BOOK REVIEW: Why your business is like a flywheel, and other key concepts for success | Fin24
 
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BOOK REVIEW: Why your business is like a flywheel, and other key concepts for success

Apr 18 2019 06:00
Ian Mann

Turning the Flywheel: A Monograph to Accompany Good to Great, by Jim Collins

In his first mega-best-selling book, Good to Great, business thinker and consultant Jim Collins used the image of a ‘Flywheel’ to communicate a profound idea. By doing the right things continuously you have the highest chances of achieving great success, and of continuing to achieve this success.

However, it comes with a few caveats: it must be the right things that are repeated, and these ‘right things’ need to be refined and enhanced as circumstances change. (For those who have read my book Strategy That Works, or who have developed their company strategy with me, it is what I call the “Functional Strategy”).

The image of a giant, heavy flywheel (20 metres in diameter and weighing 30 tons) is an appropriate one for growing and maintaining a successful enterprise – whether it is for profit or not. You must push the flywheel with great effort without stopping, and if you do, with time and this exhausting effort, at some point, you get to breakthrough. When you hit this point, the flywheel spins with little effort with almost unstoppable momentum.

Consider Amazon’s “flywheel”. Lower prices will attract more customer visits. The more customers that visit, the more sales are made, and the more commission-paying third parties are attracted to the site.

With more to sell, and selling more, the fixed costs involved, such as the fulfilment centres and the IT required to run the websites decline, and their delivery capacity can be improved.  This will lead to lower prices that will attract more customer visits, and the virtuous cycle continues.

There are two parts to being able to get the benefit of the insight of the giant flywheel.

The first is that it is excruciatingly hard to get started. There is no quick fix and no silver bullet. Great businesses do not take off and keep flying quickly or easily. I suggest clients think in terms of a decade.

The second is that it requires sustained effort and commitment. There can be no break in the effort required to get to the breakthrough point when the flywheel spins beautifully. Pausing equals a slowdown. Changing the direction requires a full stoppage and a restart. Commitment is necessary to get full value of this strategic compounding.

Before you buy into the concept and commit to unceasing effort again and again and again, you need to ensure that you have correctly defined this functional strategy.

There must be an inexorable logic to the parts of the flywheel. Your company’s flywheel will not likely be the same as Amazon’s. In almost two decades of building what Collins calls the flywheel and which I call the functional strategy, I have not yet found companies ending up with the same elements. That said, using an already created flywheel is a good way to get you started when developing your own unique one.

It should, however, have elements as clear and as logically correct as Amazon’s.

Circle of activity

The flywheel you need to create, is not merely the logical next action step on a list, but almost an inevitable result of the step that came before in a virtuous, never ending, ever more effective circle of activity. And this activity is what drives your business forward and upward.

The challenge to creating the flywheel is to begin with the understanding that the items are not to be seen as stand-alone ‘important things to do’ repeatedly. They must be understood as a sequence that “ignites and accelerates momentum” across the flywheel.

My advice to anyone planning on taking this route seriously is not to do it alone, but to get thoughtful high-level thinking colleagues to engage in the exercise with you. Additionally, it is probably prudent to do it over time, not in a single day. Make progress, revisit the issues, review them, discuss them, and keep in mind what you are trying to achieve. Hone until you all feel satisfied.

Armed with these cyclically important issues, you can rate how you function on each item, and look to remedying or expanding anything that is letting you down.

As times change, you can tweak how the issues that make up the flywheel have to manifest to keep things moving well. The flywheel itself never changes. Really.

Value

The value of this book even to those who have read Good to Great thoughtfully is that Collins uses many of the concepts he developed in subsequent books (of particular interest - How the Mighty Fall,) to bolster the importance of sticking to the flywheel.

There is a strong inclination for companies to react to disappointing results or changing circumstance through grasping for a new saviour, programme, fad, or direction. Collins’ later books analyse and report the result of these changes - more disappointment. Amazon in contrast, went through the dotcom bubble too, but they are standing because they stuck to the flywheel.

A truly great flywheel is enduring. When you successfully create one you have a ‘functional strategy’ that is worth the undivided attention and seriousness of purpose, given to the lengthy strategy plans popular in the 20th century.

It is worth reminding those who would dismiss a functional strategy as not ‘really’ strategy that giants like “Amazon, Vanguard, and Intel didn’t destroy their flywheels in response to a turbulent world; they disrupted the world around them by turning their flywheels”.

It is also worth noting that creating a flywheel is not only for CEOs of for-profit businesses; it is as necessary for NGOs, departments in large companies, and in small businesses. No one should ignore this easy-to-read, but profoundly useful book.

Readability         Light -+--- Serious

Insights              High +---- Low

Practical              High --+-- Low

*Ian Mann of Gateways consults internationally on strategy and implementation and is the author of ‘Strategy that Works’ and ‘The Executive Update.’ Views expressed are his own.

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