On Funnels and Flywheels

There’s a lot of jar­gon around mar­ket­ing fun­nels, and recent­ly about motions and fly­wheels. Here’s what you should know.

4 min read


Actual flywheel
An indus­tri­al fly­wheel at a defunct Beth­le­hem Steel plant

There’s been a lot of talk late­ly about fly­wheels.

Every year Hub­spot holds its user con­fer­ence, Inbound. I should pref­ace my next com­ments by say­ing, I’m a fan of Hub­spot. I’ve used their prod­uct for years and I’ve spent a lot of my career doing mar­ket­ing for com­pa­nies at the size Hub­spot is opti­mized for. One of my favorite growth blogs is For Entre­pre­neurs which is run by David Skok, an ear­ly investor in Hub­spot.

Basi­cal­ly, I have a bias in favor of Hub­spot on most things.

Hubspot announces the death of the funnel

In Sep 2018 at Inbound, Hub­spot founder Bri­an Hal­li­gan gave a keynote in which he announced the retire­ment or death of the mar­ket­ing fun­nel in favor of a new con­cept, the mar­ket­ing fly­wheel. I’m shar­ing a YouTube link to his talk below. And you can read more about this on the Hub­spot blog.

I get it. Fun­nels are SOOOO last year. Mar­keters every­where should stop what they are doing, do not pass go, and imme­di­ate­ly make the fol­low­ing change.

Hubspot Funnel to Flywheel Graphic

WTH? Real­ly?

This raised eye­brows for me.

I get it. The fun­nel mod­el might not encom­pass every­thing about the cus­tomer expe­ri­ence. It’s essen­tial­ly a pro­duc­tion line with cus­tomers as it’s out­put.

Maybe that tempts mar­keters to ignore the val­ue of exist­ing cus­tomers, to pass them off as client suc­cess’s prob­lem now, and to miss out on some of the val­ue to be found in an avid cus­tomer base.

But look at the fly­wheel graph­ic. Where in this mer­ry-go-round do cus­tomers actu­al­ly get on?

The usefulness of the funnel

How did we get the fun­nel metaphor in the first place?

While prob­a­bly in use in some form or fash­ion for years, one of the best-known artic­u­la­tions of the fun­nel is the Sir­ius­De­ci­sions Demand Water­fall. (A new dia­gram was intro­duced in 2017, but an exam­i­na­tion of the changes will have to wait for anoth­er post.)

Siriusdecisions Demand Waterfall 2012 marketing funnel

This intro­duced many of the con­cepts now ubiq­ui­tous among mar­keters and pop­u­lat­ing Sales­force oppor­tu­ni­ty pipeline stages every­where. Con­cepts like inbound vs. out­bound, mar­ket­ing qual­i­fied lead, and closed won oppor­tu­ni­ty.

There’s a lot of util­i­ty in view­ing the cus­tomer acqui­si­tion process as lin­ear.

The cus­tomer sto­ry has a begin­ning, a mid­dle, and an end. You can exam­ine each step in con­text of the one that came before and the one that should come after.

I saw Hal­li­gan’s fly­wheel mod­el, and asked, how can I exe­cute a CRO strat­e­gy with that?

While not exact­ly sim­i­lar, this struck me as rem­i­nis­cent of anoth­er fal­la­cy that gets a lot of play with mar­keters. The cost of retain­ing a cus­tomer.

The cost of retain­ing a cus­tomer, so the say­ing goes, is 6x (or 5x or 7x) less than acquir­ing a new one. Heav­ens to Bet­sy, we should all aban­don our new cus­tomer acqui­si­tion efforts and stop wast­ing all that mon­ey!

As I explain this in my book, Pil­lars of Inflec­tion, cost isn’t the only con­cern mar­ket­ing has. What about the impact on rev­enue? It turns out new cus­tomers have an aver­age of 12x the impact on rev­enue that exist­ing cus­tomers have (accord­ing to a study con­duct­ed by Eric Shulz).

customer retention vs customer acquisition cost and revenue
Image Cred­it: Pil­lars of Inflec­tion

You can­not retain your way to growth in cus­tomers or sales.

