In his Good to Great book, Jim Collins has used the analogy of a flywheel to explain the importance of continued and consistent performance improvement. It refers to the cumulative effect of incremental advancement, creating the growing momentum of your business. He argues that launching revolutions through dramatic change programs by wrenching restructuring will likely fail to leap from Good to Great. Instead, his thesis favors relentlessly pushing a giant heavy flywheel in one direction, turn by turn, to build momentum for showing revolutionary performance. This continued momentum building leads to the point of breakthrough, making it a killer innovation. But for creating this flywheel effect in products and processes, we need a flow of ideas. Jim Collins did not explain the genesis of getting them. Furthermore, will momentum keep growing linearly or show an S-curve-like pattern, reaching saturation? Besides, is the doom loop inevitable if we keep momentum building?
For sure, Jim Collins’s thesis on creating a flywheel effect has relevance to reality. But business performance depends on how companies’ products have been performing in the market. Hence, to graduate from Good to Great performance, the focus should be on the momentum building in products as the flywheel effect. Unfortunately, Jim Collins’s legendary book did not clarify the nature of creating the flywheel effect in products’ performance. Hence, we need further clarification within the contest of innovation by leveraging technology possibility. Therefore, let’s look into different aspects of the evolution of innovations by creating the flywheel effect.
Aspects of creating flywheel effect for building momentum in innovative products:
- Birth of products and also processes in embryonic form
- Incremental advancement creating a flywheel effect
- Empathy and passion for perfection in finding the necessity of ideas
- Scouring of technology base for implementing the flow of ideas
- Non-linear return on effort in creating the flywheel effect
- Recreation through self-destruction
- Episodic form of creating flywheel effects
Birth of products and also processes in the embryonic form:
Every innovative product is born as an embryonic form, showing inferior performance. Like the product, firms patronizing them also perform poorly. For example, Apple I was an inferior product. Similarly, Carl Benz’s three-wheeler automobile was also poor. Likewise, Sony’s transistor radio emerged as a poor-performing product. Hence, at the birth of their flagship products, all these organizations were poor-performing companies, generating loss-making revenue. But they are now great companies. How did they grow from Good to Great? Where is the underlying strength for their momentum building? These once poor-performing companies grew as great ones due to the evolution of their flagship products. If they could not raise their products, any consistent effort in pushing the flywheel could not have turned them into great companies.
Incremental advancement creating a flywheel effect
As explained, irrespective of the greatness, every product and so do firm begins the journey as a poor performer. At the early stage of the lifecycle, companies are known for offering inferior products. For example, Sony’s transistor radio in the 1950s was relatively primitive. Similarly, personal computers in the 1980s were poorer than minicomputers. Hence, the companies behind those products were also poor performers.
But the underlying technology cores of those products were amenable to progression. Hence, it opened the path of creating ideas for improving performance and reducing cost. Therefore, these companies focused on R&D to consistently improve performance incrementally. The cumulative effect of such incremental advancement gave the impression of creating the flywheel effect for turning Good products and companies into Great ones.
Empathy and passion for perfection in creating the necessity of ideas for creating the flywheel effect
At the core of Jim Collins’s thesis of Good to Great is incremental advancements that accumulate over time, creating momentum. The challenge is to relentlessly push the flywheel in one direction, turn by turn. For technological innovations, this resembles the flow of ideas to keep making products more appealing and reducing costs. Such reality has been at the core of the growth of many once poor-performing products into great ones. But how to ensure a consistent flow of ideas is a big challenge. Should we focus on just gathering and adding ideas? Or should we get into a brainstorming session for generating ideas like a popcorn machine?
For sure, No. Although such approaches add ideas, they fail to ensure adding momentum in the same direction. Hence, products and so do firms fail to create the flywheel effect. Therefore, the focus should be on empathy and passion for perfection as a guiding force. For example, the success of Apple’s Macintosh or iPhone has been the outcome of the flywheel effect creation out of empathy and passion for perfection. It began with Steve Jobs’ trait, which has grown as Apple’s culture and strategy. Like Apple, all the Great companies like Sony, Canon, Toyota, Microsoft, and many others have created this organizational ability.
Scouring of technology base for implementing the flow of ideas
Yes, empathy and passion for perfection are precursors to creating the necessity of ideas. But that is not sufficient to create the flywheel effect. To implement them, we need a suitable technology base. For example, Steve Jobs felt the necessity of the idea of having a stylus and keyboard-free user interface for the smartphone. Similarly, he also felt the necessity of the idea to ease the pain of memorizing and typing text commands for computers. Likewise, AT&T felt the need to replace electromechanical telephone switches with moving parts free ones. But the feeling that necessity was not good enough. Hence, inevitability, all these companies were after scouring technology base, leading to invention and sourcing from outside.
Furthermore, passion for perfection led to the urgency of creating a flow of incremental ideas. Hence, preferred technology had to be amenable to progression. Therefore, creating the flywheel effect is strongly linked with the technology base and amenability to progression.
Non-linear return on effort in creating the flywheel effect
Jim Collins’s metaphor gives the impression that the turn-by-turn flywheel effect creation has increasing marginal return. For a physical flywheel, it’s true. Due to inertia, we need to give a huge push just for one turn. But for subsequent turns, we need a decreasing amount of force. Hence, the marginal return on investment keeps growing. But for the technological innovations, the reality shows a different picture. The invention of technology may be linked with the huge push for overcoming inertia. But for continued improvement, R&D effort for making the same percentage of advantage keeps exponential growing. Hence, R&D effort for each step of incremental advancement starts showing diminishing returns. As a result, the flywheel effect creation in technology innovations takes an S-curve-like lifecycle. Hence, creating a flywheel effect out of incremental advancement is not an endless journey. Instead, the return of investment keeps falling, reaching saturation.
Recreation through self-destruction
As explained, there is an inherent limitation of keep creating and sustaining breakthrough performance out of the flywheel effect. As the momentum building reaches saturation, both the products and firms lose the edge. Hence, once breakthrough performance evaporates, competitors catch up. Hence, there is a need for a deliberate attempt to stop momentum building by adding ideas in the same direction. To find another path of growth or create the next round of flywheel effect, a deliberate attempt is needed to recreate through self-destruction. Jim Collins termed it the Doom Loop. But in its absence, companies fail to sustain the breakthrough performance. Hence, Jim Collins’ legendry thesis fails to guide management thinking in leveraging technology possibilities concerning this reality.
Episodic form of creating flywheel effects
Contrary to Jim Collins’s thesis, the flywheel effect does not keep growing in technology innovations. Instead, the momentum building shows an S-Curve-like pattern. At the saturation point, adding further momentum by adding turns is not feasible. Furthermore, once breakthrough performance gets commoditized. Hence, a new flywheel effect creation wave from reinvention must be crated. As a result, creating a flywheel effect for momentum building in exploiting technology innovations takes episodic form.
Yes, Jim Collins’ thesis is relevant to creating breakthrough performance by adding momentum turn by turn in technology innovations. But the momentum-building progress is neither linear nor exponential. Instead, it takes the shape of an S-Curve. Furthermore, at the saturation, current momentum building should stop, and a new wave should be born out of reinvention. Again, the journey begins to create a flywheel effect in this new wave. As a result, flywheel effect building in exploiting technology possibilities is episodic—different from Jim Collins’ thesis of Good to Great.