Ep 389 | Are You Missing a Flywheel? The Steps You Should Take Right Now

Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. As business owners, we have got to have a flywheel. It's going to come out and say that, right? You've probably heard of this term, or if you haven't, now that I've mentioned it, you're probably going to see it all over the place. But the best businesses out there have some form or variation of flywheel, and you need one too. Now, what the heck is a flywheel, right? Even if we've heard the term, maybe you can't define it or you're unclear on exactly what it means. We're going to talk through in the next several minutes what is a flywheel, how does it work, what companies are leveraging a flywheel, and then lastly, what steps maybe you can take to develop yours for your business. So flywheel is technically this mechanical device that stores rotational energy, and it, it really helps to maintain steady momentum even when the energy input fluctuates. Now that's the physical definition of a, like, a mechanical device flywheel, but that— we're not talking about mechanical devices today, but we are talking about the concept of flywheel. See, in business this concept has become pretty popular as a metaphor, and it's a metaphor for just building momentum in a company. The idea was first brought about by Jim Collins, who wrote the book Good to Great, and he describes in, in the book how successful companies build momentum gradually, like a flywheel that gains speed over time through consistent effort, and then eventually requiring less input to maintain its progress. So momentum's built And now this, this circular flywheel is running. Now, this term is widely used in business for a few different reasons. It has to do with sustained growth. The flywheel metaphor represents this model of sustained compounded growth. And once it's in motion, the momentum keeps going. Uh, it also has to do with long-term focus. Companies that leverage a flywheel concept focus on continuous improvement, but they're patient. Because the results are going to come from these small efforts in this momentum. It emphasizes— flywheel emphasizes resilience because flywheels create self-reinforcing mechanisms. And in business, what this means is systems, creation of systems that feed on, on, on themselves. So one thing leads to the next. For example, customer satisfaction leads to more referrals, more referrals brings more customers, more customers brings more sales. More sales brings more cash. More cash means investing more into customer satisfaction. And the wheel is now running. But lastly, flywheel in my, from my perspective, just represents this holistic business model. In today's environment, you know, business is quite a bit different than it used to be. And this holistic approach, like at an Amazon, you have this flywheel, this full all-encompassing experience where the, say, the customer experience is had, but this drives traffic and it attracts third-party sellers and it results in lower prices. These things stack on each other. In other words, businesses are far more integrated today versus being as linear as they once were. So this really resonates with modern business, especially tech businesses, because they rely on building strong systems over time. Which leads to this scalable growth. Now, a couple companies, I mentioned Amazon, right? This is a really good one in order to see kind of this customer-centric flywheel. Amazon's oftentimes cited as the best example for flywheel because their flywheel centers around creating a really, really solid customer experience. So a solid customer experience leads to what? it leads to more traffic on their website. And more traffic on their website actually leads to more third-party sellers joining the Amazon platform. This thereby increases product selection, which in turn enhances the customer experience even more, which leads to increased sales and volume. And that in turn leads to lower cost through economies of scale and allowing Amazon to offer lower prices. And then lower prices do what? Attract even more customers, which fuels this whole loop loop all over again. Does that make sense? So great customer experience creates traffic, traffic creates more sellers, more sellers increases selection, selection creates better experience, better experience creates more sales volume, that creates lower costs through economies of scale, which leads to lower prices, and lower prices attract more people. It's crazy to think about it, but that is the flywheel effect in action. Tesla. Let's take Tesla as a flywheel. Tesla, its flywheels, uh, flywheel revolves around innovation. Better vehicles with longer ranges and improved features attract more customers. More customers creates more sales and more revenue. Tesla then takes that revenue and invests it back into R&D and manufacturing improvements. This brings about economies of scale, which bring down production costs. Which make electric vehicles more affordable, and affordable vehicles increase accessibility, brand loyalty, and lead to more customers. So each turn of Tesla's flywheel helps them innovate, helps them reduce costs, and helps them dominate the, the EV market like they do. There's lots of other examples, but you kind of see how this