You can­not retain your way to growth in cus­tomers or sales. #fly­wheel #CAC #CAM #cus­tomer­ac­qui­si­tion #mar­ket­ing Click To Tweet

Suf­fice it to say, that I was uncon­vinced that Hub­spot had artic­u­lat­ed some­thing tru­ly rev­o­lu­tion­ary about how mar­ket­ing was chang­ing, and ought to be done.

I had writ­ten fly­wheels off as only so much ephemer­al mar­ket­ing puffery.

And then…

The latest on flywheels from Jim Collins

Then, I caught Jim Collins’s inter­view with Tim Fer­riss on the Tim Fer­riss pod­cast.

I am an unabashed fan of Jim Collins. I’ve read all his books. Good to Great, Built to Last, How the Mighty Fall, Great by Choice—you name it, I’ve read and deployed tac­tics from these books.

Collins has released a new book. Well, not a book exact­ly. He calls it a mono­graph.

I had to look that up. It’s a short­er, more direct writ­ing, and tied inex­tri­ca­bly to a con­cept from his pre­vi­ous and best-known book, Good to Great. The title? Turn­ing the Fly­wheel.

And I was forced to revis­it the idea of fly­wheels for mar­ket­ing and for grow­ing com­pa­nies in gen­er­al.

Turn­ing the Fly­wheel was a very good read. I par­tic­u­lar­ly enjoyed Collins’s descrip­tion of how relent­less exe­cu­tion in step A, cre­ates a cer­tain inevitabil­i­ty in step B. For exam­ple, if you con­tin­u­al­ly exe­cute on your well-defined sales and mar­ket­ing motion, the imped­i­ments to scale reveal them­selves. You hire more sales peo­ple. Or, you invest more in your proven cus­tomer acqui­si­tion chan­nels.

Why?

Because you can’t ignore that these are the next nat­ur­al and inevitable step in your growth. Your com­pa­ny is out­grow­ing step A and demands the next action to ser­vice it’s pro­gres­sion.

On funnels and flywheels

I’ll be hon­est, I had a pre­dis­po­si­tion in favor of fly­wheels.

Left: Medieval kick­wheel-style pot­ter’s wheel. Right: the mod­ern ver­sion of the same tech­nol­o­gy.

Here’s a pic­ture of a medieval and mod­ern kick­wheels used in mak­ing wheel-thrown ceram­ics. In col­lege, I used one like this.

To oper­ate it, you kick the wheel. Just like an indus­tri­al fly­wheel, it gains momen­tum with each kick. Once it’s up to speed, the fly­wheel turns almost on its own with small­er kicks now and again to keep things going.

So, should I drop the tried and true fun­nel metaphor and focus on the fly­wheel? Or should I stick with what I knew and dis­miss the fly­wheel as a fad that was just hav­ing a good sea­son?

At the end of his mono­graph, Jim Collins deliv­ered the answer. In his con­clu­sion, he summed up lessons from all of his pre­vi­ous works in a sin­gle prin­ci­ple. One key that sep­a­rat­ed win­ner com­pa­nies from losers, cham­pi­ons from also-rans, and sur­vivors from fail­ures.

What was the key? Dis­ci­pline.

Dis­ci­pline to make dif­fi­cult choic­es, to con­front bru­tal facts, to avoid look­ing for res­cue in any­thing but exe­cu­tion. Dis­ci­pline to eschew dis­trac­tion, but open­ly test the mer­its of inno­va­tion.

And I think that’s what’s required here.

The fun­nel isn’t dead, nor has its use­ful­ness seen its day. It’s every bit as use­ful to mar­keters as it always has been. But so too is the fly­wheel. There are some beau­ti­ful lessons in the fly­wheel mod­el.

Savvy mar­keters don’t need to pick. This isn’t a boolean OR func­tion, it’s an AND.

Fun­nels and fly­wheels can coex­ist, and I think should coex­ist in the high­est func­tion­ing of mar­ket­ing teams.

What do you think? Share your thoughts in the com­ments below.


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@cmo_zen is a blog of micro med­i­ta­tions for mar­ket­ing lead­ers, designed to help them find clar­i­ty and peace in the mar­ket­ing mael­strom.

Published by Chad Jardine

@chadjardine is the CMO @goreact, an edtech company making game film for the classroom. He teaches graduate finance course @uutah and is the coauthor of Pillars of Inflection: Seven Fundamental Strategies for Explosive Company Growth. He accepts a limited number of consulting engagements each year.

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