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:

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.

Create an income plan

29% 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.

DuckDuckGo Case Study

duckduckgo-traffic-growth

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-business-model
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.

Read Next: DuckDuckGo Business Model.

Gas App Case Study

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!

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.

What are the four stages of the Hockey Stick Growth?

The four stages of Hockey Stick Growth are:

How do you achiave Hockey Stick Growth?

Achieving Hockey Stick Growth is not easy. However, there are a set of steps that you can take, such as:

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Business Engineering

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Tech Business Model Template

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A tech business model is made of four main components: value model (value propositions, missionvision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Web3 Business Model Template

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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.

Asymmetric Business Models

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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.

Business Competition

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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

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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.

Transitional Business Models

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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.

Minimum Viable Audience

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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

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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.

Market Expansion Theory

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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.

Speed-Reversibility

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Asymmetric Betting

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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 whole new problems for new customers (reinvent mode).

Revenue Streams Matrix

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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 Modeling

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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.

Pricing Strategies

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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.

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