Unlock Business Momentum: Master the Flywheel

Is your business feeling like you’re pushing a boulder uphill? The "rise and grind" mindset has taught us that suffering brings results, and that you can't grow your business any other way. This week, I have 3 examples of why that mentality is wrong.

What if your business could look more like a snowball rolling downhill, constantly gaining momentum and building up more and more mass. If that sounds like a dream come true to you, then you need to know the one thing all businesses that gain massive momentum on their own, have in common.

The Jim Collins Flywheel

The Jim Collins Flywheel is a visual representation of how putting consistent effort into a few key areas (rather than into a range of unlinked strategic initiatives) in the right order, can lead to sustained and compounding success, creating momentum... like a Flywheel.

Where did it come from?

The origins of this concept began a long time ago when Robert Burgelman, a Professor of Strategy at Stanford University said to a young Jim Collins…

"The greatest danger in business and life lies not in outright failure but in achieving success without understanding why you were successful in the first place."

That one sentence bugged Jim Collins for a long time. It drove him to explore what makes great companies tick, and why some fail.

After significant research into company success, Jim reached a revelation - The Flywheel. The understanding that great and unstoppable companies had this inherent Flywheel framework in place (many without realising), was a crowning moment of understanding for him.

So how do you avoid Burgelman's mistake?

When you deeply understand the underlying factors that give your business model its momentum, you can avoid Burgelman’s trap.

So how is this done in practice?

Before we get into it.. I want to give a big thanks to Jim Collins for his constant inspiration and fantastic work, and I'd encourage all of you to go and buy his books - particularly Turning the Flywheel, a Monograph to Accompany Good to Great and of course Good to Great, the book it was originally articulated in.

Ok... Lets break down the Flywheel.

So… imagine your business model is a huge heavy flywheel, it's mounted on an axel, weighing 2 tons, 10 metres in diameter, half a metre thick. If you push with all your effort, it barely moves an inch.

But if you push it consistently, after a few hours it will go 1 turn. As you keep pushing consistently the inertia stops working against you, then it does 5, 10, 20, 50, 100 turns. Eventually the momentum works in your favour, and you have your turning flywheel.

Now instead of a push, you have a logical and well executed step in your business model.

There is no "one big push" that made any of the below examples successful, instead, it is many well executed decisions, done in the right order, that worked together to produce momentum.

Let's look at some examples.

Amazon's Flywheel

What helped them achieve such huge amounts of momentum? Well, it looks a little like this:

• Create the biggest range of products for the lowest possible prices which…
• Creates a great experience for customers which….
• Increases the number of customers (traffic) who are attracted to that proposition which……
• Attracts more third party sellers which……
• Increases the amount of products available which further improves customer experience and attracts more traffic which…
• Leads to revenue growth which…… (as a result of being able to expand revenue faster than fixed costs)
• Enables them to have a lower cost structure due to scale which…
• Helps them lower their prices and around we go again!

There was no "one big push" that shot Amazon up to where it is today. Instead it was many decisions which led, sequentially, into each other. These decisions helped Amazon build their momentum to get them to where they are today.

Vanguard's Flywheel

Vanguard is another great example of a Flywheel in business. In Vanguard their momentum was built up more like this:

• Their central offer - to offer the lowest cost mutual funds which….
• As a result of lower fees, all things being even, leads to superior long-term returns which…
• Increases client loyalty which...
• Means they'll invest more and their funds under management grow… which
• Generates economies of scale which..
• Enables them to offer even lower cost mutual funds
• And around we go again!

Is this making sense? Let's do one more.

Intel's Flywheel

Now my last example is intel. Now I'm sure you're seeing the pattern, by now, but lets take a look at what helped intel get to where they are today:

• Centrepoint, or core offer to the market is to build chips that customers crave which…
• They then price high before competition heats up which starts to drive down unit costs... which
• Allows them to harvest profits even as prices are falling.. which
• Allows them to reinvest that profit into R&D which..
• Enables them to build the best possible chips that customers will crave...
• And around we go again!

So hopefully that's making sense, and I'm sure you're already thinking about what makes your business turn.

BUT.. before you go off and start building yours….

I attended a live workshop with Jim Collins recently at the Growth Faculty and the topic was the Flywheel… it's been getting used for almost 20 years, but he offered some tips I've never heard before which should really assist you..

VALUE ALERT: These tips are not present in his books!

Jim's 4 super tips for your Flywheel

As I said, these weren't present in the books. So this might be the only place you can get this secret info:

1. It stems from understanding what actually works. Create a list of your big successes. Your Flywheel exists in what is successful and replicable, you probably have some examples to learn from already.

2. A very important phrase in your Flywheel creation is “Then we can’t help but do ____” If we do A brilliantly, we can’t help but do B, and if we do B brilliantly, we can’t help but do C. I've used used "which" above.. but one needs to naturally, inevitably lead to the other in a logical way.

3. Each Flywheel has a beautiful logic of momentum but, no two Flywheels are ever the same.

Yours might be driven by cost or innovation or service or culture or who knows!? There are lots of types of Flywheels.

4. Finally.. Flywheels are ‘two-sided’ -

1. Right-hand side: is how you actualise your purpose in the world. What you do to create value?
2. Left-hand side: converts the right side into fuel that is used to push your Flywheel around again (like the examples above where profit was channeled into lower cost offerings, or cost structures and passing those savings onto customers).
3. There are different versions of fuel, these could be economies of scale, reputation, building resources like profitability and so on. That fuel goes back into the top of the flywheel and makes it go round and round.

Importantly.. the point of fuel is not to siphon it off to make a bunch of people rich. It’s supposed to go back into the Flywheel.

Ok.. Enough examples and explaining! Time to crack on and get to doing some quality thinking.

How do you start turning your Flywheel?

So how do you start turning your own Flywheel? Well here's a few questions to start you off:

• What are the core elements of your business that give it momentum?
• What order do they need to happen in so that one, inevitably drives the next one in a logical way?
• What is the fuel that then propels another turn of the Flywheel?
• Are there any parts of your business model, offers or propositions that don't generate momentum for your business - should you consider getting rid of them if they aren't necessary? Potentially yes.

Still feel stuck?

If you're still stuck on this one - workshop it with some of your team or a peer! Someone with a different perspective will see it more simply than you will. Doing this on a virtual or real whiteboard can also be really helpful to visualise it.

But make sure the steps are simple .. not complicated long statements.

Want to Learn More?

The whole ScaleUps Roadmap program is designed to do lead you through this kind of thinking exercise. It's not only about developing a great growth strategy, it's about stepping back and looking at how you can optimise your business model.

If you'd like to step back and be led through a series of excellent questions that will help you stack the deck for achieving amazing outcomes in the next three years in your business, you can check out the program here and register your interest now.

Enjoy and good luck!