The Flywheel Effect: How Businesses Go From Good To Great
Wisdom
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"The flywheel effect is the idea that if you do the right things consistently, over time they compound into something much bigger." -James Clear
Insight
One insight that helps you deeply understand a situation, idea, or concept.
What is The Flywheel Effect?
The Flywheel Effect is like pushing a huge wheel—it's tough to start, but once moving, it gains speed with less effort. In business, it's a gradual journey from good to great, not a sudden leap, achieved through steady, small efforts that build upon one another, much like a chicken growing inside an egg.
It's a vital concept in business, especially for companies like Amazon. Initiating progress demands significant effort, akin to the challenge of getting a heavy wheel turning. Yet, once in motion, sustaining and accelerating growth becomes smoother.
Simply put, when a business improves in one area, like customer satisfaction, it sets off a positive chain—happy customers refer others, fostering growth without hefty marketing costs. Recognizing and applying the Flywheel Effect is key for businesses aspiring to grow steadily and thrive long-term, underscoring the impact of persistent, incremental actions.
In other words:
“Each turn of the flywheel builds upon work done earlier, compounding your investment of effort.” -Jim Collins
How to Use the Flywheel Effect
Here are four steps to effectively utilize the flywheel effect.
1. Identify Your Unique Edge.
Begin by discovering your competitive edge, often rooted in past successes. This could be your distinct brand, operational methods, or factors that make it difficult for your clients to switch to another service. Investigate your past accomplishments to uncover what propels you forward.
2. Define the Virtuous Cycle.
Next, outline a potential virtuous cycle that can amplify your competitive edge. Experimentation is key to finding the right elements for this cycle. Consider examples like Nike, whose edge was their brand. They harnessed the virtuous cycle by getting famous athletes to wear their products, thus strengthening their brand and increasing revenue. Sometimes, unconventional decisions might be necessary to set this cycle in motion, even if they seem counterintuitive in the short term.
3. Focus on a Unified Direction.
Concentrate on pushing the flywheel in a single, strategic direction. Align all aspects of your business to reinforce this direction and increase the speed of the flywheel. Any activities that divert from this strategic direction are distractions and should be eliminated to maintain focus.
4. Avoid Disruptions to the Flywheel.
Finally, maintain the flywheel's momentum without interruptions. Disruptions, like changing leadership or following new trends, can negate the progress achieved. Understand that flywheels need time to accelerate, so resist the urge to interrupt the established cycle—patience is key for the shift from good to great.
Living Your Greatness Legend
One inspiring story of a famous person still living for doing something exceptionally well.
Jeff Bezos
The founder of Amazon, Jeff Bezos, is a prime example of the flywheel effect. Starting as an online bookstore, they honed in on customer satisfaction as their initial competitive edge. By prioritizing excellent customer experience and leveraging technology, they streamlined operations and expanded their book selection.
As Amazon grew, the company diversified beyond books, delving into electronics, clothing, and more. Each new product line attracted additional customers, boosting their brand and revenue. A larger customer base gave them bargaining power with suppliers, enabling lower prices and further customer attraction—a self-reinforcing cycle.
The relentless focus on putting the customer first drove Amazon's growth. Over time, it became evident that customer satisfaction and operational efficiency were the core of Amazon's flywheel effect. Their patience and persistent strategy transformed them from a good online bookstore into a global e-commerce and technology giant, illustrating the power of the flywheel effect.
Final Thoughts
Questions for you to ponder and think carefully about.
Here are some quality questions and writing prompts for self-reflection and exploration of the flywheel effect:
What unique advantage can your business leverage to start the flywheel effect?
Are there successful models similar to your industry that your business can learn from in building your own virtuous cycle?
How aligned are your businesses’ efforts in pushing the flywheel in a consistent direction?
Cheers,
Ben Mumme
Founder and CEO of Living Your Greatness
P.S. Check out the “60 Works in 60 Seconds: Dallas Art Fair” video. Impressive artwork!
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