There’s a big problem with most flywheels, and it’s the main reason they’re destined to fail. The Flywheel Concept originated from Jim Collins’ book Good to Great and outlines a series of actions that a business takes in order to build momentum in the business. The Flywheel Concept is designed to build ever-increasing momentum and growth in a business, thereby making the business more successful over time.
The successful flywheels that are provided as examples are built after a deep understanding of the business’s fundamentals, and yet today we see many people showcasing flywheels that are never going to build momentum in a business.
In this episode two of two, we discuss five things to ensure that your flywheel will fire up and build momentum over time, and what to watch out for.
SUBSCRIBE TO THE GROWTH WHISPERERS:
Please note that this episode was transcribed using an AI application and may not be 100% grammatically correct – but it will still allow you to scan the episode for key content.
Kevin Lawrence 00:13
Welcome to the Growth Whisperers podcast where everything that we talk about relates to building enduring, great companies. Because that’s something that we believe in. That’s something that we get excited about. That’s something that we want to share with you the best that we can. I’m Kevin Lawrence, and I’m here with my partner down in Perth, Australia, Brad Giles, as we are every episode, Brad. How’s it going today?
Brad Giles 00:36
It is beautiful. Winter here is a little bit unlike your winter. It’s crisp, it’s cold. It’s fine. Yeah, lovely, loving, and I’m doing well. Thank you for asking.
Kevin Lawrence 00:51
I know you’re doing pretty good. You almost always are. Yeah, and things are good here. I mean, we’re actually in our summer, thankfully, and our summer where it gets to get warm and sunny. Oh my gosh, love the sun. It makes a difference. So hey, before we jump into the episode today, want to remind subscribers Hey, if you haven’t subscribed, wherever you listen to your podcasts, please do. And if you’re enjoying the show, please give it an awesome rating. The higher the better. Hopefully the show is worthy of that anyways, appreciate if you have a chance you would today. So Brad, what are we talking about today? What’s the what’s our, what are we digging into? I know it’s episode two of two.
Brad Giles 01:30
A flywheel – last week we spoke about the problem with flywheels. Our people are building flywheels that are not really flywheels. They’re just a series of statements.
Kevin Lawrence 01:42
And then they kind of like slice squares that kind of like a square wheel in some cases, thud, thud, thud.
Brad Giles 01:48
They don’t they don’t build momentum. So now this week, we’re talking about powering up your flywheel. How do you actually get it right, last week? Again, we spoke about it, we went into it, and we spoke about why they don’t work. But now we’re giving you a few tips on how you can make it work. Excellent.
Kevin Lawrence 02:12
What’s your quick word of the day, Brad?
Brad Giles 02:16
I’m working with a team last week. They’re undertaking major strategic pivot, let’s say. And there’s this HBR article Why transformation efforts fail? I know it’s not a quick word. But yeah, it’s something from that, that it’s harder than it seems. And you’ve got to maintain focus, one within that there was this one phrase, and it said, you know, in order to make your strategic changes effective, you need you are probably under communicating your vision by a factor of 10. So that’s my simple word of the day, you’ve got to over communicate your vision by a factor of 10.
Kevin Lawrence 03:05
Or like that. minds thinking ahead. So I was with one of my clients last week, and they are doing outstandingly well, and they’re coming into some turbulence, expected turbulence. And we spent a lot of time debating some key issues that could affect them next month, or in the next six months. But because we debated it, and we’re ahead of it, we’re making little moves today to recalibrate the business. So we don’t have to make a dramatic move down the road. So we’re so far ahead of it, we should be able to manage it really, really well. But it requires a lot of thinking ahead. And a lot of debate time, we had to dramatically change the agenda of the meeting to make room for these debates. And yeah, it was really, really good. So Brad, your word again, was
Brad Giles 04:01
over communicate your vision by a factor of 10. Right.
