The Flywheel Concept from Good To Great by Jim Collins

Many entrepreneurs fall into the trap of searching for the ‘one big thing’ that will lead to business success. So, they often jump from one promising opportunity to the next without creating meaningful momentum in any one direction.

However, great businesses aren’t built on a single idea or insight. Instead, they’re the result of a series of steps that compound over time. Each one builds upon previous work to create superior results while unlocking new opportunities for the future.

So, let’s explore how successful companies like Amazon, and popular podcasts like The Joe Rogan Experience, accelerated their growth by creating a ‘flywheel’.

Insight #1 – The Power Of Momentum In Business

Let’s start with an analogy straight out of Good To Great by Jim Collins. Imagine a massive flywheel mounted horizontally on an axle, 30 ft. in diameter, 2 ft. thick, and 5,000 lbs. in weight. Your goal is to get this flywheel spinning as fast as possible.

Of course, any attempt to get it moving starts with significant effort and very little to show for it. However, so long as you continue pushing in the same direction, the task will eventually become easier as the wheel builds momentum.

The same is true when it comes to success in business. There is no single action that creates momentum. Instead, as you consistently push in a single direction over time, you’ll begin to benefit from the power of compounding results. And it’s this momentum that causes what eventually appears, from the outside, to be an overnight success.

Small wins lead to medium wins, which in turn lead to larger wins. As a result, once a flywheel has been established, it’s possible to rapidly increase results over time. So, let’s look at how great businesses are using this insight to accelerate their growth.

Insight #2 – How Great Businesses Use The Flywheel

Almost any action that contributes to forward momentum can help. However, the true power of this concept is unlocked by designing a momentum machine. One that leads to a virtuous cycle that feeds on itself to accelerate growth.

Consider the stages in Amazon’s flywheel as described in ‘Turning The Flywheel’ by Jim Collins: Lower prices lead to more customer visits. More customers increase the volume of sales and attract more commission-paying third-party sellers. That, in turn, allows Amazon to get more out of the fixed costs of their fulfillment centers and web servers. This greater efficiency then enables it to lower prices further.

Each component sets the company up for greater success in the next step. As a result, improving any one part with superior performance accelerates the entire loop.

Here’s another example from mutual fund giant Vanguard: Offer lower-cost mutual funds. Lower-cost funds deliver superior long-term results for clients. Superior long-term results help to build strong client loyalty. Strong loyalty increases the total assets under management. Increased assets under management help to generate economies of scale. And finally, economies of scale lower the costs of the fund.

Notice how each flywheel component isn’t merely a “next action step on the list” but almost an inevitable consequence of the step that came before. If you nail the first, you are propelled into the next component, and the next, and the next, and the next, almost like a chain reaction. That is the power of an efficient flywheel.

Here’s a final example based on a popular podcasting model: Start by producing valuable long-form content. Long-form content can be cut into short, shareable social clips. Social clips help attract more first-time listeners. Some of those first-time listeners will turn into loyal subscribers. A growing base of loyal subscribers helps attract more popular guests. Finally, popular guests help produce more valuable long-form content.

While this last example was not covered by Jim Collins, it shows how a flywheel can be created for almost any business model. Once you identify the correct sequence, you will want to renew and extend that flywheel for years to come. That way, you can benefit from the compounding results that are generated over time.

Wildly popular podcasts like The Joe Rogan Experience didn’t become an overnight success. In the beginning, Joe had to convince people from his personal network to participate as guests. Eventually, after a long period of steady growth, world-famous celebrities, entertainers, and educators became eager to reach his audience. That’s the power of building an effective flywheel and sticking with it for years.

Insight #3 – Tips For How To Build A Great Flywheel

In some cases, you can model your flywheel on how others have achieved similar success. This is especially true when leveraging a common medium or platform like podcasting, social media, email marketing, content marketing, or even e-commerce.

Another option is to identify successful patterns from unrelated industries. By studying great businesses like Amazon and Vanguard, you can gain a deeper insight into how their flywheels work and what makes them so effective. And then, you can use their models as inspiration for your approach.

However, if you’ve already established a business and simply want to identify the key elements that are already leading to your success, here is an abridged version of seven essential tips from Turning The Flywheel by Jim Collins:

1. Create a list of significant replicable successes your organization has achieved. This should include new initiatives and offerings that exceeded expectations.
2. Compile a list of failures and disappointments. This should include new initiatives and offerings that have failed outright or fell far below expectations.
3. Compare the successes to the disappointments and ask, “What do each of these tell us about the possible components of our flywheel?”
4. Using the components you’ve identified (keeping it to four to six), sketch the flywheel. Where does it start? What follows next? And next after that? You should be able to explain why each component follows from the previous component.
5. If you have more than six components, you’re making it too complicated; consolidate and simplify to capture the essence of the flywheel.
6. Test the flywheel against your list of successes and disappointments. Does your empirical experience validate it? Tweak the diagram until you can explain your biggest replicable successes as outcomes arising directly from the flywheel and your biggest disappointments as failures to execute or adhere to the flywheel.
7. Test the flywheel against the three circles of your Hedgehog Concept as covered in Good To Great. A Hedgehog Concept is an overarching strategy that flows from understanding the intersection of the following three circles: (1) what you’re deeply passionate about, (2) what you can be the best in the world at, and (3) what drives your economic or resource engine. Does the flywheel fit within the three circles of your Hedgehog Concept?

The goal is to design a flywheel where improvements in any one component help boost other components’ performance. This allows you to create a momentum machine that will steadily produce better results over time. And then, it’s just a matter of finding ways to renew and improve it in the future.

Beyond The Flywheel From Good To Great

Keep in mind that The Flywheel is only one of the valuable insights from Good To Great by Jim Collins. So, I recommend that you familiarize yourself with the remaining concepts to discover how you can make full use of the framework.

You can learn more by reading my book summary of Good To Great or my articles on The Hedgehog Concept and Level 5 Leadership.

Are you looking for another great book? Consider checking out the best leadership books, the best management books, or the best business books.

You can also subscribe to The Rick Kettner YouTube Channel or The Rick Kettner Podcast to get updates about future articles, summaries, and reading lists.

Do You Have A Question Or Comment?

Please visit the Flywheel Concept video on YouTube to share your thoughts in the comment section.