April 18, 2017

The Flywheel and the Doom Loop

“The gent who wakes up and finds himself a success hasn't been asleep.” – Wilson Mizner
When we see companies that seem to have had an incredible overnight success, it causes us to question whether our own company is on the right track. If we’re not careful, comparing ourselves like this can lead to making a rash of bad decisions / knee-jerk reactions – this is called the doom loop. The way to avoid this pitfall is to have a clearly defined roadmap. The principles outlined in Jim Collins Good to Great study provide us just such a roadmap. To recap, Collins tells us to think of these principles as a giant heavy flywheel. When you first start pushing on it, it turns so slowly that the movement is almost imperceptible. The key is consistency. Over time, with sustained and consistent effort, the flywheel will start to gain momentum. This is what Collins refers to as the buildup-to-breakthrough process. The principles are broken down into the following three stages. Disciplined People First, you have to be a Level 5 Leader – someone with the personal humility to make your ambition first and foremost for the company and not for yourself. Secondly, you must have the professional will to stick to things when you face various kinds of resistance and temptation to change direction. This also includes choosing the right kind of people to who are both self-motivated and properly aligned with the company’s core vision values (and letting the wrong kind of people go). Disciplined Thought Not only is a Level 5 Leader not afraid to face the brutal facts, but they also create an environment where the truth is sought after and people are free to report ugly findings without fear. They also maintain an unwavering faith that regardless of how bad things look, they will still prevail. Most importantly, they have identified their hedgehog concept, also known as the three circles (the thing their company is most passionate about, has the potential to be the best in the world at, and the thing that has the biggest economic impact), and they stick to it relentlessly. Disciplined Action Once a culture of discipline has been created, the flywheel has really started gaining momentum. A culture of discipline can only thrive in an environment that nurtures the entrepreneurial spirit (one fueled by creativity and imagination, and not stifled by bureaucracy - red tape, rules, and fear of disciplinary action). At this point, introducing some sort of technology to assist with any of the processes within the hedgehog concept will sometimes provide the acceleration for your company to breakthrough to lasting greatness. It is important to note though, even without a technology accelerator, your company would eventually still have it’s breakthrough because of the momentum of the flywheel. Collins says that the good-to-great transformations often look like dramatic, revolutionary events to those observing from the outside, but on the inside, things look very different. On the inside, there was simple consistency and adherence to the principles outlined above. No grand program, no single defining action, no miracle moment - just persistent pushing in a consistent direction and eventually hitting a point of breakthrough. The comparison companies (the ones that failed to have lasting greatness, even in the face of temporary good results) failed because they did not stick to those principles. Instead, they fell into the doom loop. Instead of building momentum on like the flywheel, they tried to skip the buildup and jump straight to breakthrough. They were reactionary and knee-jerk, lurching back and forth, failing to maintain a consistent direction. Next time you see a direct competitor leap ahead in the market – as long as you have your checklist of good-to-great principles in place, you have nothing to worry about – stick to your plan and you will most likely catch and surpass them. If your direct competitor's success isn't rooted in the good-to-great principles – it will be short lived – you on the other hand are setting setting your company up for lasting greatness. Sometimes it takes time for the flywheel to gain momentum, but when it does it will be something to marvel at.
“Do not turn from it to the right hand or to the left, that you may have good success wherever you go.” – Joshua 1:7b (ESV)

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