two was the most critical for an emerging start-up, with the blade years having the ability to either make or break a company.
With that in mind, there are ways a start-up can maximize the odds of success:
Have a plan
It is critical to create systems and processes from the start, whether that be the hiring of a project manager or the commitment to a well-defined schedule.
Once the initial euphoria of a new venture starts to wane, a robust plan gives the entrepreneurs direction and helps them stay motivated.
Commit to the vision
Part of the robust plan mentioned above should be to detail a concise picture of where the company is headed.
Entrepreneurs need to stick to this vision, especially when the temptation may be to pivot or shore up revenue streams.
Companies should determine how they intend to fund operations before embarking on the project work itself.
Smart resource allocation
Many entrepreneurs balk at a time-saving software subscription but are only too happy to take a prospective client out for lunch.
Early-stage start-up companies require intelligent and frugal resource allocation.
Create an enthusiastic team
A task easier said than done but nonetheless extremely important.
This begins with identifying talented individuals and having the foresight and decisiveness to invest in their potential.
Once the team is assembled, expectations should be made clear with periodic updates to ensure the work is progressing well.
DuckDuckGo Case Study
When DuckDuckGo entered the search engine space, back in 2008-9, it was already way way late to the game.
Indeed, already back then, Google had a dominating position, and other very large players like Microsoft, Bing, and Yahoo were dominating the space.
So launching a new search engine didn’t seem at all a good idea.
However, DuckDuckGo carved a space for itself based on privacy, and as over the years privacy concerns grew substantially, also the growth of DuckDuckGo spiked up.
DuckDuckGo makes money in two simple ways: Advertising and Affiliate Marketing. Advertising is shown based on the keywords typed into the search box. Affiliate revenues come from Amazon and eBay affiliate programs. When users buy after getting on those sites through DuckDuckGo the company collects a small commission.
In a set of Twitter threads, Nikita Bier (@nikitabier) explained the explosive growth of the Gas App.
In a context where the social media space was dominated by players like Facebook, Instagram, TikTok, Twitter, and Reddi, launching a new social media app isn’t as simple.
Yet, in the midst of a messy 2022, Nikita managed to launch, roll out, and expand the launch of the Gas App with incredible success, which generated millions of dollars in a few weeks.
The Gas App followed a gradual, staged rollout, similar to what Facebook did in the early days.
Where it first opened to a very selected group of colleges and campuses across the US, and once it had been tested at various scales, and as it built momentum and network effects, it was opened to more and more people.
The Gas App is going through the same momentum as we speak!
Source: Twitter @nikitabier
One of the last steps, after making the Gas App among the most successful in the US, was to launch in Canada, where after a few days, that is how the Hockey Stick Growth looked like!
Other Case Studies
Airbnb: In its early years, Airbnb experienced slow growth as it struggled to gain traction in the travel and hospitality industry. However, after implementing effective marketing strategies, building a robust platform, and improving user experience, Airbnb achieved hockey stick growth, becoming a global leader in short-term lodging and vacation rentals.
Tesla: Tesla, the electric vehicle manufacturer, faced challenges in its initial years, with limited sales and revenue growth. The company’s growth trajectory changed dramatically when it introduced the Model S and later expanded its product line to include more affordable electric vehicles. Tesla’s exponential growth in electric vehicle adoption contributed to its status as a market leader.
Instagram: Instagram, a photo and video sharing social media platform, experienced rapid growth after its launch in 2010. Its user base and engagement levels steadily increased over the years, leading to significant hockey stick growth. Instagram’s success was driven by its user-friendly interface and visual content appeal.
Zoom Video Communications: Zoom, a video conferencing platform, saw a surge in demand during the COVID-19 pandemic. While the company had been steadily growing before the pandemic, the sudden shift to remote work and virtual meetings propelled it into a period of exponential growth, exemplifying hockey stick growth.
Snap Inc. (Snapchat): Snapchat, a multimedia messaging app, initially faced slow user growth and revenue generation. However, its unique features, such as disappearing messages and stories, resonated with younger audiences. After introducing advertising options and expanding its platform, Snap Inc. achieved significant revenue growth and user engagement.
Slack Technologies: Slack, a business communication platform, experienced remarkable growth after its launch in 2013. Its user-friendly interface and collaboration tools attracted numerous organizations. Within a few years, Slack became a go-to platform for workplace communication, leading to exponential user adoption.
Netflix: While Netflix started as a DVD rental service, it transitioned into a streaming platform. Initially, it faced competition from traditional cable and DVD rental stores. However, the company’s emphasis on original content production and global expansion contributed to hockey stick growth in subscribers and revenue.
Shopify: Shopify, an e-commerce platform, enables businesses to set up online stores quickly. The company’s growth trajectory changed when it introduced an easy-to-use platform for entrepreneurs and small businesses. As e-commerce surged, Shopify experienced exponential growth in merchant sign-ups and revenue.
Uber Technologies: Uber, a ride-sharing and transportation company, disrupted the traditional taxi industry. After its launch, it expanded rapidly to various cities globally, experiencing hockey stick growth in ridership and revenue. Uber’s innovative approach to transportation services revolutionized the industry.
