handbooksEngines of growth
New customers come from the actions of past customers. The four ways that happens, the three engines built on them, and why running one at a time beats running all three badly.
- Sustainable growth follows one rule: new customers come from the actions of past customers.
- Three engines: sticky, viral, paid. Each has one metric that tells you whether it is working.
- Run one at a time. A team tuning all three tunes none of them well.
- Every engine eventually runs out. That is a signal to pivot the engine rather than push harder.
The rule
Growth that lasts comes from what past customers do, not from a one-off push. Ries lists four ways that happens:
- Word of mouth. People tell other people.
- A side effect of use. Using the product exposes it to others. Every PayPal payment showed PayPal to the person receiving it.
- Funded advertising. Paid for out of revenue, not out of investment.
- Repeat purchase or use. Subscriptions, or products people come back to by design.
Status goods are the clearest case of the second. A visible iPhone advertised itself every time someone used one in public.
A launch, a press hit, or a campaign funded from investment can move the numbers without any of these four being true. The test is whether the growth continues when the push stops.
The three engines
Sticky
The arithmetic is unforgiving: with 10% monthly churn, a tenth of the business has to be replaced every month before any growth counts. Teams running this engine often work on acquisition when the leak is the real problem.
Viral
Above 1.0 the coefficient compounds on its own. Below 1.0 every cohort is smaller than the one before, whatever the raw numbers look like.
The distinction from word of mouth is that virality is built into how the product works. People do not have to remember to recommend it.
Paid
The wider the gap between what a customer costs and what they are worth, the faster you can grow, because each customer funds more than the next one. When the gap narrows, growth slows regardless of how much you spend. No ad platform fixes a bad ratio.
Run one at a time
Each engine needs different work, different metrics, and a different product. Trying all three splits the team's attention and produces three weak engines.
Pick the one your product most naturally fits, tune it until it stops responding, then consider an engine of growth pivot.
Ask three people on your team which engine you are running. If you get three answers, that is the problem to fix before any growth work.