Understanding the Impact and Significance of a Hockey Stick Chart
A hockey stick chart is a price line chart where a sharp increase occurs suddenly after a short period of quiescence or relatively stable data points. The line connecting these data points traditionally mimics the shape of a hockey stick.
Hockey stick charts are significant in numerous fields, including business, economics, and scientific research, as they visually depict dramatic shifts or explosive growth—be it corporate earnings, global temperature changes, or poverty statistics.
Key Insights
- Sharp Increases Indicated: The hockey stick chart is characterized by a sudden spike following a flat and calm period.
- Extensively Used in Research: Seen frequently in research fields such as healthcare and environmental studies. For instance, businesses exhibit this pattern with sudden, dramatic sales increases.
- Need for Analysis: It’s critical to determine if the surge is a lasting trend or a temporary fluke.
Decoding Hockey Stick Charts
A hockey stick is made up of a blade, a slight curve, and a long shaft. Similarly, a hockey stick chart begins with low-level activities (y-axis) spanning a short duration (x-axis), followed by an abrupt bend signifying an inflection point, and progresses to a steep, straight ascent resembling the shaft of a hockey stick.
This pattern is observable in scientific disciplines. For example, global warming studies often demonstrate this chart pattern. Similarly, social scientists may use it to analyze trends in poverty.
The intuitive appeal of a hockey stick chart quickly highlights significant changes requiring further investigation. Whether in a short or long duration, identifying the underlying causes is crucial to discern if the change is fleeting or indicative of a more profound shift.
Business Growth Illustrated Through a Hockey Stick Chart
Consider the case of Groupon Inc., a company noted for its rapid ascent to the $1 billion sales milestone. It accomplished this feat within approximately two-and-a-half years, much faster than tech pioneers like Amazon and Google.
In early stages, Groupon generated sales of less than $100K in 2008, skyrocketing to $14.5 million in 2009, representing the steady and low phase—the ‘blade’ of the hockey stick. By 2010, sales reached $312.9 million, displaying the turning point or ‘inflection’ of the hockey stick. By 2011, revenues soared to $1.6 billion, showcasing dramatic growth on a hockey stick chart.
However, enormous revenue does not equate to profitability. Groupon’s marketing and sales expenses led to a $413 million net loss in 2010, revealing the business insights and caution necessary when evaluating data trends shown by hockey stick charts.
Related Terms: line chart, inflection point, exponential growth, growth chart, business analytics.
References
- U.S. Securities and Exchange Commission. “Amendment No. 7 to Form S-1, Groupon Inc.”, Page 47.
- U.S. Securities and Exchange Commission. “Amendment No. 7 to Form S-1, Groupon Inc.”, Page 64.
