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"No matter what your walk in life, no matter how big or small your enterprise, no matter whether it's for-profit or nonprofit, no matter whether you're CEO or a unit leader, the question stands: How does your flywheel turn?" — Jim Collins

Book Summary

This is my book summary of Turning the Flywheel by Jim Collins. My notes are informal and often contain quotes from the book as well as my own thoughts. This summary also includes key lessons and important passages from the book.

• Video Book Summary
• Overview
• The Book in Three Sentences
• Introduction by Jim Collins
• Steps to Capturing Your Flywheel
• Tips and Tactics for Building Your Flywheel
• Renewing Your Flywheel
• Extending Your Flywheel
• The 5 Stages of Business Decline
• The Verdict of History
• Watch Jim Collins Explain "The Flywheel"
• Who is Jim Collins?
• More Books Like This One
• Buy the Book

Video Book Summary

On Outliers with Daniel Scrivner, I recorded an hour long summary of Turning the Flywheel. It explores the concept of the flywheel to explain why some companies build moments and others don't. As well as how to build your flywheel, renew it, and extend it to continue growing your business and avoid the 5 Stages of Business Decline. For more, read through the full show notes and transcript of my book summary.

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Overview

Turning the Flywheel is a monograph that was meant to accompany Jim Collins' famous book Good to Great — which is all about what separate good companies from great ones, and how companies can make the journey to greatness. As Jim Collins writes in Turning the Flywheel:

I wrote this monograph to share practical insights about the flywheel principles that became clear in the years after first writing about the flywheel effect in Chapter 8 of Good to Great. I decided to create this monograph because I've witnessed the power of the flywheel, when properly conceived and harnessed, in a wide range of organizations: in public corporations and private companies, in large multinationals and small family businesses, in military organizations and professional sports teams, in school systems and medical centers, in social movements and nonprofits.

Since learning about the concept of the Flywheel, I've since explained it and helped many of the portfolio companies I've invested in — both personally and through my venture fund Ligature — to create and implement their own flywheel.

It's a fantastic way to force deep strategic thinking as it forces you to identify the disciplines, that sit far above any product or month or quarter, that will help you build and sustain momentum. The best flywheels are both timely and timeless, acting as a source of strength in turbulent times and a fantastic guardrail when making strategic decisions.

Flywheels ultimately explain why some companies build momentum and others don't.‍

The Book in Three Sentences

Turning the Flywheel, which is a monograph Jim Collins wrote to accompany his famous book Good to Great, introduces the concept of the Flywheel. Which serves both as a way to breakdown and analyze any business, as well as a framework to understand why some companies build momentum and others don't. The best flywheels are both timely and timeless, acting as a source of strength in turbulent times and a fantastic guardrail when making strategic decisions.

Introduction by Jim Collins

In the autumn of 2001, just as Good to Great first hit the market, Amazon.com invited me to engage in a spirited dialogue with founder Jeff Bezos and a few members of his executive team. This was right in the middle of the dot-com bust, when some wondered how (or if) Amazon could recover and prevail as a great company. I taught them about "the flywheel effect" that we'd uncovered in our research. In creating a good-to-great transformation, there's no single defining action, no grand program, no single killer innovation, no solitary lucky break, no miracle moment.

Rather it feels like turning a giant, heavy flywheel. Pushing with great effort, you get the flywheel to inch forward. You keep pushing, and with persistent effort, you get the flywheel to inch forward. You keep pushing, and with persistent effort, you get the flywheel to complete one entire turn. You don't stop. You keep pushing. The flywheel moves a bit faster. Two turns… then four… then eight… the flywheel builds momentum… sixteen… thirty-two… moving faster… a thousand… ten thousand… a hundred thousand. Then at some point—breakthrough! The flywheel flies forward with almost unstoppable momentum.