Facebook: Facebook, the social media giant, initially started as a platform for college students. However, it expanded its user base and features over time. Facebook’s acquisition of Instagram and WhatsApp further contributed to its hockey stick growth in terms of active users and advertising revenue.
Key Highlights:
Hockey Stick Growth: Hockey stick growth is a growth pattern in which a company experiences slow growth until an inflection point is reached, leading to exponential growth. The pattern resembles a hockey stick, with a sudden sharp increase after a period of slower growth.
Understanding the Pattern: Hockey stick growth commonly represents revenue growth in start-up companies, but it can also apply to other growth-related metrics such as bounce rate, customers, and sales.
Examples of Hockey Stick Growth:
Amazon: Experienced slow growth for about thirteen years until an inflection point around 2007 led to exponential revenue growth.
Groupon: Achieved rapid revenue growth within a few years, with revenue increasing from $100,000 in 2008 to $1.6 billion in 2011.
Four Stages of Growth: Bobby Martin identified four stages of hockey stick growth after studying start-up companies:
Tinkering: Initial commitment to developing a new idea into a viable business.
Blade Years: The first few years with limited revenue growth, characterized by founders’ hard work.
Growth Inflection: A point where critical mass is achieved, refining the business model, and experiencing a small increase in revenue growth.
Surging Growth: Exponential revenue growth as the business model scales.
Facilitating Hockey Stick Growth:
Have a Plan: Establish systems, processes, and a clear schedule for direction and motivation.
Commit to the Vision: Stick to the company’s vision even during temptations to pivot or change revenue streams.
Create an Income Plan: Determine funding sources before starting project work to avoid running out of money.
Smart Resource Allocation: Allocate resources intelligently and frugally for efficient use.
Create an Enthusiastic Team: Assemble a talented team and invest in their potential while maintaining clear expectations.
DuckDuckGo Case Study: DuckDuckGo entered the crowded search engine space by focusing on privacy. As privacy concerns grew, the company experienced significant growth by offering advertising and affiliate marketing revenue models.
Gas App Case Study: The Gas App achieved explosive growth in the social media space by gradually rolling out to select colleges and campuses, building momentum and network effects, and eventually expanding to more regions.
Key Takeaways: Hockey stick growth signifies sudden exponential growth after a period of slower progress. Understanding the growth stages and implementing strategies like having a plan, committing to the vision, creating an income plan, resource allocation, and building an enthusiastic team can increase the chances of achieving hockey stick growth.
Aspect
Description
Introduction
Hockey Stick Growth is a term used in business and investment to describe a sudden and substantial increase in a company’s growth or revenue. It refers to a growth curve that starts gradually but then experiences a sharp upward trajectory, resembling the shape of a hockey stick. This phenomenon often occurs in startups and emerging industries and is a key indicator of success and market penetration.
Key Concepts
– Exponential Growth: Hockey Stick Growth signifies exponential growth, where the rate of increase accelerates significantly over a relatively short period.
– Market Traction: It indicates that a company’s product or service has gained significant market traction and is experiencing high demand.
– Investment and Scaling: Companies experiencing hockey stick growth often attract investment to scale operations and capitalize on the surge in demand.
Causes of Hockey Stick Growth
Several factors contribute to hockey stick growth:
– Product-Market Fit: Finding the right product-market fit is crucial, as it means the product or service resonates with the target audience.
– Viral Marketing: Viral marketing and word-of-mouth can quickly spread awareness and attract a large customer base.
– Technological Advancements: In tech-based industries, breakthroughs or innovations can lead to rapid growth.
– Strategic Partnerships: Partnerships with established companies can boost distribution and visibility.
Applications
Hockey Stick Growth is observed in various sectors:
– Tech Startups: Many tech startups, such as social media platforms and e-commerce companies, have experienced hockey stick growth.
– Biotech and Healthcare: Companies with groundbreaking medical discoveries or pharmaceuticals can undergo rapid growth.
– Cryptocurrency: The cryptocurrency market has seen instances of hockey stick growth, driven by increased adoption and speculation.
Challenges and Considerations
Challenges associated with hockey stick growth include:
– Scalability: Companies must scale their operations, infrastructure, and workforce quickly to meet demand.
– Market Competition: Increased growth often attracts competition, requiring strategies to maintain a competitive edge.
– Sustainability: Sustaining rapid growth and transitioning to a stable growth phase can be challenging.
Future Trends
Future trends related to hockey stick growth may involve:
– Data-Driven Growth: Companies may rely more on data analytics to predict and manage growth patterns.
– Sustainable Growth: A focus on sustainable growth models that prioritize long-term stability over rapid but potentially volatile expansion.
– Regulatory Factors: Increased attention from regulators in industries like cryptocurrency and fintech may influence growth trajectories.
Conclusion
Hockey Stick Growth is a term used to describe a sudden, exponential increase in a company’s growth or revenue. It is often seen in startups and emerging industries, driven by factors such as product-market fit, viral marketing, and technological advancements. While it signifies success and market penetration, managing the challenges associated with rapid growth is crucial for long-term sustainability.
What are the four stages of the Hockey Stick Growth?
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.
A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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