Kevin Lawrence 04:05
And I would say and mine is thinking ahead, thinking ahead and over committing your vision and this over communicating the vision and the plan. Both great strategies. All right. So the flywheel by Jim Collins, I mean, we’re both massive fans of it. And again, in the last episode, that was episode 117, we dug into making it a good flywheel not one of those square clunky ones that I referenced earlier on. But once you’ve got it, and having worked with dozens of companies through this process, either at the workshops and the private sessions that Jim does with some of our clients and you know, two days with Jim and his lab, the CEOs come away like walking on water, just incredible. But you know, coming away with a flywheel that actually does power itself when it’s powered up is awesome. And that’s hard work, but let’s assume that you got that Then is okay, great. Now how do you power this thing up? How do you fuel it so it gets stronger and stronger, and then continue to iterate it. So it continues to get stronger even when something might change in the market. So that’s kind of what we’re digging into today. So as I mentioned, Episode 117, how to build the flywheel. We also did an episode way back. But a year ago, Episode 51, we just introduced the flywheel concept by Jim Collins. So we’re gonna go and dig in today. And so the first point I’ve already kind of covered is, you got to ensure that it’s right, and that one part powers the next which last episode was about. And the key thing that Brad we talked about was, you can’t help but so because of X action, you can’t help but get why. Why can’t they help? Why happened? Yeah, and because why happens? You can’t help but have Zed happen? Yeah, no, I ran out of letters there. So that flywheel will need some creative numbering or letters to go around. But the point is, so that’s the last episode. You can go dig in. There was anything else you want to add to that brad?
Brad Giles 06:10
Any flywheel that you see where it shows you an arrow, you must replace that in your mind with, we can’t help but other NFL it’s not a logical outcome. That’s the really simple stress test, it was not a logical outcome, well, then you’ve got to start again, or you’ve got to make it work, because it’s not going to build momentum, which is the whole point of doing the flow will exercise.
Kevin Lawrence 06:35
That’s what a flywheel is about. You get a mass rotating, that has a lot of power that it’s hard to stop or impossible to stop.
Brad Giles 06:42
So that’s really our first point, right? That’s right. And at one part powers the next, listen to the last week’s episode 117. Let’s move on to number two. Yeah.
Kevin Lawrence 06:57
So it’s KPIs for each part of the flywheel unknown who owns that damn part of the machine? Yeah. So last week, and with the client that I was with, and if a few weeks before that with another client, but last week with a client, we’ve had the flywheel dialed for a long time, it’s a forefront in our meetings, we talk about it a lot we talk about at the top of the flywheel is this key ingredient, and we continue to invest in it. And be careful of not investing. And actually, most of our meeting was about that one piece at the top of the flywheel. But we’ve done a great job and the five aspects that are flywheels. And we’ve got a set of KPIs that measure each part of the flywheel, so we can have an opinion about how the flywheel is doing. But that’s cute, we actually have KPIs. So we went through in the meeting, like we do every quarter, and we just go in red, yellow, green, all the aspects. And we found that the top of the flywheel is actually a little yellowish right now. The second step is actually we didn’t, it was either orange or red, orange, between between between yellow and, and red. But the rest of the flywheel was green. But we had two parts that were you know, we know, we’re a little late, and we got them and we made sure that we are doing things to recalibrate them. Sometimes, sometimes we like to color outside the lines. So if it’s yellow, where it’s it’s off track, but probably will cover red, you know, deep trouble. We kind of felt it was in the middle. Because what it was in a, you know, is that we had four KPIs in it. Two were green, one was yellow, one was red. So we didn’t want to call it yellow, because there’s something red, but we didn’t want to call red because there was a couple that were green. So we compromised. We negotiate sometimes.
Brad Giles 09:08
So the point here is that, we want to know that each component of the flywheel where is it at today? So for me, it’s slightly different. I would be saying it’s a snapshot of today. Is it red or green? There isn’t an amber, which isn’t right. And yours is wrong. It’s just a different flavor. Yep. But so today is this red or green? And if it’s red, obviously, we’re looking for priorities in the next 90 days to help to build that momentum up. So that’s it real quick and dirty. But then the next kind of layer might be one or two or three or four KPIs team that I work with. They’ve got I think, For KPIs for each of the components of the flywheel, and then each of those four KPIs within each of the components are equally colored red or amber or green. And, and then we’re able to really understand what is we’re getting maximum momentum from the flywheel that we can.
Kevin Lawrence 10:21
And that’s identical to the client that I was with is that we have four KPIs for each one of them actually has five, we color the individual. And then we give it the summary color. Other companies have chose to go with a rating. And we’ll, we’ll come into that into the next point, the point of it. Ideally, you have KPIs, because you have a business with lots of measurements, they should relate directly to the flywheel. And that should be how you ground it. So you as best you can you stay away from an opinion fast another client that I was with a couple of weeks before that, they’re not there yet. We got the flywheel. We revised it, we dialed it, and we nailed it. And we are currently just giving it a rating. And then talking about how we improve it. Well, the KPIs will come. But it’s, you know, it’s the ultimate established KPIs.
