The Flywheel effect is a concept developed in the book Good to Great. No matter how dramatic the end result, good-to-great transformations never happen in one fell swoop. In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.
Kevin & Brad discuss The Flywheel concept and how to create your flywheel, how to validate your flywheel and how to speed up your flywheel.
Then they discuss how to leverage your flywheel, how to measure your flywheel and how to optimize your flywheel.
Jim Collins Flywheel Concept: How to build unstoppable momentum in your company
Episode 50 – The Growth Whisperers
The Growth Whisperers is a weekly podcast hosted by Brad Giles and Kevin Lawrence two advisors to mid-market businesses, one Australian, one Canadian, who each work with CEOs and Leadership Teams across the world with a mission to build enduring, great companies. Each weekly episode covers interesting situations and questions from the world of strategic planning, leadership development, talent and hiring in high growth entrepreneurial companies where real results matter.
Kevin Lawrence 00:13
Hey there, welcome to the growth whispers podcast where everything we talk about is about helping leaders and their teams build enduring great companies, awesome companies, the kinds of companies that we want to read about for decades, kinds of companies, we’d like to work at kinds of companies that we actually like to do business with kinds of companies that really make a positive impression on the planet, and create opportunities for those around them, and great returns for their shareholders. So I’m Kevin Lawrence. And I’m joined today by my co host, Brad Giles, Brad, how you doing today?
Brad Giles 00:47
Very, very good. Thank you. Good and very interested to talk about our subject today. As always, we’ve got a word or phrase of the day, Kevin, yes. What is your word or phrase?
Kevin Lawrence 01:01
I’ll let you go first today, Brad, I haven’t had a chance to think about it. But I’d like you to go first.
Brad Giles 01:10
My word today is spiral. So I do a newsletter each week. And I, we were talking about this before the show, it’s something that’s been on my mind. So when we think about the work that we do, which is regular rhythmic meetings with leadership teams, it may look to other people that were just going around in circles wherever we made every quarter we made every year. And it’s like, yeah, you know, like, they just come in, and they do the same things. And if you look at it only from one angle, yeah, it looks like you’re going around in circles. But if you look at it from another angle, and if you think about a spiral that’s going around in circles, but each time it’s going up higher and higher and higher, it’s actually a different perspective, because that’s what we really see is organizations going higher and higher. Yeah, up in a spiral Up, up, up, up higher. So yeah, my word that’s what’s on my mind, I wrote about it this week. And I’m really been thinking, I have really been thinking about spiral.
Kevin Lawrence 02:23
And I mentioned to you and I was considered writing a book around that same concept, because I believe in it, because it’s not only you have more perspective, in terms of being at a higher level, you have more insight, because you have greater understanding and intelligence about whatever it is that you’re doing. It’s a super-powerful concept. And that way, it’s not Groundhog Day, where it looks the same. And by the way, if you’re dealing with the same problems all the time, that means you’re probably not building momentum, which something we’ll be talking about today. So my word today, I’m going to riff off what you’re saying is spy. And I was watching this interesting documentary series just for a little bit on the weekend, about spies, and how they get information on governments in particular. But we also know some of this stuff happens in companies. So not advocating, you know, illegal information gathering. But there, what’s amazing out there is, is the amount that people will gladly share with you. And I remember an executive from a soft drink company that will remain unnamed, that I met in an airport lounge after he’d had a good half dozen cocktails. And until I joined them, you know, he was probably going on to seven, I was on one. And I’m curious, and holy, did he tell me stuff. And this massive global beverage company, he told me what it was like in the boardroom, because he was in one of those positions to put them in a boardroom. Wow. And let’s just say, imagine two massive polar bears fighting polar bears, fighting, trying to kill each other. That’s what it was, like in the boardroom of this company, and the stories that he was telling me, just, anyway, so the point is, is it’s spy and that is, where can you legally gather intelligence about the companies that you competed most against or the markets that you’re in? And most people underutilize it? And it’s as simple sometimes as calling up a CEO of a competitor? And talking to them and having a willingness to, you know, get to know them get to know you and a lot of competitors do collaborate on some ways, right? Sometimes they have no backup supply for you today. So let’s spy. How can you get additional information or have relationships that are transparent but beneficial. And by nature, you just learned a lot more. And so yeah. So you’re sort of spiraling up. And I’m up there trying to zoom in almost like with a satellite image and get more information from that a greater height.
Brad Giles 05:13
Kevin Lawrence 05:15
So, today with our theme of spiral and spies, you know, what is it that we’re going to dig in today that we are excited about? By the way, you know, for those of you listening, we, we’ve been talking about doing this episode for about four or five, six months, you know, and for a number of reasons, today is the day it’s actually Episode 50. So I think our 50th episode, is that right? Today’s is our 50th. Yeah, yeah, it’s our 50th episode. And hey, for something that we had talked about trying for six or 12 episodes, right back in back in COVID. There, it’s kind of cool that we’re 15 do two more episodes, that’s going to be the it’ll be the one year of doing it. So, you know, for Episode 50, we’re talking about something that we’re quite excited about and is incredibly impactful for the firms that we have the great honor to work with. So Brad, on further a little drumroll.
