So your business is growing. That’s great right? Turns out, it depends.
A few years ago, my partner Barrett, and I met up with Aaron Ross, bestselling author of Predictable Revenue. We discussed our business’s growth. Ross is a major expert on business growth. He asked us if we were growing through inertia or momentum. We both had a blank look on our faces.
“What’s the difference between growth and momentum?” we asked. Aaron unpacked it for us and it made a lot of sense. I’ve reflected on that conversation for the past years and here’s the best way to explain it.
Let’s take the example of two fictional companies: NewCo and DiffCo. NewCo and DiffCo are both businesses with brand new products/services that address the problems of their consumers. Because they both meet the needs of their consumers, they both do very well to start.
For years, NewCo and DiffCo are neck and neck with results. They are the envy of many businesses. Everyone wants to work for them. Then something happens. The fate of both companies diverges.
NewCo realizes too late it was growing through inertia. They kept the same methods, didn’t improve their products or services, or expand into new markets. Soon they were eclipsed by competitors.
DiffCo, on the other hand, kept growing through momentum. They came up with new products, offered new solutions and services, and we’re always searching for new clients. After a decade, DiffCo was so different it was no longer known for the product it became famous for. Their momentum model kept it growing.
Can you tell which companies these are in real life? I bet you can think of lots of examples. In business, you can either grow through inertia or momentum. However, only one method will keep your company around for the long term.
Growing by Inertia
Inertia companies grow by doing the same thing. They belong to the “if it ain’t broke, don’t fix it” model. These companies may have initially offered a great solution to consumers. Then years later, they have been eclipsed by a better product or were undersold by new competitors.
A prime example of an inertia company would be Blockbuster. It grew through inertia until it had a store in every town. Blockbuster became the undisputed king of renting movies. Then the internet came along and they said, we’re a company that rents movies from brick-and-mortar stores.
SoonMarc Randolph came up with the idea for Netflix. He helped innovate DVDs through the mail. After his departure, Reed Hastings continued to innovate with streaming videos, then started creating their entertainment. Bye-bye Blockbuster.
Growing by Momentum
Are you a momentum growth business? Momentum companies grow by always looking for new business. They don’t stop when they find one new product or solution. They keep coming up with better ways to help and serve their customer base.
A prime example of a momentum company would be Amazon. Jeff Bezos started Amazon as an online bookstore, then began selling anything online, allowed third parties to sell, moved to create its own products, and then produced entertainment. Amazon kept the momentum by making everything easier for the customer to do one-stop shopping. Now no one thinks of Amazon as an online bookstore anymore. They think of it as a one-stop shop.
How to Be a Momentum Company
According to Jim Collins, who examined great companies in Good To Greatyou need to come up with your own momentum model, which he explained in his companion book Turning the Flywheel.
Collins suggests your organization needs to create (or recognize) your system for business growth and keep doing that system. Business growth is not about coming up with one great idea. Rather, growth is about creating a system where you’re always creating, refining, examining, evaluating, and executing your ideas.
Collins explained Amazon’s flywheel works like this. Amazon grows revenues per fixed costs, which allows them to lower prices on more offerings, which leads to increased customer visits, which attracts third-party sellers so that they can expand their store and distribution. It’s a virtuous circle that allows for continued growth.
For my company, we also grow by momentum. We do it by offering a large selection of great keynote speakers, which draws in more website visits, which gets us more leads, who we give great service, which gets us more return business, which draws in better keynote speakers, and so on. In that way, my company has been able to keep the momentum going even during the pandemic.
So your business growth may be great right now. However, it might be caused by inertia, not by momentum. If you want to be around in another decade, look at your systems and figure out why and how you are growing. Thank me later. Better yet, send me a few options or warrants.