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.