Brad Giles 06:10
Today, we are talking about the flywheel. But let’s be fair, you already know that if you’re listening because you saw it on the subject of today. So we’re talking about the flywheels are so important. Once you’ve built one, once you’ve built one, and you’ve watched it really embedded in an organization, a flywheel can be really, really important to clearly and simply and succinctly explain how do we get momentum within this business? So let’s maybe begin with explaining what is it and I’m going to refer to some text with Jim Collins explains it, obviously it comes. Jim goes, Yeah,
Kevin Lawrence 06:55
this comes from him. This is Jim’s. And let’s be very clear, we are giving full credit to Jim Collins, who created this concept, did the research that discovered it and shared it with us, we’re going to, we’re going to share our insights of how to apply it and leverage it with companies. But this is Jim’s invention.
Brad Giles 07:13
Okay, so let’s dip in the flywheel effect is a concept developed in the book good, great, no matter how dramatic The end result, Good to Great transformations never happened in one fell swoop. in building a great company or social sector enterprise, there is no single defining action, no grant program, no killer innovation, no solitary, lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel turn upon turn, building momentum until a point of breakthrough and beyond. So that’s Jim’s definition of the flywheel effect. And then so the flywheel is a series of actions that a business takes to create momentum.
Kevin Lawrence 08:15
Yeah, and what I would say and it’s in this book for those who see the video is from he wrote a separate monograph on this called turning the flywheel just on this piece. I’ve got a wonderful signed copy here, which he was nice enough to sign. But in simple terms, I’d put it as it’s, it’s how do you build unstoppable momentum in your company. That’s the idea. And a lot of companies don’t, a lot of companies are constant grind forever, and there’s always stuff to do. But then there are others that spiral up and scale and they build more power and more momentum as they grow. And that’s what this is about. So it’s about making sure that choices that you make, continue to build your momentum, but you got to know what builds momentum, first of all, and I’ll share an example like in our own firm, Brad didn’t talk about this specifically. But we worked on the flywheel a couple years ago, and then really nailed it. Probably just over a year ago with some stuff we did with our team. And then we started paying more attention to it. And, and things have spilled dramatically since that. We just refocused a few things that we were doing is, you know, we had caught up in being so passionate about what we’re doing, and excited about it. But sometimes we forget and we get obsessed with doing great work for our clients, but that alone isn’t enough. There’s other things that it kind of brings and so’s the strategy together. And that’s really the idea of is it guides I’ve written it No, here’s a guide strategic focus on the highest value activities and ensures you build self sustaining momentum. Time, that’s the idea. So if you’ve got a business and it’s going well, but you can’t feel the engine of it getting better and self sustaining over time, you probably want to take a look at it.
Brad Giles 10:12
And self sustaining is really a key thing to think about when you think about the momentum. So the business is growing, I’m going to say on its own, but you’re making the those key activities work. But that creates self sustaining growth, it continues to spin faster and faster. So the great leaders take it from one turn to 10 turns to 1000 turns to a million turns, and it continues to spin faster and faster. Now, the only way that you can do that is with focus and discipline and understanding these components, and not trying to build many different businesses.
Kevin Lawrence 11:00
Yes. And making it simple. And it’s fascinating. You know, if I, if I look at, you know, clients that we’ve implemented this, and you know, they’re sure we’ve had many, many CEOs go and spend two days with Jim in his lab in Boulder, and this is one thing he talked about, you know, with intensity and passion, a lot. And every single client came up with this as a homework piece. And we’ve since implemented it probably over five years and lots of companies. And you know, what’s interesting, one of them that we did it in, we remember, we were sitting in a meeting down in Los Angeles, beautiful day, we’re up on a rooftop deck, and it was a spectacular, as good as a day in LA can get close to the beach was all it was awesome. But we’re going through and identifying the flow because the company got in trouble. And they brought me in when a company got in trouble. And so we’re sitting there and we’re going through the flywheel. We figured out their flywheel. And then we went and rated, how strong each of the areas were. And the look that the CEO had, was almost horrified. And I could feel the feeling in their body. And it was gut wrenching. Because the second or third thing on the flywheel was they rated it at a three out of 10. Yeah, then they went through and looked at where they had spent money in the last two or three years. And it was like a one out of 10. They looked at where they had hired people on the flywheel proportionally, it was like zero to 10. Because they, they actually, in the excitement of their success forgot a key aspect of their success. And they knew that they could rattle it off. But they had forgotten and when we went through and did the flywheel It was like, we need to invest more, we need to change more. We need to bring this back to life. We need to get the right person running this who is going to fight for the peace of the fight. What’s the point of it is I’ve had many clients that when we go through and do the exercise, first of all, they’re like, there’s something that they make it a notable recalibration on. And that piece that is notably weak on the flywheel, they can see how it the direct correlation, how it’s holding them back. So it’s a health check in a reality check on your spooling of your strategy to make your business you know, spiral up, it’s insanely powerful. And it’s not the easiest thing to figure out. So what we’re going to do today is give you some guidelines to help you to figure it out, so that you can get the benefit of having it and then making it part of your reality check that you do every quarter and every year.
Brad Giles 13:48
Yeah, um, and so I guess before we jump in further, we’ve explained what a hedgehog concept is. But I’d like to also just explain what sorry what a flywheel is, I’d like to also explain what a hedgehog is and what a smack recipe is, because we’re going to talk about those things a little bit later on. So let’s begin with a hedgehog concept is a simple crystallin concept that flows from the deep understanding about the intersection, think about three circles, intersecting in the center of Venn diagram, the intersection of purpose or core purpose. What accompany can be best that accompanies company’s profit per x or single economic denominator. Then that so that’s the hedgehog concept. Okay, we’ve spoken about that before on this podcast. Now a snack recipe.
