image1 image2 image3


Funnels and Loops

A lot of companies look at their user funnel and then try to optimize for every step of the funnel - acquire more leads, convert more of them to users, convert more to paying customers and so on.

This is traditional conversion optimization that treats every single entry into the funnel as a transaction that ends when the end of the funnel (usually, the purchase) is reached.

However, some companies are leading the move away from funnels to loops, where the idea is to take a more long-term view of the funnel such that it stops being a linear flow with a start and an end, and starts becoming a loop where those that complete a transaction enhance the system in the process.

Amazon, that popularised this approach by calling it the flywheel, is a good example for how this works. When more users come to Amazon and search for products and eventually buy something, this generates value for the sellers on Amazon, who in turn stock more products which attracts more users to make a purchase, thus creating a positive cycle or the 'flywheel' that keeps turning itself.

Although a lot of funnel optimization still exists even with this approach, this takes away the short term gains that come at the expense of long term gains.

We have the same two approaches available to us in our personal lives as well. We can either take the funnel approach and treat every encounter and everything we do as a means to achieving an end for us which can come in the form of a higher bonus or a favour to be cashed in later, or we can take the loop/flywheel approach and ensure that the value that we derive from others (and the environment and the ecosystem) doesn't end with us, but instead is compounded on to someone else, creating a positive loop that comes back to us.

As ancient philosophies like to point out, 'What goes around, comes around'. This is also known as karma. 

While I had always treated the concept of karma as a way of bringing about good behaviour in us ("treat others like you want them to treat you") through inducing a fear of future consequences for bad things we do now, looking at it from the lens of the flywheel shows that it can be a way of compounding the good.

While it is easy enough to see the flywheel in action in product development, it is even easier to see it in action in our own lives.

Share this: