The Flywheel Effect – Is it Working For or Against You?

Over the past five years, one of the most powerful strategic tools we’ve implemented with clients is the Flywheel (Initially created by Jim Collins in his book Good to Great and in his follow-up Turning the Flywheel: A Monograph to Accompany Good to Great). And while we’ve always known and talked about the metaphor for building a business, it wasn’t until we had a group of CEOs, with Jim, in his lab in Boulder, Colorado that I got the full depth and understanding of how to identify and build a Flywheel for a business, and how to use it as a growth engine.

Many are familiar with the Flywheel effect – building momentum to become more powerful, unstoppable force – much like a cartoon snowball that rolls down a hill, getting bigger and bigger and bigger as it gets closer to the bottom.

With a Flywheel, that snowball rolls down an Infinite hill, with an infinite supply of snow and infinite growth potential – almost to the point where the snowball becomes the size of a galaxy, over a decade or two.

So, it’s an incredibly powerful tool – and generally hard to figure out and get right. Some Flywheels apply to a business overall, some to each individual locations a business may have.

Now that we’ve developed and used the Flywheel with dozens of clients, I truly see the essence of the power and sustainability of a business’s growth because it’s really about the knock-on effect of how one good deed leads to another and another and another to become a virtual circle. When you get it right, it not only clarifies your strategy for growing your business, it crystallizes and aligns your team around what truly matters the most.

The Flywheel Effect as a Health Check

Once in place, the Flywheel can also be a health check for the company, to really see where it’s performing and where it isn’t. If you get the Flywheel right, there’s a direct correlation between the health of the Flywheel and the health of the business. Here are two examples:

• Just over six months ago, back when I could travel, I was working with a client in the US with whom we had built and acid-tested their Flywheel from different perspectives. We had nailed the essence, and the company had been building over more than two decades.

A piece of the business wasn’t performing as well as we wanted and, by looking the Flywheel, we went through each of the key drivers and rated their strength from 0-10. We also evaluated how resources had been allocated and had a massive epiphany when we realized we had under-resourced and put the fewest new hires in the weakest link on the Flywheel. Over the years, we had taken that weakest link and put on even more pressure.

After going through this process, it became crystal-clear what we had to do to increase and improve performance, which translated into our goals for the coming year.

• For another company, we used the Flywheel to inform an acquisition strategy. When they took the company to market, we used it to explain to the buyer why the business had grown so profitably and rapidly – and would continue to do so, if we kept feeding the Flywheel. The buyer easily understood and could be more confident in the future of the business.

While there are hundreds of different things that make a business tick, when you boil it down to a Flywheel, you can see how your business can be more powerful and effective.

It’s worth the work to figure out your Flywheel and make it part of your quarterly rhythm to evaluate performance – and to guide where you set priorities and allocate resources to make sure you strengthen the key aspects of your business and don’t inadvertently starve other areas where they need resources the most.

The Challenge

• If you haven’t defined your Flywheel yet, how are you going to make sure you and your senior team clearly understand and align to all your strategic and capital decisions?
• If you have done it, pull it out, see if you need to change anything based on your new understanding of the market, now, what are you going to do to make it part of your review on a quarterly basis?

If you need help in understanding or designing your Flywheel – or educating your teams about how to use it effectively, just let our experienced team know.