Kevin Lawrence 14:47
the hedgehog is just a simple way to articulate what your business is about. And you know, what’s the best in the world passionate about and what makes money those three things, the center of which It’s your B hag, your big, hairy, audacious goal that you want to achieve over the next 10 to 30 years. So that is a core central basic piece and understanding. It’s kind of like, you know who we are, and what are we about, in simple terms.
Brad Giles 15:14
So that’s the hedgehog and then we move on to what we call the smack recipe. So that’s short, for specific, methodical and consistent. So this is, again, about discipline. So a smack recipe is the code for translating a high level hedgehog concept into specific action, and for keeping an organization focused in the same direction, thereby building flywheel momentum. So again, it’s about keeping the organization focused in the same direction. So the more that we can not get distracted, the more that we can maintain focus in the right direction. Understanding the components that make up the flywheel, the more that we can build that flywheel momentum.
Kevin Lawrence 16:01
Yeah, and that’s at the root of most strategies is to stay focused on the most highly impactful activities. And as companies grow, they get diluted by interesting creative ideas, and basically dilute their force. And it’s no different than if you have a bullet, you want to shoot at a target or an arrow, you want to shoot at a target. When you shoot it, if it splits off into 100 pieces, it’s not going to have the same impact, versus one single projectile hitting a target is going to have more impact versus a kind of spray. And it’s we want to keep the impact behind our actions. That is the idea. And again, these are things to help us so with a hedgehog in mind, and I even when we do it with clients, we even put the hedgehog in the middle and the flywheel around it. Right. And it was we’re talking about the smack. There’s probably a visual way to integrate the smack as part of it to help stay focus. So yeah.
Brad Giles 17:06
is the crazy, crazy thing, right? You already, if you’re listening to this, you already have a flywheel. Yeah, it’s already suck. It just might be a bad one.
Kevin Lawrence 17:23
It’s like you already have a great idea, but maybe buried in the back of your brain mixed in with the bad ideas. there is there is brilliant ideas and all of our brains, but sometimes they get lost.
Brad Giles 17:36
Yeah. And the thing is, is that we are not making a flywheel. Okay, we are discovering a flywheel. And it’s such a different way to think about it.
Kevin Lawrence 17:48
startup and you’re trying, you don’t even know which way is up yet and what your business model is. But with this, you know, most of them aren’t pure startups. But if you’ve been around and already had some good success, there is a version of a flywheel. Now, it might be a weak flywheel, or it might have weakened or it might be awesome. But it’s discovery to get clarity so that you can use decisions that constantly enhance it. So yeah, you already got one, it just it might be a positive one, it might be neutral. And it might be a negative flywheel, which Collins calls the doom loop in his work.
Brad Giles 18:24
Yeah, so let’s go back to the spiral, you can have spirals which are going upwards, which is not the best analogy, but spirals that are going upwards and creating more momentum, or you can have ones that are going down and then the doom loop. So you can have positive or negative flywheels. The thing with it is that it’s already there. Every business already has a flywheel, but most of the time, they’re not focused on it. And they’re not, they’re distracted. And the absence of discipline around the flaw wheel means that they’re not seeing anywhere near the kind of effort that they could
Kevin Lawrence 19:10
So in one of the companies that we worked with, the CEO came out a Jim session, he figures when he sold the company, it added 20% to the value of the organization because we could articulate the flywheel, and he sold it for a big number. So that was a big value But the interesting thing is, is that everything that we did if it didn’t line up to the flywheel, we didn’t do it. All of our acquisition targets had to enhance the flywheel. And if and even if they didn’t fit within the flywheel, we wouldn’t do them. There was one that slipped through that was bad choice but acquisition targets. Everything went back flywheel. Interestingly, when that CEO would address the company, as he did on a fairly regular basis, and the leaders, what he talked about was, aside from the culture, you know, the purpose and the values was a flywheel and hedgehog again and again, it was, for him, it was the most important thing. Because if we improve this thing, the whole machine improves.
Brad Giles 20:24
And you know, what I recommend, everybody in that organization would have understood the flywheel and they would have understood. Everyone tries to make strategy more complex than it should be.
Kevin Lawrence 20:44
Because they don’t know what they’re doing. If your strategy is complicated, it means you don’t understand it, it should be able to make sense to a 10 year old kid, the best strategies or so basic, except for the ones that are complicated, but those usually aren’t the best ones.
Brad Giles 21:00
Kevin Lawrence 21:01
and it’s not that a mad brilliant, crazy, spectacular scientist, couldn’t come up with potentially a better strategy. But if it’s super complicated and intricate, even though it could be better, it’s almost impossible to execute. So a simplified version. and simplifying, you know, simply as you know, gentlemen, Mastery, my is, you know, my one of my favourite quotes is attributed to Mark Twain may or may not have actually been him, but we’ll go with Mark Twain today. And that’s, you know, I would have written you a shorter letter. But I didn’t have the time. Right. It’s hard to be simple and succinct, and simply, his simplicity is mastery. you can’t scale something that isn’t an insanely simple and easy to understand. It doesn’t scale.
Brad Giles 21:53
Yeah. And so for that leader in that example, many times, I’m gonna say every time many times when he’s communicating to the staff, what he’s doing is reinforcing what’s most important because people respect what you inspect, right? So the most important thing is, right, this is our hedgehog. And this is our flywheel. And this is how they work together. It’s everyone gets it, everyone knows what the most important things are.
