The power of flywheel catalysts

You’ve already met flywheels in Part 1. (Quick recap in case you missed it: a flywheel is any positive-feedback system where each cycle increases output or lowers the input needed for the next, so results accelerate over time.)

And as we just overviewed, some catalysts are also flywheels. And when it comes to catalysts (and, really, growth in general), they’re the gold standard. Let’s check out an example.

Example: Amazon's Flywheel(s)

Speaking of the gold standard, Amazon’s flywheels are about as good as it gets. Here's how their system works:

• Two-sided Network Effects: More buyers → attracts more sellers → which increases product selection → which strengthens core value proposition → which attracts more buyers
• Scale Flywheels: More buyers → lower costs → enabling lower prices → attracting more buyers
• Brand flywheel: More buyers and sellers → increased association with brand promise → increased “Amazon as default option” → even more buyers
  

These flywheels don’t operate in isolation. They feed and accelerate each other. The result is a system that doesn’t just produce growth; it improves the entire foundation as it scales.

Flywheels are incredibly powerful. But how much do they really matter?

Consider this: NFX analyzed 336 companies that crossed $1B from 1994–2017 and found ~70% of tech value creation came from companies with network effects—just one of our four types of catalyst flywheels. What’s even wilder is that only 35% of companies studied had network effects. 

That said, let’s take a look at all four.