In his book « Good to great », Jim COLLINS mentions the flywheel effect which he describes in more detail in a separate book. He presents it as one of the major differentiators between excellent companies and their more mediocre competitors. Learn more about it in this post.
I discussed the work of Jim COLLINS and his team in a previous ARTICLE. As a reminder, they have, during 5 years, analyzed 11 companies called excellent (according to specific criteria) and compared them to their direct and indirect competitors. Several differentiators emerged, including the flywheel effect.
A global perspective of your business
Imagine your project or company as a steering wheel. You turn it over and over again. At first, it turns very, very slowly and is extremely hard to turn. Then, as you go along, it turns faster and easier. This represents 50% of the flying effect.
But that’s not all ! You still need to define the steps of your flywheel and the order in which to operate them.
The Amazon example
Let’s take the example of Amazon. From the very beginning, Jeff BEZOS had imbued Amazon with an obsession: to create more and more value for more and more customers. He and his team drew the following wheel: low prices lead to more and more visits, which leads to more sales and attracts more third-party sellers who want to sell on the site. The result is that Amazon gets a better return on its fixed costs (servers, storage and delivery centers, etc.). The increased efficiency then allows prices to be pulled down even further. Whichever part of the flywheel is reinforced, it is accelerating and gaining momentum. The process is shown in the figure below.
I am sharing with you in this article the steps to follow to define your own steering wheel.
Question or comment ? As always, I will be happy to answer them.
Want to define or improve your own flywheel? Let’s discuss !