Kevin Lawrence 22:24
As long as you keep reminding them.
Brad Giles 22:27
Yeah, of course, the, that’s the job of or part of one of the key jobs of the leader is to keep reminding them. So I want to give a quick example of a flywheel, which is Amazon. Okay, Amazon has a really simple flywheel that most people will get, because most people know Amazon. So it’s got five components. Number one is lower prices on more offerings. Number two, if we do that have lower prices or more offerings, we can’t help but have increase customer visits, more people will come because we’ve got low offerings. If we increase customer visits, we can’t help but attract third party sellers. So there’s more people on our platform, more third parties are going to want to come and sell. So already in these first three steps, you can see the momentum that this builds, then when we move to number four, we expand the store and extend the distribution. Now, if we attract those third party sellers, the previous point, we can’t help but expand the store and extend distribution. If we do that we can’t help but grow our revenues per fixed costs. So we’ve got more revenues per fixed costs. And if we do that, we can’t help but lower prices on more offerings. So you can see as we go around that circle, how it builds momentum in the business, and how Amazon’s grown to be, if not the largest, depending on when you listen to this one of the largest companies in the world, just by focusing on that really, really simple model.
Kevin Lawrence 24:06
It is and you know, and Jim had done some work with I think it was with Bezos. I mean he talked about this.
Brad Giles 24:13
He did back in 2000. I think it was
Kevin Lawrence 24:15
yes, there was when they talked here and here is I put the image on the screen out of Jim’s book turning the flywheel for those can I find it there’s a there’s an image on page two of his book, but the idea is one thing feeds the next thing and before you know it, because it because they have lower the costs and then they can have a go back to the flywheel here. It becomes an uncontrollable for so because they can lower their prices they can get more customers, which gets more people wants to sell to them, which gets a better store, which grows revenue per fixed costs lower the price. lower price brings more customers brings more sellers who more stuff on the site, more revenue per fixed cost, lower the prices, and then it just keeps going and going and going. And to the point where, you know, there’s this thing called monopoly, which mill people don’t like where they almost companies pretty well control the market. So the idea with a flywheel in reality, what you’re going to do is to push the limits to be such a powerful force, that it almost in other people’s eyes is unfair, the truth is, you’ve just got such momentum, because you’ve been so darn good. So lots of that’s a great, that’s a great example, we have another client that has one, and I’ll keep it generic. But it’s basically as their flywheel goals, they keep getting to hire more amazing people who innovate, which the customers are thrilled, the customers refer stay, obviously, but refer other people. And because they have a larger customer base, they get way better buying power. So for them is leveraging suppliers and buying power getting discounts, because the buying power, they can invest more in people, which make the products and services better which thrill the customers which gets more referrals, which gets them a bigger client base, which gets more buying power. And then it just to the point in this company, they were number one in their space in the state they were in in the US. And it was a very state based business was a substantial company. They bought number two, and number two was almost relieved. Like, like, we talked, I would talk to some of the people in the aquarium cuz they’re like, thank God, like we were done. Because they were such a powerful force. Yeah, now we bought that company. And we know we could have crushed them. But we bought it because we wanted to take the customers and we didn’t want to fully destroy the company was good value to buy them and take over those customers. But it was a machine. And interestingly, their flywheel was so strong, but their product differentiation actually wasn’t that strong. So when you would line their product up, and we did some work on that’s another conversation, but their flywheel was so strong it, it almost didn’t matter. They were just a beast. And interestingly, they got to 91% a players in their company. And there was hundreds of people. It was just a beast, like a beast of a machine. It was an army. It was unbelievable. Lots of lots of great things. And we can also talk about when it doesn’t work. Go ahead, right.
Brad Giles 27:38
Yeah, so the product differentiation may not have been different all possible. But they were differentiating through their flywheel in terms of they were getting the simple things, right. consistently, all the time service.
Kevin Lawrence 27:56
Excellence. Yeah, their differentiation was better service. But product wise, there wasn’t but their flywheel always around service excellence. Yeah, like just the best service you could possibly get in industry. It’s just awesome examples and unders been the ones that go the other way. You know, and we tend not to work with companies like that. But companies who work with might go through phases, where anyone in the in when you don’t have this or you have a negative flywheel. You’re on Colin’s map. So but the essence of it is you do something, it fails.
Brad Giles 28:33
Kevin Lawrence 28:34
Your people get disengaged or disappointed, then you just try anything. And usually it’s hype and you’re throwing spaghetti at the wall. It fails, your people are disappointed and you just flail and do something else. And the typical is you come up with some big slogan or, you know, a fancy outside CEO, and you’re not strategic and you’re not disciplined, you’re just chucking stuff at the wall and hoping stuff works and you have good intentions versus getting back and grinding out as Colin says one of us favorite quotes from a session I did with him was you know, success is relentless execution of the boring basics that are within your hedgehog. The basics, like went to a restaurant last on the weekend and I ordered a couple things and the people that are really nice, but you know asked for water and they forgot to bring water for probably 20 minutes it’s a basic you know, it’s not rocket science. And I asked for my meal to be cooked a certain way and it wasn’t and it was not a crazy request. It was a normal request. So you know where I go back Yeah, cuz I like the place and it’s close to the people are nice. But you know the basics of bring water when a customer wants water and maybe it was a bad night. about who Oh, bad hour, who knows, and cooking something as it’s expected. But if they do that two or three times, you know, they’re not going to have a lineup for reservations, right? It’s
Brad Giles 30:11
not going to build momentum. They’re not going to build momentum. That’s the thing. Would you recommend that to other people? Would you be a raving fan and an advocate? Would you go back? No. Because no,
Kevin Lawrence 30:23
I would give them another try. But the other tried the previous experience was awesome. But another try. I don’t want to say their name. Super nice people there. But but but but I’ll go over the tribe. And then after that, I’ll probably start going, I go somewhere different.
Brad Giles 30:37
Yeah, because I went to a restaurant on the weekend as well. It was on the beach, like, so where I live, we have a sunset over the water. So you go to a restaurant on the beach, you look at the sun go down for dinner. It’s lovely. So that was fantastic. Like, the fit out was lovely. The staff were pretty friendly, but the food was just okay. Like, it wasn’t even like it was just a home. Right? So it’s the What is it? How do you build momentum in that type of environment? Yeah, you have the sunset? Yeah, you have good staff, and you have food doesn’t need to be like the best food in the world. It just needs to be yo is pretty good. Like, that’s it. And that’s the relentless focus on the boring.
Kevin Lawrence 31:22
Instantly good are pretty good. Yeah. And again, it’s not rocket science. So basically, take a restaurant that’s underperforming people would you know, change a menu, right? Or change a name or repaint a wall or got a bunch of staff out? Maybe it works, but at the end of the day, what does the customer want? They want what they’ve asked for, they want good, pleasant service, which this place has the service piece covered. It’s not rocket science, but that people get lost in all of this other stuff. And it’s from the eyes of the customer. What are the basics that matter the most. And that’s and the fly will should point you in that direction. Something that helps you to be thinking that way? Go ahead. So there’s
Brad Giles 32:06
there’s two, there’s two problems that create this issue that creates the need for a hedgehog smack and a flywheel. Okay. And those are number one is the human brain doesn’t like discipline, the human brain gets bored, and it wants to be creative. It really wants to do new and exciting things. to focus on the boring basics, the human brain is like, that is not what I want to do at all. But the second thing is that leaders are seduced by an endless search for the next big thing. And many leaders want to pursue growth for growth’s sake.
Kevin Lawrence 32:52
Yeah, and that’s okay, as long as somebody else is focusing on those boring basics to make sure they’re right. And your strategy is pointed at speeding up your flywheel. It new can be good. But often, it’s more dangerous than it is good for a lot of people.
Brad Giles 33:11
Well, it’s no growth for growth sake,
Kevin Lawrence 33:14
I often say to people growth to become a better organization and better take care of your customers or your employees. Yeah, quality growth, not just growth. In other words, you fall on your face.
Brad Giles 33:25
Yeah. So you go, Yeah,
Kevin Lawrence 33:30
I was just gonna say, look, so how do you do it? You know, and then we talked about starting with a hedgehog and smack list. But you just go through and try and unpack and sometimes you have to go back five years in the business? What is it that drives this thing? What is it and the own? It’s as simple as a brainstorm of trying to map out pieces. We like to get people sit on their own and think about it, then let’s work on it as a group, what is it that drives this business? And the question is, you know, what is the language that Jim uses, because I can’t help but can’t help. But so for example, this other company we talked about, because we provide outstanding service experience to our customer, we can’t help but retain them and get referrals because we retain them and and and, and get referrals, we can’t help but grow the total number of users in our system. Because we have a massive increase on our total number of users, we can’t help but leverage that for better buying power with our suppliers. Because we have better buying power and save that money. We can’t help but be able to invest in more amazing people. Because it’s we can’t help but and really one thing really specifically driving Next now, we can’t give you a paint by number, it’s an it’s a discussion. Sometimes you do one, you throw it away, you try, again, you try from three or four different perspectives. You know, sometimes there’s one that’s a customer oriented flywheel. Sometimes it’s a product or r&d flywheel like, like Intel’s example. Sometimes it’s an employee oriented flywheel, and I’m sure there’s many different types. But it’s to start mapping it out. And because anybody can end up with four or five, six things that really drive into a continuous loop, like a flywheel that spent spools up,
Brad Giles 35:35
but it’s already there. It’s already inside your business. And the insights come from the hedgehog and the snack recipe. And those things are built using very specific methods that will give you a great and deep insight. You can’t just, you can’t just rock up and go, hey, let’s get some stuff onto a page and the metal main will become Amazon, it just doesn’t work that way you’ve got to do the thinking it has
Kevin Lawrence 36:02
a store trickly now, and again, those things may not be working at the time, sometimes they fall they fail. Yeah. But historically, this has led to this. So for example, one of the companies had made an expansion into the US. And it was going horribly, well, for a number of reasons. And but Canada was a wild success story. So we just went back into Canada, we went, we didn’t even bother looking at the US. We went five years back in Canada. Okay, what were you doing when the growth engine took off?
Brad Giles 36:36
And what was it?
Kevin Lawrence 36:37
What were the specific things and we went through? And we made the fly when then we overlaid it to the US? And we’re like, Ah, no wonder.
Brad Giles 36:45
that’s why it’s completely logical.
Kevin Lawrence 36:49
It is so obvious. But you’re right, ready, he got to go back in time to map it out. So you go and map it out. But let’s move on. So that’s point two, how do you create it starting with the hedgehog? And the smack list is content go through and map it out? And then number Go ahead, Bing or something?