Brad Giles 11:09
What, what do I found interesting with one of the teams that I’m with, we analyze the flywheel understanding everybody in the business in every department, how do they contribute to it. And that meant that each of the four KPIs, they were not necessarily all from the same area, there were people from all parts of the business that were contributing to each of the different components. And it kind of got quite a lot of buy in from people throughout the business.
Kevin Lawrence 11:40
Yeah. And as companies get larger, there will be multiple people that have ownership within those. Awesome. So point number one, making sure you’ve done your flywheel property and one part powers the next. And you can answer it’s an automatic answer is we can’t help but get to the next stage and flywheel to having KPIs and owners knowing who is accountable for those KPIs, which ideally already have, but sometimes that’s messy. And then three, and I talked about a little bit with that story. And Brad did as well, but quarterly, and annually rate how we’re doing. And whether you do red, yellow, green, or red and green, or reading at zero to 10. Or ideally using the KPIs are above but use the tool as a reflection point on the health of the business. Your financials could be perfect or horrible. The flywheel is the piece that you should be paying attention to because it’s a driver of future results. So that’s looking at it and really giving an objective measure. The other piece in there is Brad, you want to hear something want to add something in their circle.,
Brad Giles 12:55
What I found funny with flywheels, is people think that once they write it down, it’s going to create momentum. And it’s, it’s, it’s just a ping, it’s just words on a piece of paper.
Kevin Lawrence 13:09
It’s kind of like that’s like fairy tales, and Disneyland and cotton candy and butterflies.
Brad Giles 13:16
But maybe not every time but quite a lot of times I’ve seen people, they, they’re very proud of it. They’re produced a flywheel, even whether or not it actually makes sense. It’s like, well, this is only documenting the work that we’ve got to do. That’s it.
Kevin Lawrence 13:34
Yes, that’s the point. This point, it won’t take care of everything needs maintenance, and energy, improve over time. If you leave it alone, it’ll degrade, guaranteed.
Brad Giles 13:44
And so that’s why we’ve got this point quarterly. And annually, we’ve got to analyze and look at the flywheel. And so what do we need to do in the next 90 days so that we can maintain green get more green or get to green?
Kevin Lawrence 13:59
Exactly, or get to extra green. The other piece that you can look at once you get dialed in, you gotta be really careful. But ideally, once you look at the data for the overall, you can start to break it down and look at it by division, or region or location. And look at the how that flywheel is performing in different segments. So if you’ve got seven different divisions in your business, you can look at the flywheel for each of those divisions as part of how the general manager or person leading division reports out. In a in a real estate development company worked with in India, the flywheel has been so helpful, it’s been one of the most helpful tools for them. And when we look at each of the locations they have across the country, we look at the flywheel and the correlation with the flywheel health and the business health is uncanny like they nailed it. But we get red, yellow, green and KPIs. Both they do both for the flywheel for each of the locations, and it helps to set up a very strong conversation for the location.
Brad Giles 15:08
But each of those flywheels would be connected and would be drawing up to the primary flow.
Kevin Lawrence 15:15
It’s identical. It’s just the sub snapshot, it’s not a different fly one, here’s Be careful, that simplest client that it is one client that did this. And they try, they ended up trying to come up with three different flywheels that work together. No, it’s just, it’s about simplicity. And it’s very, so I have a cup, two rules around this. Once you get a flywheel, we lock the language. And we keep like a secure file, because someone decides usually from marketing that they want to go in and slick that thing up, and they generally destroy it. So number one, number two, people want to go make department fly wheels and all these other flights. I mean, if you want to do fill your boots, I from a strategic lead, I don’t want to see the other stuff. I don’t even want to pay attention to it. Because normally it just creates confusion and mess.
Brad Giles 16:07
So the rule that I applies is one fly we’ll per balance sheet. Okay. Be great. I love that. Yeah, because we’re connecting the we’re trying to build momentum with the assets that we have. I’ve got a business I work with, they’ve got to completely balance sheet.
Kevin Lawrence 16:28
That’s frickin that’s awesome, Brad, because there’ll be multiple income statements from all kinds of different divisions, but they generally share the same cash or balance sheet.
Brad Giles 16:38
And the flywheel tells us how do we maximize the use of that balance sheet?
