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Chapter 8, G2G:“The Flywheel and the
Doom Loop”Team II
Josh Pavlik, Jennifer Rogas, Logan Reynolds, Corbin Ray, Marlee Armstrong, Amy Drake
“Revolution means turning the wheel.” -Igor Stravinsky
“Flywheel” example: heavy flywheel, takes a lot of effort and momentum to get it going; once it gets going and builds momentum, you eventually get a breakthrough.
The “flywheel” image captures the overall feel of what it was like inside the companies as they went from good to great. No matter how dramatic the end result, the good-to-great transformations never happened in one fell swoop.
Buildup and Breakthrough
1976-Apple I 1977-Apple II 1984-Macintosh 1989-Macintosh SE/30 1991-PowerBook 100 1994-Quicktake camera 1995-Power Macintosh 9500 1998-iMac
◦ At this point, Apple wasn’t doing so hot because Steve Jobs had been ousted back in 1985, so they brought Jobs back; after the release of this product, brought Apple back to their “all-in-one basics.” This product set Apple back onto a profitable track and could be
considered the first of Apple’s many “breakthroughs” in the computer industry
Apple
The media gives a completely different account of what happens during the good-to-great transformations◦ Often, the media will not cover a company until
the flywheel is already turning at a thousand rotations/minute
This skews our perception of how such transformations happen, making it seem as if they jumped right to the breakthrough overnight
Media Accounts
August 27th, 1984: Forbes magazine published the first national-level profile ever published on the company.◦ Talked about Circuit City’s growth and made it seem like
an overnight success story◦ From 1973-1982, Alan Wurtzel rebuilt his executive team
and experimented with a warehouse showroom style of retailing and transformed the concept into the first-ever Circuit City store; began transforming its stereo stores into Circuit City stores
◦ From 1982-1999, Circuit City generated cumulative stock returns 22 times better than the market, and this is when Circuit City found itself a prime subject for media attention
Circuit City
Steel company; 1965-1975, no media attention
1975: transition point for the company◦ Had already built its third mini-mill, well on its way to
becoming the most profitable steel company in America
First Business Week article didn’t come out until 1978, thirteen years later
1976-1995: 96 articles on Nucor, with 40 of them being major profiles or nationally prominent features
Nucor
Allowed the way transitions look from the outside to drive our perception of what they must feel like to those going through them on the inside.
From the outside, they look like dramatic and revolutionary transformations
From the inside, they feel completely different, more like an organic development process
What’s Important
Good-to-great companies had no name for their transformations
No launch event, no tag line; some executives said that they weren’t even aware that a major transformation was under way until they were well into it
It was often more obvious to them after the fact than at the time
NO Miracle Moment
“The transition to focus on the superstore didn’t happen overnight. We first considered the concept in 1974, but we didn’t convert fully to Circuit City superstores until about ten years later, after we’d redefined the concept and built enough momentum to bet our whole future on it.” -Circuit City
Circuit City
John Wooden coached the Bruins for fifteen years before his first NCAA Championship in 1964◦ Bruins then went on to win ten NCAA Championships in twelve
years, at one point assembling a sixty-one-game winning streak
Like the Wooden Dynasty, lasting transformations from good to great follow a general pattern of buildup followed by breakthrough◦ In some cases, the buildup-to-breakthrough stage takes a long
time, in other cases, a shorter time◦ No matter how short or long it took, every good-to-great
transformation followed the same basic pattern-accumulating momentum, turn by turn of the flywheel- until buildup transformed into breakthrough
UCLA Bruins Basketball Dynasty
The buildup-breakthrough flywheel model is not just a luxury of circumstance
Companies may believe their current circumstances or constraints prevent them from taking this long term approach
However, the good-to-great companies followed the flywheel model no matter how serious or urgent the short term circumstances
Not Just a Luxury of Circumstance
FANNIE MAE & ABBOTT LABORATORIES
Effectively managed Wall Street during their buildup-breakthrough years
Communicated with analysts by educating them on what they were doing and where they were going
Focused on accumulating results, often by underpromising and overdelivering
Results began to accumulate, flywheel built momentum, and investors became supporters
Short Term Pressures
Simple Truth-◦ Tremendous power exists in the fact of continued
improvement and the delivery of results.
Tangible Accomplishments◦ Show how steps fit into context of overall goal
People see and feel the buildup of momentum◦ Line up enthusiastically to join
The “Flywheel Effect”
The Flywheel Effect
“Do we really have to keep asking that stupid question?”
“The one about commitment, alignment, and how they managed change.”
“a lot of the executives who made the transition-well, they think it’s a stupid question. Some don’t even understand the question!”
“Yes we have to keep asking…besides, its even more interesting that they don’t understand the question.”
Near Revolt
Commitment Good to Great Companies have incredible
commitment and alignment◦ Spend minimal time thinking about it
Transparent to the Companies◦ Commitment takes care of itself
Keep Pushing Let momentum do the talking “Hey if we just keep doing this, look at
where we can go!” People turn potential into the fact of results
◦ The goal sets itself
Kroger 50,000 employees
◦ Cant change through one big event or program Jim Herring initiated the transformation
◦ Created tangible evidence that the plan made sense To get people lined up turn the flywheel consistent
with the vision “See what we’re doing and how well its working?
Extrapolate from that, and that’s where we’re going.”
Nucor Initiated Flywheel to avoid bankruptcy Built first steel mill to avoid unreliable suppliers
◦ Knack for creating steel better and cheaper Flywheel built momentum and Nucor kept pushing 2 decades later generated more profits than all
other steel mills on Fortune 1000 list
A winning team◦ Involved in something “that just flat out works”◦ Apple Culture…people want to be there
Plans developed from understanding not bravado◦ “That’ll work, count me in.”
Unity of Executives◦ Simple plan◦ Dedicated level 5 leadership◦ Steve Jobs makes people believe as a level 4 leader
Employees stand behind the leaders and company
People
The comparison companies did not follow the “flywheel effect” like the good to great companies, but instead fell into the doom loop◦ Comparison companies continuously launched new
programs to motivate workers towards the company’s goal, and the programs would fail
◦ Companies would push the flywheel in one direction the stop and change directions multiple times
◦ Comparison companies were not able to buildup the sustained momentum the the flywheel requires
The Doom Loop
Some version of the doom loop was found in every comparison company
Two prevalent patterns were found in the doom loops of the companies:◦ 1)The misguided use of acquisitions◦ 2)Leaders who stopped the flywheel
The good to great companies had a higher success rate with acquisitions than the comparison companies
This occurred because good to great companies used acquisitions and mergers as a way to accelerate flywheel momentum, and comparison companies used acquisitions to create flywheel momentum◦ Comparison companies made acquisitions to
increase growth, diversify away problems, or make a CEO look good
The Misguided Use of Acquisitions
Leaders coming into the organization, must focus on the already spinning flywheel, rather than throwing it in an entirely new direction
Do not turn from your “Hedgehog” concept- focus and do not deviate from what you can be the best in the world at
Just because you are seeing fast growth does not mean that you will achieve sustained growth
Leaders Who stop the Flywheel
Leaders stepping into an organization should first recognize what is working and what makes them the best in the world◦ Harris company revolted with new leadership- and
by deviating from their Hedgehog concept (applying technology to printing and communications and entering into the office automation market), the flywheel came to a halt
◦ Tim Cook, Apple’s CEO describes their hedgehog concept as being able to say no to good ideas- its unlike any other company
Leaders who stop the Flywheel
Avoiding the Doom Loop◦ To avoid the Doom Loop, leaders should stay
consistent with the process that is working◦ Apple has designed the process behind their
products to focus on their consumers, in summary they focus on the user experience being easy and in turn the EXPERIENCE of their customers is what drives their flywheel
When looking over the good-to-great transformation what words should come to mind?
◦ Consistency Going through the Flywheel continually
◦ Coherence The magnifying effect of one factor upon another
The Flywheel as a Wraparound Idea
Signs of the Flywheel◦ Follow a pattern of buildup leading to
breakthrough◦ Reach breakthrough◦ Confront the brutal facts of the company◦ Attain consistency with a clear Hedgehog concept◦ Follow pattern of disciplined people, disciplined
thought, and disciplined action.◦ Harness appropriate technologies. ◦ Make minor acquisitions to accelerate
momentum.◦ Little energy spent to motivate or align people.
Flywheel or Doom Loop?
Signs of the Doom Loop◦ Skip buildup and jump right to breakthrough.◦ Implement big radical change programs.◦ Embrace fads and management hoopla instead of
confronting brutal facts. ◦ Jump right into action◦ Run around crazy because of the technology.◦ Spending a lot of time and effort trying to
motivate people.
Flywheel or Doom Loop?
Everything starts with Level 5 leaders, who naturally gravitate toward the flywheel model. ◦ Less interested in flashy programs that make
them look good. ◦ More interested in quiet, deliberate process of
pushing the flywheel to produce “Results”◦ Right people on the bus in the correct seats◦ Wrong people off the bus◦ All of these are crucial steps in the early buildup
Flywheel as a Wraparound Idea
Buildup and Breakthrough “No Miracle Moment” Not just a Luxury of Circumstance The “Flywheel Effect” The Doom Loop The Misguided use of Acquisitions Leaders of Stop the Flywheel The Flywheel as a Wraparound Idea
Brief Summary