The Growth Flywheel (Introduction): Breaking Your Addiction To ‘Funnel Porn’
I’ve read almost every must-read business book, subscribed to every entrepreneurial-focused podcast, blog, and watched an ungodly amount of YouTube videos, trying to learn as much as humanly possible about startups and growth. I am obsessed with growth and startups.
But I am disturbed by how much ‘funnel porn’ there is. I admit I was addicted too. Everywhere I looked there are ‘gurus’ selling online courses, ‘software’, and books about building the ultimate funnel. There are ads all over Facebook and Instagram with claims like ‘build a 7-figure funnel with seven easy steps.’ It seems so easy. Seductively simple.
But false promises like these enforce the wrong mindset for startups — that the funnel is the holy grail. But in fact, it is the opposite.
Recent failures and flops like Casper Mattresses (CSPR) and Brandless are prime examples of this pressing issue. Casper has lost over $900 million (~80%) of its valuation, dropping from a high of $1.1 Billion to ~$200 Million. And Brandless has completely shut down after raising $240 million — both citing issues with their unit economics, namely their rising client acquisition costs (CAC).
But why? Why will Brandless’s name likely be forgotten, and Casper (not the friendly ghost) may actually die.
It is because they built their companies as funnels, which is an incomplete business model. A funnel only focuses on how to get a customer and neglects how to keep them. It doesn’t matter what type of new business strategy or growth tactic you learn if you apply it to a fundamentally outdated framework — it will fail.
And the current global pandemic has only highlighted the need, even more, to build companies with more robust business fundamentals.
So, if not a funnel, how should you view your business?
You likely already guessed the answer to that question: a flywheel. The concept of a flywheel is not new. It was first popularized in Jim Collins’s book, ‘Good to Great’. Even Jeff Bezos, the CEO of Amazon, swears by it. And other great companies like Uber, Airbnb, Apple, and Netflix are also built on the concept of a flywheel. Because, at its core, the most important thing about a flywheel is that it builds momentum.
Startups need to focus on building momentum as fast as they can.
Although most companies and startups have heard of the flywheel concept, they have not been able to apply it because there’s no framework for anyone to do so easily.
This three-part series is not trying to replace one auto-mechanic’s tool (the funnel) with a different one (the flywheel). The goal is to break-down and demystify the flywheel concept so that it’s not just another marketing or startup buzzword. I will introduce The Growth Flywheel framework and show how it will help any startup design their flywheels to build more durable companies for the future.
The Growth Flywheel (Part 1): Why Are Flywheels Better Than Funnels?
First, we’ll explain and analyze the key differences between the flywheel and the funnel so you can understand why thinking of your startup only as a funnel will ultimately destroy your company.
We’ll show you why the funnel does not build momentum. Then we’ll explore why the funnel is an outdated business model and why it does not fit current market conditions and consumer behaviors.
This section will also explain how the viral k-factor (an action-based measure of customer happiness) impacts a startup’s unit economics, and how the flywheel redefines what an ideal customer persona (ICP) is.
The Growth Flywheel (Part 2): How to Build and Measure Your Growth Engine
This section is pretty straightforward and is the core of this whole series. You should be able to build and measure your flywheel after this section.
We will introduce ‘The Growth Flywheel’ framework and provide a dynamic formula to measure a flywheel’s performance. This section will explain in detail the fundamentals of The Growth Flywheel and its four main components (Demand Generation, Client Acquisition, Lifetime Value (LTV) Optimization, and Retention & Referral).
And we will expand on the concept of momentum even more.
The Growth Flywheel Formula
The Growth Flywheel (Part 3): Make Your Startup More Efficient
All startups aim to grow (well, at least they should). But how?
We’ll explain why you must first determine and focus on your core growth goal (CGG). I’ll then explain why the product, marketing, sales, and support team are the four core teams for growth and dive deeper into their individual flywheels.
Then we’ll show you how to put it all together to create complete company alignment with all of the flywheels- which will help your teams and employees ‘wear multiple hats’ more efficiently.
The Product Flywheel
The Marketing Flywheel
The Sales Flywheel
The Support Flywheel
The Startup Flywheel
