Jim Collin wrote in his book “Good to great” about the concept of great businesses having a flywheel. He said:
“Big things happen because you do a lot of small things supremely well and they compound over time.”
A flywheel is an incredibly heavy wheel which takes a huge amount of intelligent effort in consistent direction to complete the first revolution. However if you continue with the intelligent and consistent effort the second revolution will take less time and need less effort, the third even less. Before you know it you will have completed ten, a hundred, a thousand revolutions. Each one quicker and with less effort than the previous.
All as the result of intelligent and consistent effort in the right direction.
Amazon’s CEO Jeff Bezos has taken the flywheel to the next level. They have built a company where you can fuel any part of the system and it will accelerate the loop.
This is how it works:
Lower prices lead to more customer visits. More customers increased the volume of sales and attracted more commission-paying third-party sellers to the site. This allows Amazon to get more out of fixed costs like the fulfilment centers and the servers needed to run the website. This greater efficiency then enabled it to lower prices further.
By focusing on the customer Amazon has built a business which gets better with ever new customer who shops with them. It has helped them become one of the most valuable companies in the world. It is important to know the difference between an asset purchase agreement and full sale of your business
3 problems you have with your business growth flywheel
Most businesses have a lot of things which slow down or some times even halt the flywheel.
There are 3 common reasons almost every business never gets the flywheel spinning very fast, if at all.
Most businesses are in a constant state of conflict between the needs of the business to hit targets and generate revenue vs actually helping customers. This leads to inconsistency in priorities which leads to inconsistency in results. They say they want to help their customers but then they either get greedy or desperate to generate more sales and then they become focused on serving their own needs and not those of the customer.
Instead of thinking how do I sell more stuff, think, how can I help more people.
Systems and Processes
Most businesses have limitations in the systems and processes or lack of systems and processes.That will slow down your flywheel not speed it up.
Lets say your new marketing efforts starts to work and you generate twice as many leads for your sales team. You have a complicated product which you rely on your salespeople to explain. The spike in leads won’t double your revenue because you sales people haven’t got the time to follow them all up and provide the great service you normally would.
Instead of hiring and training new salespeople if you want to build a flywheel business you need to think about how to simplify the way you sell your products or even simplify your products.
One business we work with who has nailed this part of the flywheel has even gone as far as redesigning his product range to make it simpler and easier to understand so that a potential customer can configure the product themselves on their website. Now if they generate twice as many leads they can service twice as many customers because they have automated the bottle neck in what was a complicated sales process. When they need to hire more people they can hire people and look for people with excellant customer service skills and not just those with decades of product knowledge.
We all know buying online is much more convenient and an easier process than having to pick up the phone and speak to a sales rep. So why do most companies make it so difficult to do business with them? Whether it is not having their pricing on their website, forcing a potential client to go through you lengthy sales process or not providing enough information on your website to help a potential customer make a purchase decision without talking to you. You slowing down your flywheel.
Tesla can sell a £185,000 car to anyone with a credit card why can’t you do the same?
I hope this post has helped you think differently about your business and how you want to grow it.
What businesses are doing this well?
What businesses do you know of that have either a really good or a really bad flywheel? Let me know in the comments below.