Brad Giles 37:07
And so how many flies? This is a great mistake that I’ve seen how many flywheels? Should an organization have? Six?
Kevin Lawrence 37:14
814? How many would you like to have? I mean, you know, it doesn’t really, you know, you know, it doesn’t, you don’t need to have one, you could you know, you don’t need to be disciplined, you could just have a whole bunch because they’re kind of fun to play with. You, you can also have 27 goals per person, per quarter. I mean, why wouldn’t you have more, the better, more the merrier? That’s a better party having 27 instead of seven, isn’t it?
Brad Giles 37:37
Yeah. And that’s cool, because then we’ll get more stuff done. If we have 27 goals.
Kevin Lawrence 37:41
27 times the thing done, if we have 27 goals and 14 fly wheels, and we feel we should have like at least a dozen core values. And while we’re at it, we should probably have seven different names for the company.
Brad Giles 38:00
So for those of you who may not have picked up there’s a an a blanket of sarcasm that’s just fallen over us. Let’s remove that and come back and shake that blanket off. No, what we’re saying is, you should have one flywheel for each CEO. One flywheel for each CEO. And why is that because you might have multiple profit and loss and balance sheets in an organization. Okay, but you’re probably only going to have one CEO. And so I think about one organization that I work with now I’ve got two distinct divisions that work with different types of customers. Okay, one’s more of a, let’s say, a smaller customer, the other ones a much larger customer. But we’ve got a central flywheel that works across the entire CEOs oversight, then there’s another business and they Yeah, they have got three different areas in which they operate. They’re all in the same industry, but three completely different areas. One CEO and all of those, they have this same flywheel. So because sometimes the energy of the CEO you want it all to be going in the same way, as you mentioned earlier with your friend who, your friend, your colleague, your associate, who comes out talks about the flywheel and the hedgehog, relentlessly. One central point of focus per CEO,
Kevin Lawrence 39:47
I think so and that can be hard. Anybody can come up with seven or three, but to get down to the one flywheel that drives the whole machine. All of the assets that you have in organizations cripple now, teams might go and develop a flywheel a little sub flywheel, let’s call it. But that’s not the part that we’re obsessed with. We’re obsessed with the main one for the organization that drives the organizational strategy. You could have your logistics team that might think about it down and logistics, you know, in some organizations, you know, in a divisional level, they will allow them to create a divisional purpose, or a divisional B hag or a divisional, whatever. That’s, we’re not saying you can’t, you might let people do it. But this is about the overall organization and the one that we all talk about regularly, just like the one company name, and the one B hag, and the one set of core values. I think it’s super important. And companies sometimes that aren’t good at simplicity will create multiples. So I think it’s super important. I got so so. So one person, and then how do you know that it’s correct? Right. And, you know, it’s not rocket science. But you know, Brad, you and I are big on pressure testing ideas. And because theory doesn’t produce value, it’s reality that produces value. So the one that the simple pressure test is going through and saying, does this directly drive this? Or because of this? Is it true that we can’t help but get the next one. The second is to go through and look at some of your biggest periods of success, or divisions or parts of your business that have had massive success or massive failure, and go and then pressure test. So was there something in here that was actually critical to our success? When we did well? And was there something in this that broke? That was, uh, that was critical to our failure? That’s another way of pressure testing to make sure that you absolutely got it.
Brad Giles 41:58
Yeah. Does it explain your failures and successes or your successes and disappointments? That’s the simplest test. When you look through those three to six items. Can you say? Yeah, well, when we launched in this market, or when we did that, or when we did that, like that absolutely succeeded because of that, or that absolutely. file because of that. Yeah. So. So that’s the simplest way to validate it. It’s correct. There’s no, there’s no enormous diagnostic that you need to take. Just ask. Can successes and disappointments?
Kevin Lawrence 42:37
Brad Giles 42:39
Kevin Lawrence 42:40
now that we’ve so we’ve gone through, and we know what it is? We’re pushing towards positive we’ve drafted it. We’ve validated it’s correct. We know we’ve only got one. How do you speed this thing up? And this seems basic, right? But it’s one of the things that actually speed it up. And you know, hold on to your hat. This is rocket science here. But it’s, you literally make sure that your major goals relate to an area of the flywheel. Right now, if you’ve evaluated yourself, and you have one area that’s really lowly, if that client to talk to you about when we had the meeting in California, you better make darn sure you fix that. Because that will every time the flywheel spins that one area it’s gonna slow down because it’s a weak spot. So you got to make sure you patch up your weaknesses and you know, shore them up with the right resources and get them back to success. But ideally, is that your most important your you know, your yourr goals you have for three years, we call them key thrusts or priorities wherever you want to call them. They should directly be linking to the flywheel. That’s not that everything on your flywheel needs to be your three year goals. Your three year goals need to drive what matters and your one year goals and your quarterly goals. That’s a simple, simple thing to look at. And, you know, if you can go and look at your plans often, Brad, you know, for you and I both when we go to a company and evaluate their strategy and execution plans, often they’re all over the road. Yeah, it all seems like important stuff. But if you put it through the filter of the flywheel it might not make a difference. And even though they have beautiful intentions and awesome plans, because leaders
Brad Giles 44:21
are often seduced by an endless search for the next big thing, and they pursue growth for the sake of growth. And that means that sometimes priorities land on these 90 day or one year or three year lists that may not necessarily make sense.
Kevin Lawrence 44:39
Yeah, and sometimes leaders are seduced by the good old things right there’s some are caught up in the shiny new there’s all others that are caught up in the reliable old and that can be just as bad you know, we go into companies and and and our three year strategy in our company hasn’t changed a lot in a decade now. That can be a good thing for some. Sometimes they’ve just they got stuck tunnel vision and thinking about their business and it needs a shake. So, again, there’s no right answer here. The key is that you got to invest into those things that speed it up. And yeah, that’s speeded up. And, you know, and the kind of the point number five, and it’s a bit of almost maybe not needed, but how do you make sure you don’t slow it down? Well, don’t invest in things that don’t speed it up.
Brad Giles 45:31
Right. Yeah, that’s, that’s obvious. And I would add to that, regularly look at it quarterly and annual planning sessions. So what color and this kind of will lead to our next point, but What color is this component of the flow wheel currently? Is it red or green? And then what do we need to do to get it to become green? Yeah, so
Kevin Lawrence 45:54
for example, last week, I spent all week virtually with my one of my clients in India, right. I think I talked to him about a little bit last week. They’re like, they’re like family. You know, when I saw his six nights, six evenings and my time, and one of our things that we did with the three directors that run through brothers as we go through and evaluate the flywheel. Where are we at? How are we doing on the different pieces? Now? How do we take that into mind when we set the three year strategy? You know, every quarter, or every time I meet with them, I know that we do twice a year meaning we go back and we get a report color coding the flywheel not only overall, but by division, which we’ll talk about a little bit later. So yeah, which so which really leads
Brad Giles 46:36
us which really leads us into number six, the next one, which is how do you measure and we both touched on that, I’ve got one client that comes to mind. And we’ve taken the flow will really, really deep into the layers of the org chart. And so we’ve divided each of the components of the flywheel into what are the four things that we do that makes this component of the flywheel work, okay, so we’ve got to have salespeople having that KPI and we’ve got to have the operations, people having that KPI or whatever it might be. So across the floor, where we can look at it in its simplicity. But then we can look behind it to the things that make eight the KPIs that we need in each of the areas of the business to have that flywheel color green, let’s say. And then beyond that, like you just mentioned, we’re setting priorities at a 90 day or one year or three year level to get those, those KPIs to green. Yeah,
Kevin Lawrence 47:41
so Exactly. So what I’ve heard you say, Brad, is that you know that you have KPIs for each part of the flywheel. And even looking at that way, you can delegate it down to make sure different departments are doing their part to enhance that piece. So yeah, I’ve got one client, where they have one KPI for each part of the flywheel, I’ve got another that’s got four, I don’t really care how many you got. But you know, even when it has for the combination of those four measures indicated, and because of that, we can provide a score and coloring and you and I both love red, yellow and green coloring, just, you know, traffic lights basically did a previous episode on that on the podcast, but it’s a simple way to evaluate performance. And, and, you know, and you know, which it’s basic, but what’s the reporting, and like he’s abroad every quarter looking at it. And we’ll talk about it in our in number eight about how do you tweak it? So So six is, you know, how do you measure it, KPIs and your red, yellow, green? And then number seven, which I started is how do you leverage it across multiple divisions or locations. So here, this simple, we’ve got one flywheel for the overall business, we take the identical flywheel without touching it. And we use it as an analysis tool on divisions or departments. So the client India, for example, they have, you know, just under 10 different locations that they work in throughout the country. So when we get the flywheel reports, we actually don’t get summary data on the overall, we get the report on each different location, red, yellow, green, and where there’s a yellow or a red a comment of why and what can be done to fix it by the person who runs that location. So the people that run the locations, which are like, you know, general managers of divisions, they know themselves to evaluate themselves on the flywheel and they’re being trained to come up with an action plan. So it’s very simple. You just apply it as a filter to look at a piece of and the correlation in this company is insane, it feels like a direct correlation between the flywheel and performance. Now, unlike anything, there’s no not many things in the world are 100% Indirect, but there’s an insanely strong correlation because they’ve got it right between the colors on the flywheel. So the highest performing locations are generally green all around.
Brad Giles 50:12
So I would go as far as to say, not withstanding your last comment, I would go as far as to say, when the flywheel is all green, you’re outperforming the market. In terms of growth? Yeah, um, yes,
Kevin Lawrence 50:30
you should be outperforming the market, or at least you’re performing at your best. Right, like you are the dude, you are just you, you are excellent. Like, in most cases, you’re probably outperforming the market. You should be Yes, I’m filtering my nose. We’re talking about it. Yes,
Brad Giles 50:46
yeah. Yeah. out of thin air.
Kevin Lawrence 50:49
You know, I know that you don’t, you don’t. So but it’s but it’s basically, it’s an evaluation tool. But the key to remember, this is not our corporate head office, let me evaluate you. You’re training people to think about their business to be better, smarter operators in everything we do. Again, without spiraling up with everything we do, every person that we’re we’re almost subconsciously wanting to train them to be the CEO, or to move in that direction to be a better, more capable version of themselves. So the number eight, you know, how do you optimize it over time? And we’ve already said this, but it’s, you know, quarterly planning meetings, looking at it, evaluate it, take that into account, when you reset your goals, annual planning to go really look at and say, What do we change something like I’m a big believer in once you lock down any strategic principle, you shouldn’t debate it throughout the year, unless something’s really gone wrong, should drop into execution mode, execute like crazy. And then when you decide it’s time, then there’s a period where you evaluate, and whether it’s at a six month mark in the year where the executive goes off and works on strategy, or some clients do, or it’s at the annual planning meeting, it doesn’t matter what it is. But on those quarterly, you know, staying in execution mode, and then evaluate strategically whenever you do it.
Brad Giles 52:12
And ask, have we had any failures in the last year, or quarter but year? And does is that explained by our flywheel because sometimes you’re adhering to the flywheel means that you will experience a failure. But you know, like, I go back to the spiral at the beginning of this episode, we’re getting a deeper understanding over the years of our flywheel deeper understanding, deeper understanding. And so that regular rhythm and checking in makes a huge, huge difference.
Kevin Lawrence 52:45
Yep. I agree. And the thing I’d really want people to understand, Brad is, look, our role is to help facilitate companies that want to build enduring great companies and continue that growth path and get bigger and better continually. That’s their goals. And that’s what we do. And we look at those lots of different tools out there. And I look at what sticks and continues to add value 235 years in the future. And the flywheel absolutely does. Yes, five years in the future, it’s still insanely valuable, and we will never stop looking at it. It’s, it’s, it’s incredible. And in companies that keep focusing on it, they generally keep getting better and better, because they’re obsessed with the stuff that matters most. So should we do a quick recap here, Brad, and maybe I’ll do one you can do the next I’ll start with number one, I’m gonna go back and forth. So it’s like a point number one point to remember is, you know, you’ve already got a flywheel, and either it’s a positive flywheel it’s spiralling you up. Or you could have a Doom loop that’s keeps knocking you down. And yeah, that’s, that’s the first thing. It’s already there. And our job is to discover it.
Brad Giles 54:04
Number two is, is you begin by understanding your hedgehog concept and smack list. So you look at those two things. If you haven’t got it, then you build those before you build the flywheel you get a deep understanding of what works and what doesn’t in those areas. That’s the you know, that’s the qualifier, the pre conceived,
Kevin Lawrence 54:25
right and those both are also principles, you’ll still look at five years down the road. Number three is you got to validate it’s correct. First of all, make sure you only have one per CEO Thank you very much. But each piece should drive the next piece and you should be able to say, because of this, we can’t help but as it drives to the next piece
Brad Giles 54:48
number four, how to speed it up well, a relentless execution of the boring basics within your hedgehog. So ask the question, What color is it which we’ll get to in a moment, ask the question But then relentless, boring, execute execution of the boring basic.
Kevin Lawrence 55:05
Yes. And find people that like doing that stuff that we might consider boring. Five, and it was kind of obvious. How do you not slow it down? Well, don’t do things that don’t relate to the flywheel and distract energy away from it, and evaluate on a quarterly basis how you’re doing so you can keep tweaking it.
Brad Giles 55:25
Yeah. So and then number six, how do you measure and know that it’s getting stronger, red, yellow, green, each of the components within the flywheel and then ask yourself, what are the key performance indicators that will tell us that we’re consistently going to be green measured those and then build priorities that will help to give the business the ability to achieve those KPIs?
Kevin Lawrence 55:51
Number seven, how do you leverage across multiple divisions and locations? Well, you take the one flywheel, you don’t make new ones, and use it as an analysis tool to evaluate and ideally, train the people that run that part of the business, to use it to guide their thinking and their actions.
Brad Giles 56:09
And then finally, number eight, how do you optimize it over time? Well, at annual planning sessions, rethink it. Ask yourself, have we had any failures in the past year? And is that explained by our flywheel have we had any successes is that explained so help the leadership team to get a deeper understanding of what the flywheel is doing and not doing and kind of continually stress tester? What a good episode this has been. So
Kevin Lawrence 56:42
let’s make sure turning the flywheel the monograph by Jim Collins, go and read it go back to good degrade. And by the way, if you happen to be in one of those Doom loops, go back to what used to be my favorite of all Jim’s books, how the mighty fall, this is a boat, the doom loop, a boat companies that make bad choices and stay in a negative downward spiral. Often until they either straighten themselves out with relentless execution of the boring basics, or they get bought.
Brad Giles 57:18
And quickly that turning the flywheel book is about a one hour read. Like it’s Yes, yeah, yeah. It’s a monograph. It’s like 38 pages. I think.
Kevin Lawrence 57:30
You’re such a precise brain. It’s actually 37. And then notes.
Brad Giles 57:35
Yeah, so yeah, so it’s a very easy read and see, it’s very thin,
Kevin Lawrence 57:40
you can, you can probably read it before your plane takes off. If you’re one of those people, that’s back to traveling. So I were really gonna say Good thing, a shout out to Jim Collins, and thank him for this great research. You know, we rely on that research a lot in this and you know, and we’re experts at implementing it in companies and bringing value to life. And we’re grateful to have people that have created these concepts that are proven based on research, not just hypothetical ideas.
Brad Giles 58:12
Awesome. So thank you for listening. I hope you’ve enjoyed today’s episode about the flywheel. This has been the growth whispers where we always talk about building enduring great companies. My name is Brad Giles, and you can find me at evolution partners.com.au and of course, my co host, Kevin, the Canadian with the extra cheese, who joins me every week, if you can find him at Lawrence and co.com. Thanks very much for listening. We look forward to chatting again next week.
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