Flywheels and Momentum
“Once you fully grasp how to create flywheel momentum in your particular situation, and apply that understanding with creative intensity and relentless discipline, you’ll gain the power of strategic compounding. Never underestimate the power of momentum, especially when it’s compounded over an extended period of time.” — Jim Collins
In Part 1 of this series, we explained how the k-factor makes a flywheel grow exponentially rather than linearly like a funnel.
As a refresher, the k-factor measures the ability and willingness of one customer to attract another customer. You can think of it as a measure of organic growth or word-of-mouth growth.
Revisiting the formula paraguay mobile database from Part 1...
The flywheel formula for customer growth:
Now we can consider the most important factor of a flywheel - momentum .
The compounding effect of strategic actions is what builds momentum. The longer the compounding period, the more momentum you build.
For example, let's say you acquire 10 new customers, and their k-factor is 1 meaning each customer helps you bring in 1 additional customer. In this case, your flywheel will have 10 more customers - making your total number of new customers 20, not 10.
But what about next year?
Those 20 customers still have a k-factor of 1, so they bring in 20 more customers! Your original 10 customers are now 40 customers! Next year, if you keep all 40, you will have doubled again to 80.