Learn to scale sustainably

Alongside the value hypothesis, every startup must also test its growth hypothesis — the theory of how new customers will discover the product or service. Together, these hypotheses define the variables that drive the growth engine, the mechanism at the heart of sustainable scaling. The growth engine identifies the most effective ways for the business to expand and ensures that growth can be maintained over time.

There are three primary types of growth engines: Sticky Growth, Paid Growth, and Viral Growth. Each offers a different approach to acquiring and retaining customers.

 

1. Sticky Growth Engine

The sticky growth engine relies on customer retention and loyalty. Growth happens when customers remain engaged for the long term and churn rates stay low. The business grows because new customers are added faster than existing customers are lost.

Example: Subscription-based services, such as streaming platforms and SaaS products, that continuously deliver value and enhance user experience.
Key metrics: Churn rate, average customer lifetime.

 

2. Paid Growth Engine

In this model, customer acquisition comes through paid marketing efforts, such as digital ad campaigns. Profitability depends on ensuring that the lifetime value (LTV) of new customers is greater than the customer acquisition cost (CAC). This engine works as long as this ratio remains favorable.

Example: E-commerce stores leveraging search engine ads or social media advertising to bring in new buyers.
Key metrics: CAC, LTV, advertising ROI.

 

3. Viral Growth Engine

The viral growth engine works when existing users bring in new users, creating exponential growth through word-of-mouth. This requires a product or service that delivers additional value when it is shared or recommended.

Example: Social media platforms like WhatsApp or TikTok, where growth is fueled by active sharing and community engagement.
Key metrics: Viral coefficient (how many new users each existing user brings), referral conversion rates.

 

Improving Your Growth Engine

While a company can operate more than one growth engine at a time, focusing on a single primary engine often makes measurement and optimization more effective. Businesses may also pivot their growth engine if they discover a faster or more profitable way to grow.

The growth engine is not a “set it and forget it” system. It must evolve through data-driven experimentation, testing, and iteration. Even a proven engine may require changes when moving from early adopters to the mass market in order to sustain momentum.