A bit of a technical discussion today to clear out what's the difference between a growth engine, a network effect, and a flywheel. It could seem pretty esoteric, but it's not. This discussion is center-stage for (a) the few startups that might scale after finding their product-market fit and, for me, even most importantly, (b) every single corporate innovation project.
To be clear, I'm not advocating that all companies should scale up (at Innovation Copilots, we are thrilled not to have to), but if you're a startup, then yes, this is expected of you. Innovation is risky, and investors mathematically expect a high return from the few projects that will survive. And if you're in a corporate setup, some innovation projects might be about probing weak signals, but the core idea is to sustain a multi-million or -billion business; thinking about scaling is essential from day one.
So, let's try to unpack this. The short version is:
- A growth engine is a generic term for your growth strategy.
- A network effect is a specific element of a growth engine occurring mainly with digital businesses that can generate hyper-growth.
- And a flywheel is an ideal growth model designed to self-sustain scale acceleration.
Here are more details and why/when you should consider these different logics: