Turning the Flywheel: A Monograph to Accompany Good to Great

by Jim Collins

“Beauty does not come from decorative effects but from structural coherence.” — Pier Luigi Nervi1

Once you fully grasp how to create flywheel momentum in your particular circumstance (which is the topic of this monograph) and apply that understanding with creativity and discipline, you get the power of strategic compounding. Each turn builds upon previous work as you make a series of good decisions, supremely well executed, that compound one upon another. This is how you build greatness.

When caught in the doom loop, companies react to disappointing results without discipline—grasping for a new savior, program, fad, event, or direction—only to experience more disappointment.

Notice how each component in the Vanguard flywheel isn’t merely a “next action step on a list” but almost an inevitable consequence of the step that came before.

The Vanguard case exemplifies a key aspect of how the best flywheels work. If you nail one component, you’re propelled into the next component, and the next, and the next, and the next—almost like a chain reaction. In thinking about your own flywheel, it’s absolutely vital that it not be conceived as merely a list of static objectives that you’ve simply drawn as a circle. It must capture the sequence that ignites and accelerates momentum.

As Stanford Graduate School of Business strategy professor Robert Burgelman once observed to a classroom full of students in 1982 (of which I was one), the greatest danger in business and life lies not in outright failure but in achieving success without understanding why you were successful in the first place. Burgelman’s insight kept pinging in my brain throughout my twenty-five years of research into the question of what makes great companies tick, especially in explaining why some companies fall from grace. When you deeply understand the underlying causal factors that give your flywheel its momentum, you can avoid Burgelman’s trap.

One of the biggest, and most common, strategic mistakes lies in failing to aggressively and persistently make the most of victories. One

For a truly great company, the Big Thing is never any specific line of business or product or idea or invention. The Big Thing is your underlying flywheel architecture, properly conceived. If you get your flywheel right, it can guide and drive momentum (with renewal and extensions) for at least a decade, and likely much longer. Amazon, Vanguard, and Intel didn’t destroy their flywheels in response to a turbulent world; they disrupted the world around them by turning their flywheels.

So, then, how might you go about capturing your own flywheel? At our management lab, we’ve developed a basic process, refined during Socratic-dialogue sessions with a wide range of organizations. Here are the essential steps: Create a list of significant replicable successes your enterprise has achieved. This should include new initiatives and offerings that have far exceeded expectations. Compile a list of failures and disappointments. This should include new initiatives and offerings by your enterprise that have failed outright or fell far below expectations. Compare the successes to the disappointments and ask, “What do these successes and disappointments tell us about the possible components of our flywheel?” Using the components you’ve identified (keeping it to four to six), sketch the flywheel. Where does the flywheel start—what’s the top of the loop? What follows next? And next after that? You should be able to explain why each component follows from the prior component. Outline the path back to the top of the loop. You should be able to explain how this loop cycles back upon itself to accelerate momentum. If you have more than six components, you’re making it too complicated; consolidate and simplify to capture the essence of the flywheel. 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 fly...

A flywheel need not be entirely unique. Two successful organizations can have similar flywheels. What matters most is how well you understand your flywheel and how well you execute on each component over a long series of iterations.

As Gerard Tellis and Peter Golder demonstrated in their book, Will and Vision, the pioneering innovators in a new business arena almost never (less than 10 percent of the time) become the big winners in the end. Similarly, across all our rigorous matched-pair research studies (Built to Last, Good to Great, How the Mighty Fall, and Great by Choice), we found no systematic correlation between achieving the highest levels of performance and being first into the game. This proved true even in innovation-intensive industries such as computers, software, semiconductors, and medical devices. Amazon and Intel started life in the wake of pioneers that preceded them;

Once you get the flywheel right, the question becomes, What do we need to do better to accelerate momentum? The

The flywheel, when properly conceived and executed, creates both continuity and change. On the one hand, you need to stay with a flywheel long enough to get its full compounding effect. On the other hand, to keep the flywheel spinning, you need to continually renew, and improve each and every component.

In Built to Last, Jerry Porras and I observed that those who build enduring great companies reject the “Tyranny of the OR” (the view that things must be either A OR B but not both). Instead, they liberate themselves with the “Genius of the AND.” Instead of choosing between A OR B, they figure out a way to have both A AND B. When it comes to the flywheel, you need to fully embrace the Genius of the AND, sustain the flywheel AND renew the flywheel.

The Cleveland Clinic became one of the most admired healthcare institutions in the world by embracing the Genius of the AND—consistency AND change—in its flywheel.

In his book, The Cleveland Clinic Way, Cosgrove details the myriad of changes put in place to renew the flywheel—changes big and small, strategic and tactical, structural and symbolic.

There are two possible explanations for a stalled or stuck flywheel. Possible explanation #1: The underlying flywheel is just fine, but you’re failing to innovate and execute brilliantly on every single component; the flywheel needs to be reinvigorated. Possible explanation #2: The underlying flywheel no longer fits reality and must be changed in some significant way. It’s imperative that you make the right diagnosis.

So what to you do? How do you tell if you're right?

We coined the concept fire bullets, then cannonballs to capture the difference.19

It would have been nice if he had done a little homework. This is a good and workable concept, BUT he doesn't seem to know much about firearms or artillery.

In the nearby table, I’ve listed a range of fabulous flywheel extensions from corporate history. In every case, the company followed the bullet-to-cannonball method to extend and accelerate an underlying flywheel that had been turning for years.

It's not at all clear to me that all of these represent a "flywheel."

Every large organization will eventually have multiple sub-flywheels spinning about, each with its own nuance. But to achieve greatest momentum, they should be held together by an underlying logic. And each sub-flywheel should clearly fit within and contribute to the whole.

The most important thing is to keep turning the overall flywheel—and every component and sub-flywheel—with creative intensity and relentless discipline. Even

OK, now we have the main flywheel and a bunch of sub-flywheels, and all of them have components

STAY ON THE FLYWHEEL . . . AND OUT OF HOW THE MIGHTY FALL

This is beginning to seem like an ad for every other book Collins has written.

Hedgehog Concept,

In our research for How the Mighty Fall, we found that the demise of once-great companies happens in five stages: (1) Hubris Born of Success, (2) Undisciplined Pursuit of More, (3) Denial of Risk and Peril, (4) Grasping for Salvation, and (5) Capitulation to Irrelevance or Death. Take special note of Stage 4, Grasping for Salvation. When companies fall into Stage 4, they succumb to the doom loop, the exact opposite of building flywheel momentum. They grasp for charismatic saviors or untested strategies or big uncalibrated cannonballs or cultural revolutions or “game-changing” acquisitions or transformative technologies or radical restructurings (then another and another) or . . . well, you get the idea.

In Stage 4, each grasp for salvation creates a burst of hope and momentary momentum. But if there’s no underlying flywheel, the momentum doesn’t last. And with each grasp, the enterprise erodes capital—financial capital, cultural capital, stakeholder capital—and weakens. If the company never gets back to the discipline of the flywheel, it will likely continue to spiral downward until it enters Stage 5. No enterprise comes back from Stage 5. Game over.

Second—and this is the most fundamental lesson from Circuit City’s demise—the post-Wurtzel team underestimated how far a flywheel could go if seen as an underlying architecture (that can be extended) rather than as a single line of business.

Is it misunderstanding the flywheel that caused this or simply that the people who sold Carmax didn't imagine themselves in the car business or didn't see the potential of Carmax?

As Alan Wurtzel later wrote in his book, Good to Great to Gone (which I warmly recommend reading), “Looked at from a long-term perspective, it is disappointing that CarMax did not remain part of the Circuit City portfolio . . . The initial premise for CarMax was to create a portfolio of retail companies, so that as one matured another would be coming along to support the growth of the whole.”26

Wurtzel understood CarMax as part of a bigger flywheel,

NO. Wurtzel understood Carmax as part of a portfolio that would incluce companies that were growing to replace those that had run their course. Wurtzel doesn't mention "flywheel." Only Collins does that.

After conducting a quarter-century of research into the question of what makes great companies tick—more than six thousand years of combined corporate history in the research data base—we can issue a clear verdict. The big winners are those who take a flywheel from ten turns to a billion turns rather than crank through ten turns, start over with a new flywheel, push it to ten turns, only to divert energy into yet another new flywheel, then another and another.

I wrote this monograph to share practical insights about the flywheel principle

I missed those.

Level 5 leaders

So the first thing is that you have to have a Level 5 leader. This seems like circular reasoning.

Those who lead organizations from good to great first get the right people on the bus (and the wrong people off the bus) and then figure out where to drive the bus.

This presumes that there is some "right people" who are good to have no matter where you intend to drive the bus. That's nonsense.