Kevin Lawrence 16:44
My other client, it wouldn’t work, though. Because they have separate balance sheets. But the principal, the principal is good for a lot of businesses that have multi if it’s got a separate balance sheet, you could consider a separate flywheel. I like it.
Brad Giles 16:59
Well, sometimes balance sheets lead to one balance sheet, right? So that’s kind of what I’m saying like, so yeah. I’ll give you the example. I’ve got a business I work with two very different businesses. Yes, they’ve got different p&l. Yes, they’re different companies. But there’s one ultimate owner with one balance sheet. And so what we want is a retail and one is a wholesale, completely different markets. And the average price point is, let’s say $5,000, compared to $250,000. Completely different. But what we say it is, yeah, the flywheel must we must have one flywheel that we can connect with the whole thing. Because we’re trying to leverage we don’t want to add any. We don’t want to invest more in one area than necessarily.
Kevin Lawrence 17:56
I like that. So if you’re going to look at it divisionally, regionally, whatever it happens to be. Ideally, it’s same flywheel just scored for that part of the business, not inventing new things, because you’re just adding complexity. And novelty is fun, it just generally doesn’t scale that well. So that’s ideas quarterly, or annual rate, the effectiveness of each of the areas know where you stand, which leads us into the next point. We’ll look at them once you’ve rated them. How do you get them all to like bright green? Or if you’re using numbers, 10 and a 10? Or whatever it happens to be? How do you make sure each of those pieces is incredibly strong? Because the weakest point of the flywheel establishes the speed of the strength of the thought the flywheel is the old weakest link argument. So the key is how do we get them there. And sometimes you have to under invest in an area over invest in another area, because it’s about allocating the scarce resources that you have to get maximum impact. So it’s really interesting. When we did this exercise for a company, this is a company down in Los Angeles, this is going back. Four years ago. Yeah, for and as we’re doing the flywheel. It was just an epiphany that usually it’s an epiphany when you nail it. Everyone’s just like, oh, my gosh, it’s incredibly valuable. And then we went and there was one spot of the flywheel. And I think I mentioned in the last episode to one spot in our flywheel that was about a three out of 10 for strength. And then we went and someone said, You know what? We’ve hired 50 people over the last year or so. There was one person added in that area of the flywheel. And then we look at the budget and they’ve spent nothing on that and they’re like, and it was like it was number two on the flywheel. It might it. Yeah, it was number two position on the flywheel. And they were just like banging their heads in the dust. I can’t believe we missed it. Not only was it incredibly weak, they had under under invested capital and human capital on it. So it was like, it was like the, the neglected second third cousin in the family dinner that’s forgotten about it was just it was. Anyway, that’s, that’s, that’s why we do it.
Brad Giles 20:14
That’s why we do it. That’s why we want to come back and analyze it regularly. Yeah. It’s the whole purpose of coming back. And we want to be able to, to use it amongst all of the other tools that we do. People look, and they see examples of flywheels, for example, the Amazon flywheel, and they think, wow, that’s genius. But what they don’t appreciate is that that Amazon flywheel was probably built over many, many years, all of the business case studies that we read, it’s not like someone documented it. And you know, the leadership team, high fived each other and then all of that success was instant.
Kevin Lawrence 21:04
It takes years and lots of little time ever the flywheel is lots of little bits of power into it, eventually, over time builds this massive, massive power and force. But it takes an incredible amount of little inputs to get it going many, many, many, many, many things. Just just like remember, did you guys have in Australia, when you were a kid, those things called merry go rounds? Yeah, a big spinning still just the grab onto and someone sits on it, and you push when you try and spin your buddies off? Yep. Yeah, for sure. Same thing, when you’re getting that thing going, it takes a lot of force once it’s going, if you don’t want to get hit, it’s got a lot of momentum, and it has made a steel, it’s got a lot of power. I’m sure they don’t even have I’m sure those aren’t allowed on playgrounds anymore. They’re just way too much fun. So the idea is, is it the brand, the work of the team? Is that okay? How do we get into 10 or 10. So this client last week, as we’re digging into it, we were talking about the top of the flywheel, which is the one that we were concerned about the most. And the second one that was weak, the one that was you know, orange color. And we were talking about making sure that our plants calibrated to give the additional investment it needed. We weren’t overdoing it, just making sure there was enough energy going there. Because in context of the economy and what’s going on in the business, we needed to pay attention and didn’t want to be playing catch up six months or a year down the road.