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.‍‍‍‍

Steps to Capturing Your Flywheel

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:

1. Create a list of significant replicable successes your enterprise has achieved. This should include new initiatives and offerings that have far exceeded expectations.
2. 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.
3. Compare the successes to the disappointments and ask, “What do these successes and disappointments tell us about the possible components of our flywheel?”
4. 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.
5. If you have more than six components, you’re making it too complicated; consolidate and simplify to capture the essence of the flywheel.
6. 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 flywheel, and your biggest disappointments as failures to execute or adhere to the flywheel.
7. Test the flywheel against the three circles of your Hedgehog Concept. A Hedgehog Concept is a simple, crystalline concept that flows from deeply understanding the intersection of the following three circles: (1) what you’re deeply passionate about, (2) what you can be the best in the world at, and (3) what drives your economic or resource engine. Does the flywheel fit with what you’re deeply passionate about—especially the guiding core purpose and enduring core values of the enterprise? Does the flywheel build upon what you can be the best in the world at? Does the flywheel help fuel your economic or resource engine?

As inspiration, here are two examples of flywheels from the book for Amazon.com and Vanguard:

Tips and Tactics for Building Your Flywheel

Never underestimate the power of a great flywheel, especially when it builds compounding momentum over a very long time. Once you get your flywheel right, you want to renew and extend that flywheel for years to decades — decision upon decision, action upon action, turn by turn — each loop adding to the cumulative effect. But to best accomplish this, you need to understand how your specific flywheel turns. Your flywheel will almost certainly not be identical to Amazon’s, but it should be just as clear and it’s logic equally sound.

As you nail each component in your flywheel, you’re propelled into the next component, and the next, and the next, and the next — almost like a chain reaction. I’m thinking about your own flywheel, it’s absolutely vital that it not be conceived as merely a list of static objectives thst you’ve simply drawn as a circle. It must capture the sequence that ignites and accelerates momentum.

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 like much longer.

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.

Leaders who create pockets of greatness at the unit level of their organization don’t sit around hoping for perfection from the organization or system around them. They figure out how to harness the flywheel effect within their unit of responsibility.

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. Ok the other hand, to keep the flywheel spinning, you need to continually renew, and improve each and every component.

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. In this case, 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.

Renewing Your Flywheel

Once you get the flywheel right, the question becomes, What do we need to do better to accelerate momentum? The very nature of a flywheel—that it depends upon getting the sequence right and that every component depends on all the other components—means that you simply cannot falter on any primary component and sustain momentum. Think of it this way. Suppose you have, say, six components in the flywheel, and you score your performance in each from 1 to 10. What happens if your execution scores are 9, 10, 8, 3, 9, and 10? The entire flywheel stalls at the component scoring 3. To regain momentum, you need to bring that 3 up to at least an 8.

Over the long course of time (multiple decades), a flywheel might evolve significantly. You might replace components. You might delete components. You might revise components. You might narrow or broaden the scope of a component. You might adjust the sequence. These changes might happen by a process of invention, as you discover or create fundamentally new activities or businesses. Or they might happen by a process wherein you confront the brutal facts and practice productive paranoia about existential threats to your flywheel. For example, a company whose business model depended on collecting the personal information of millions of people found its flywheel imperiled by a data breach. Members of the executive team realized that they needed to insert a component dedicated to protecting privacy and earning trust. The rest of the flywheel remained intact, but without this vital new component, the company might have woken up one day on the verge of extinction.

That said, if you feel compelled to continuously make fundamental changes to the sequence or components of the flywheel, you’ve likely failed to get your flywheel right in the first place. Rarely does a great flywheel stall because it’s run out of potential or is fundamentally broken. More often, momentum stalls due to either poor execution and/or failure to renew and extend within a fundamentally sound flywheel architecture. It is to the topic of extending the flywheel that we now turn.

Extending Your Flywheel

In looking across the history of great companies in all our research studies, we find a frequent pattern. They usually begin life being successful in a specific business arena, making the most of their early big bets. But sook they make a conceptual shift from “running a business” to turning the flywheel. And over time, they extend that flywheel by firing bullets, then cannonballs. They crank the flywheel in their first arena of success, while simultaneously firing bullets to discover new things that might work and act as a hedge against uncertainty.

