The Hockey Stick Effect, also called the Hockey Stick Phenomenon, describes a certain curve progression which resembles the shape of a Hockey Stick. First, the curve is flat, even characterized by a dip, but soon after, it shows a meteoric rise. Whether this development is intentional, unwanted, or even completely illusionary, depends on the original goal and how the progression is interpreted.
We can assume an intentional Hockey Stick Effect, if a startup calculates low revenues at the start or even factors in a small setback followed by a strong linear or even above average rise. Such a progression must not even necessarily refer to revenue. Other planned factors might be profit, units, download, visits, or similar items.
An unwanted Hockey Stick Phenomenon can be assumed, if a less sharp but more even curve progression was the desired result. This usally is the case for business models that have already been established for some time. In companies that are planning in quarters, for example, the sales department might ramp up their efforts towards the end of a quarter to meet a pre-defined quota – let’s say, by granting discounts. If the customers get used to that strategy, the bulk of sales might shift towards the end of a quarter and thus creating the Hockey Stick Effect.
The Hockey Stick Effect – Between Dream and Reality
The illusionary Hockey Stick Effect occurs, when a startup is planning for that effect but the data does not support their hopes. Many base their prognosis on very optimistically interpreted conditions. They project results from a short period onto a longer, barely tangible span of time and ignore factors that might lead to a setbeck. In fact, quite a few companies manage to create a Hockey Stick progression. The majority, however, will have to live with considerable fluctuations.
There is another context that has made the Hockey Stick Effect famous – climate change. Here, the curve progression refers to the temperate change over the last 1.000 years. For a long time, the global average temperate registered a moderate decrease but then rose sharply in the last decades. In this case, the illustrative hockey stick shows a bit of a different progression on the chart than our startup example.
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