Brad Giles 22:32
Awesome. And so then the next point is deciding investments and goals. So the theory is, is that we should be able to invest money or resources or people into the flywheel and make it gain more momentum and spin faster. That’s the broad principle. Like you said, your team identified, they’d under invested in one area but we should be able to understand once we’ve got the KPIs or where we’re measuring, we understand the different colors, we should be confident enough over time to say this is where we’re going to invest to build flywheel momentum.
Kevin Lawrence 23:19
So that client last week is we were doing investments and we were looking at a quarterly recalibration because we’ve been doing it for a few years, we got an excellent rhythm couple of weeks ago, we were reestablishing our three to five year we call key thrusts are our three biggest three to five investments over the next three to five years. We’re establishing those investments based on on the flywheel. I’ve got one this coming week with a client that had an amazing growth trajectory. And then it got along a little bit weird and wobbly. And we’re gonna go back and reset. We’re gonna go look at the flywheel, calibrate it, do this exact exercise we’re talking about here. And then we’re going to reset those three to five year investments, the areas that we believe that we invest in, that will strengthen the flywheel, which is essentially strengthening and adding momentum to the growth engine. Again, it’s not rocket science, this tool is to remind us the stuff that matters most. And most of all, because it’s the stuff that powers up the economic and economic engine of the business.
Brad Giles 24:24
Yeah, the great enduring businesses, they were able to turn it once, and then 10 times and then 100 times 1000, and then up to a million or a billion times, and it’s spinning ever faster and faster over time. And it’s not about you don’t win by having more turns, but you win by gaining momentum in the business because you’re getting these fundamentals right and building that momentum.
Kevin Lawrence 24:53
Yes, and one good deed leads to the next one and just it’s a beautiful thing to watch it happen. It’s also a beautiful thing when you can do a retrospective on the performance over the past year, and link it back to the flywheel and basically have your little guidebook of why it worked. So well. Or maybe yeah, why didn’t we in one side note, we had one acquisition in a company worked with it just there’s a lot of excitement about it. And once we started doing it, it wasn’t what was expected. And we went back and looked at it through the lens of the flywheel. And it was just didn’t belong on the flywheel. Yeah, yeah. Never mind, it wasn’t in our core competency. It’s learning.
Brad Giles 25:42
That’s, is you’re getting a deeper insight. A quick comment, we it’s awesome to be in a leadership team, where you get flywheel momentum. I’ve been in meetings where you’re going around doing check ins, at the beginning of let’s say, a quarterly workshop. And it’s like a major, a major milestone, with the first person, another major mile person with a milestone with the second, third, fourth, fifth, the end the sense of like, growth is good, but momentum is awesome, right?
Kevin Lawrence 26:17
It is because it basically fuels and funds itself. It’s kind of like cashflow like good cash flow. It just fuels and funds the bank. Anyway, it’s awesome. So let’s go back. And really so this is about powering up your flywheel once you’ve got it established, again, Episode 117, how to build it, this one how to power it. So number one, make sure it’s right. Last episode number two, have KPIs to measure each piece of the flywheel and know who the owner is, who’s accountable for it. So you can see and know the performance factually. And not just feeling wise, number three, quarter quarterly and annually, step back and rate it each of those areas, whether using colors or numbers based on those KPIs. And the advanced move is to do it by divisions.
Brad Giles 27:08
Okay, and then look at how to get to 10 out of 10, or super green, or whatever you would use, right where you’re at. And then ask yourself, how do we get there. And regularly every quarter ideally, bring in new priorities that help you to build flywheel momentum. And then violently Finally, set your investments and goals around three to five years to build that flywheel momentum, so that you can continually invest in whatever form it takes. What a good chat we’ve had today. Yeah. Last week, the problem with flywheels and this week, how to really get that flywheel momentum going. hope that you’ve enjoyed the episode today, you can subscribe to us. And we do love reviews, the things that warm the cockles of our hearts, let me tell you that. So we’d love it if you could post a review, in form in which you watch. And you can see us on YouTube, and obviously, wherever you catch your podcasts, you can see Kevin at Lawrence and co.com. He’s got a lovely newsletter that he puts out each week and myself, Brad Giles at evolution partners.com.au And obviously I’ve got a newsletter as well, where I talk about interesting things on a regular basis. So hope you’ve enjoyed today’s episode about the flywheel. Look forward to catching up with you again next week.