hockey-stick-growth

What is Hockey Stick Growth? Hockey Stick Growth In A Nutshell

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.

Understanding hockey stick growth

Amazon experienced a period of approximately thirteen years before there was any appreciable increase in revenue. The company reached an inflection point around 2007, with linear revenue growth becoming exponential. Global eCommerce marketplace Groupon experienced a similar increase but in a much shorter time. The company earned $100,000 revenue in 2008, $14.5 million in 2009, and $312.9 million in 2010. The following year, sales revenue increased exponentially to $1.6 billion.

The four stages of hockey stick growth

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:

  1. Tinkering – the initial stage where entrepreneurs commit to taking a new idea seriously by developing it into a viable business
  2. 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.
  3. 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
  4. 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.
  • Create an income plan29% of all start-ups fail because they run out of money. 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.

Key takeaways:

  • 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.

Connected Business Frameworks

Ansoff Matrix

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You can use the Ansoff Matrix as a strategic framework to understand what growth strategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growth strategy can be derived by whether the market is new or existing, and the product is new or existing.

ReadAnsoff Matrix In A Nutshell

BCG Matrix

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In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

ReadBCG Matrix

Balanced Scorecard

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First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

ReadBalanced Scorecard

Blue Ocean Strategy

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A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

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PEST Analysis

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The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.

ReadPestel Analysis

Scenario Planning

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Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.

ReadScenario Planning

SWOT Analysis

A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

ReadSWOT Analysis In A Nutshell

Growth Matrix

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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 the whole new problems for new customers (reinvent mode).

ReadGrowth Matrix In A Nutshell

Comparable Analysis Framework

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A comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company. To find comparables you can look at two key profiles: the business and financial profile. From the comparable company analysis, it is possible to understand the competitive landscape of the target organization.

ReadComparable Analysis Framework In A Nutshell

Business Model Canvas

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The business model canvas is a framework proposed by Alexander Osterwalder and Yves Pigneur in Busines Model Generation enabling the design of business models through nine building blocks comprising: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.

ReadBusiness Model Canvas In A Nutshell

Business Experimentation 

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Business experiments help entrepreneurs test their hypotheses. Rather than define the problem by making too many hypotheses, a digital entrepreneur can formulate a few assumptions, design experiments, and check them against the actions of potential customers. Once measured, the impact, the entrepreneur, will be closer to define the problem.

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Speed Reversibility

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The speed-reversibility Matrix, by FourWeekMBA will help you understand how to allocate the resources based on the worst-case-scenario-test.

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Blue Ocean

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A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

ReadBlue Ocean Strategy

BCG Matrix

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In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

Read moreBCG Matrix

AIDA Model

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AIDA stands for attention, interest, desire, and action. That is a model that is used in marketing to describe the potential journey a customer might go through before purchasing a product or service. The AIDA model helps organizations focus their efforts when optimizing their marketing activities based on the customers’ journeys.

Read moreAIDA Model

Pirate Funnel

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Venture capitalist, Dave McClure, coined the acronym AARRR which is a simplified model that enables us to understand what metrics and channels to look at, at each stage for the users’ path toward becoming customers and referrers of a brand.

Read morePirate Funnel

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