How do great companies go about extending a flywheel? The answer lies in a concept I developed with my colleague Morten Hansen in our book, Great by Choice. Morten and I systematically studied small entrepreneurial companies that became the 10X winners (beating their industries by more than ten times, in returns to investors) in highly turbulent industries in contrast to less successful comparison cases in the same environments. We found that both sets of companies made big bets but with a huge difference. The big successes tended to make big bets after they’d empirically validated that the bet would pay off, whereas the less successful comparisons tended to make big bets before having empirical validation. We coined the concept fire bullets, then cannonballs to capture the difference.

Here’s the idea: Imagine a hostile ship bearing down on you. You have a limited amount of gunpowder. You take all your gunpowder and use it to fire a big cannonball. The cannonball flies out and splashes in the ocean, missing the oncoming ship. You turn to your stockpile and discover that you’re out of gunpowder. You’re in trouble. But suppose instead that when you see the ship bearing down, you take a little bit of gunpowder and fire a bullet. It misses by 40 degrees. You make another bullet and fire. It misses by 30 degrees. You make a third bullet and fire, missing by only 10 degrees. The next bullet hits—ping!—the hull of the oncoming ship. You have empirical validation, a calibrated line of sight. Now, you take all the remaining gunpowder and fire a big cannonball along the calibrated line of sight, which sinks the enemy ship.

Some bullets hit nothing, but some give enough empirical validation that the company then fires a cannonball, providing a big burst of momentum. In some cases, these extensions come to generate the vast majority of momentum in the flywheel, and in a few cases (such as when Intel moved from memory to microprocessors), they entirely replace what came before.

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

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 clear fit within and contribute to the whole.

The 5 Stages of Business Decline

In studying the horrifying fall of once-great companies, we see them abandoning the key principles that made them great in the first place. They vest the wrong leaders with power. They veer from the First Who principle and cease to get the right people on the bus. They fail to confront the brutal facts. They stray far beyond the three circles of their Hedgehog Concept, throwing themselves into activities at which they could never become best in the world. They subvert discipline with bureaucracy. They corrupt their core values and lose their purpose. And one of the biggest patterns exhibited by once-great companies that bring about their own senseless self-destruction is failure to adhere to the flywheel principle.

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.

The Verdict of History

After conducting a quarter-venture of research into the question of what makes great companies tick — more than six thousand years of combined corporations history in the research database — we can issue a clear verdict. The bigger winners are those who take a flywheel from the 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.

When you reach a hundred turns on a flywheel, go for a thousand turns, then ten thousand, then a million, then ten million, and keep going until (and unless) you make a conscious decisions to abandon that flywheel. Apply your creativity and discipline to each and every turn with as much intensity as when you cranked out your first turns on the flywheel, nonstop, relentlessly, ever building momentum.

If you do this, your organization will be much more likely to stay out of How The Mighty Fall and earn a place amongst those rare few that not only make the leap from good to great but also become built to last.

Watch Jim Collins Explain "The Flywheel"

"One of the key disciplines for building a great organization is to recognize that it's never a single event. It's a cumulative process. There's no big bang, no big breakthrough, no big aha. Rather, it's like pushing a giant heavy flywheel." Sustained progress is like a chain reaction that just runs in a loop. Watch Jim Collins breakdown and explain "The Flywheel" in the YouTube playlist below.

Who is Jim Collins?

Driven by a relentless curiosity, Jim Collins spent more than a quarter-century doing rigorous research around the differences between good and great companies, what the world's most durable companies got right, and how once great businesses fall from greatness. Out of this research he's written 6 books that have sold more than 10 million copies worldwide. Those include Good to Great, Built to Last, How the Mighty Fall, Great by Choice, and BE 2.0 (Beyond Entrepreneurship 2.0).

Recommended Reading

If you enjoyed Turning the Flywheel, you might also like:

• The Essays of Warren Buffett: Warren's Ideas from 50+ Years Grouped by Topic
• The Tao of Charlie Munger: Wisdom on Life, Business, and the Pursuit of Wealth
• The Science of Hitting: From the Last Baseball Player to Break the Magic .400 Barrier
• A Few Lessons From Sherlock Holmes: Learn to Think Like the Famous Detective

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