Reinventing the wheel – Jim Collinsin haastattelu / Nordic Business Report 2022
As companies look for ways to get back on track after times of turbulence, they should not underestimate the power of a great flywheel. Once you get the components right and understand how your specific flywheel turns, it can build compounding momentum over a very long time – even if, and when, that time will be full of more surprises.
For most leaders, the past couple of years have been a struggle for survival. The reasons we all are too aware of have driven companies into turmoil. With all these unexpected incidents that seem to be completely out of our control, many have decided to simply lay low and wait for the storm to pass.
Little by little, we have grown to understand that this is not going to happen.
”A great history professor Edward T. O’Donnell once said that history is the study of surprises; we do not know what is coming next”, says Jim Collins – a renowned researcher, writer, and sought-after speaker whose studies have provided instructions and inspiration for leaders around the world.
Busy in the midst of his most recent research, Jim Collins took the time to have a conversation with Nordic Business Report about what the future looks like – and how leaders could successfully start taking their companies forward, through times that remain uncertain, if not entirely chaotic.
The success will not come by waiting for the perfect circumstances. “Life is uncertain, the future unknown”, Collins continues. ”This is neither good nor bad. It just is, like gravity. Covid is simply the latest manifestation of living history, surprise after surprise. And there are more surprises to come. What’s coming next? All we know for sure is that no-one knows. Yet – and this is the key point – great companies well-led can master their own fate nonetheless.”
The trick may be old, but that is precisely why it works
”For great companies, times of turbulence prove to be ideal for pulling ahead of others”, Collins points out. ”This is a perfect moment to rigorously think of the ways to build momentum.”
This is where the famous flywheel concept comes in. Jim Collins designed it a couple of decades ago, yet it keeps building momentum – and success – to companies regardless of their size, industry, or market.
”If you want to build a great company or lead a company from good to great, harnessing the flywheel effect is one of the crucial ingredients”, Collins explains. ”Breakthrough momentum – the flywheel effect – flows from a series of good decisions, supremely well-executed, that accumulate one upon another over a long period of time. Once you fully grasp how to create flywheel momentum in your particular circumstance, and apply that understanding with creativity and discipline, you get the power of strategic compounding.”
Momentum can be built, but to succeed every company must begin with thoroughly thinking what their respective flywheel is. Getting the steps just right requires plenty of discipline and perseverance, but once that is done, the company will have a long-term momentum builder that can be extended and even renewed to fit other business areas.
”Every company should right now concentrate on getting their flywheel right and embrace it at full force”, Collins advises. ”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.”
To help us out, Jim Collins listed five things every flywheel should include:
1. It has an inexorable logic of momentum
If you want to build momentum, you have to get the logic right. A great flywheel is not merely a series of steps – the idea behind it is that at every step of the flywheel, you can say that if we do this, the next step is almost an inevitable consequence of the step that came before.
2. The top step should express something essential
If you can get the top of the flywheel work for you, then everything else works a lot smoother. Every company has their own starting point. It can begin with culture or anything else. The essential thing is to make a wise choice – something that genuinely represents the reason for existence.
3. Right side – contribution, left side – fuel
All great flywheels proceed so that the first half (12 to 6) is about what you do, create, and contribute to the world. It is how you practically bring your purpose to life. On the other side, this all converts to fuel. The top redeploys the fuel and make the flywheel go further and faster
4. It has empirical validation on actual successes
Identify and describe achievements that represent your company’s big successes – and make sure the flywheel reflects them. Empirical validation enables you to build big bursts of momentum with full confidence.
5. It is an architecture, not a single line of business
This is important when you think about expansion, momentum and stimulating progress: all great flywheels allow you to do various businesses under the same principles. An underlying, properly conceived flywheel architecture, renewed and extended at need, can guide and drive momentum even for decades.
Putting the flywheel to work
The execution phase puts every component of the flywheel to a rigorous test – just like a chain, a flywheel is only as strong as the weakest part. Every component depends on all the others and if one is a lot weaker than the others, the entire flywheel stalls.
Jim Collins emphasizes that to bring home the results, it is essential to understand that the flywheel concept works over a long period of time. After thoroughly ensuring that every step has been built just right, the flywheel has to start moving. At first, it takes great effort to get the flywheel to even inch forward, but soon as it starts moving, every push makes it go faster. With persistent effort, you can make the flywheel complete turn after turn, picking up speed at the same time. Long as you maintain discipline and keep pushing, the flywheel eventually flies forward with almost unstoppable momentum.
Jim Collins mentions that executing the flywheel concept is like a 20-mile march – another one of his concepts designed to help companies thrive in a turbulent world. Success requires relentless consistency, every day, regardless of conditions. Achieving breakthrough performance – and sustaining flywheel momentum – requires, among other things, disciplined action.
As Jim talked to the executive team in the beginning of the century, he advised everyone not to approach the dotcom bust that had just taken place as a crisis. The right approach at that situation was to take Jim’s flywheel thinking further and to create one of their own.
”The situation at the time could very easily have led to everyone panicking and grasping desperately to anything that they’d think might be their instant savior, only to experience more disappointment”, Jim Collins recalls. ”Instead of abandoning the flywheel, Amazon committed fully and stuck with the game plan. The results speak for themselves.”
Do not change, if you can renew and extend
To make the most of any flywheel that has been built right and executed flawlessly, leaders should think about ways to further accelerate momentum. There may come a time when any company needs to renew its operational principles. That does not mean a flywheel has come to the end of its existence.
”At its best, the underlying architecture of the flywheel is distinct from a company’s single line of business”, Collins points out. “Over time, great companies extend their flywheel architecture far beyond where they first began.”
As Intel moved its main focus from memory chips to microprocessors, the underlying flywheel architecture applied just as soundly. When the flywheel has been conceived the right way, even if it is continually renewed and extended, it can be remarkably durable.
Amazon also eventually renewed and extended the flywheel far beyond e-commerce with new technology accelerators such as machine learning and artificial intelligence, but the underlying architecture would remain largely intact.
In extending the flywheel, empirical validation assumes a critical role as it helps make bold moves with confidence. Empirical validation is like calibrated line of sight: when you know for a fact that you are going to hit the target, you can go all in and bring on the big guns. Apple is a great example of this approach, starting their extension from personal computers first carefully with iPods, then, as experience and confidence grew, extending to iTunes, iPhone, and iPad.
“Apple followed exactly this pattern,” Collins explains. “In 2002, nearly all of Apple’s flywheel momentum came from its line of Macintosh personal computers. But it had fired a bullet on this little thing called an iPod. The bullet hit, and Apple then fired a cannonball – extending the flywheel into smart handhelds. And Apple kept extending the flywheel, from iPod to iPhone, from iPhone to iPad, and Apple’s flywheel extension became the largest generator of momentum.”
Building a great company never happens instantaneously and thriving in chaos follows the same principle. Leaders, organizations, and shareholders get impatient waiting for the most current crisis to settle and are at the same time afraid of the next one.
Jim Collins urges everyone to not wait for a miracle, lucky break, instant innovation, or a miracle moment that suddenly makes everything alright. The world has always been full of surprises and unexpected incidents, and that is the kind of world where companies and human beings will have to move forward also from now on.
The flywheel effect has what it takes to move companies forward, to new successes, business areas and sources of growth. To maximize the effect leaders must first thoroughly understand how their specific flywheel should be constructed, and how it turns. Then, through rigorous commitment and discipline, it is just a matter to push it to the point of breakthrough, so that it starts building momentum at an accelerating speed.