works. Now, I mentioned at the start you need a flywheel. In your business, and you could develop one. Developing a flywheel for your business involves identifying a few components and then just reinforcing this cycle of growth. So I'm going to give you a high-level step-by-step what I'd be thinking around. Number one, I think I would identify our core strength. Like, what do we do super well? Pinpoint the fundamental strength that drives your business. Maybe it's customer service, or maybe it's a product quality, maybe it's brand loyalty, or maybe it's innovation. Your flywheel is likely to revolve around this core value. So I want you to ask yourself, what do customers, my customers, most value about my business? What do my customers most value? What— second question, what activity or what asset gives my company, my business, a competitive edge, a competitive advantage? So, what do my customers most value? And what gives my business a competitive edge? This will help you identify your core strength. The next thing I want you to do is identify the key activities that feed into this strength. What are these things? Like, if it's, let's say, customer service is the core strength, what are the key activities that feed into this core strength? Maybe it's customer feedback, surveys. Maybe it's the way that you're delivering the service in that the care that you're putting into the actual service itself. Maybe it's the efficiencies in which you operate. But you're measuring these things. These are the inputs. These are the activities. So again, if customer experience is your strength, maybe it's, you know, what are the key activities that include customer service improvements, or what are the— maybe it's faster delivery of the service or the product, maybe it's more personalized or custom service, whatever it may be. You can see where I'm going with this. We got to figure out what are all the inputs to this core strength. Then I want you to determine the reinforcing factors. What that really means is figure out the components of your business that can create this positive feedback loop, right? Like Amazon, each component, each element strengthens the next, which creates this momentum. So I would ask questions like, what actions can lead to other positive results? For example, better service leads to higher customer retention, which increases more referrals. See how they stack on one another? So what actions can lead to other positive results? And how do small improvements in one area strengthen the overall business? Maybe even how do these small improvements multiply the performance of the business, not just add to it but multiply. So what's multiplicative in this, in this formula? Lastly, I would leverage the metrics and leverage feedback. I would have, you know, metrics, key performance indicators that represent each step of the flywheel. The purpose here is that these metrics should help you understand whether your actions are taking you know, uh, I'm sorry, moving the flywheel forward, or they're slowing the pace of the flywheel. So you got to use customer feedback or performance data with the idea being that you're going to fine-tune or strengthen the loop. The last thing, of course, is you got to scale the flywheel once it's built, once it's functioning. Look for ways to scale it. Maybe it's expanding your customer base and plugging more people into this wheel. Maybe it's investing in other activities that are driving the wheel or even added to the wheel itself to strengthen the bond to the client. So in wrapping this up, I would, I would really take a look at, you know, what we talked around with respect to, with respect to Amazon especially, because I think Amazon is the best one out there, but also Tesla. And I, I would think about this wheel. I'd literally draw a circle, and I think about the activities and the things we provide and how they're reinforcing or maybe not reinforcing the other components of my model. If your core strength, by the way, is sales team performance— because I'm going to call that one out since so many of our listeners are in that environment— maybe your flywheel could involve better team training that, that leads to an improved performance that then in turn leads to higher sales. Which then leads to more customer satisfaction, which creates more referrals, which increases your team's motivation, which gets them to buy into the training. See the whole cycle there? That's just an example of sales team performance. That was your core strength, which I think many of you may be experiencing that but are unclear as to exactly why. See how that wheel, that flywheel vantage point would influence or drive your business. So the focusing question— there are so many focusing questions in today's episode around each of these components, I'm not going to give you an additional one. What I want to challenge you to do though is draw this out on a whiteboard and really, really think it through. Give it some time. When the best of the best in terms of businesses are thinking about things of this nature, it's probably a cue that you should too. That's all I have for you today, the No Days Off Podcast. Thank you so much for listening, and remember, every single day brings a new opportunity to get better. So let's get after it.