Flywheel example: heavy flywheel, takes a lot of effort and momentum to get it going; once it gets going and builds momentum, you eventually get a breakthrough. The flywheel image captures the overall feel of what it was like inside the companies as they went from good to great. No matter how dramatic the end result, the good-to-great transformations never happened in one fell swoop.
1976-Apple I 1977-Apple II 1984-Macintosh 1989-Macintosh SE/30 1991-PowerBook 100 1994-Quicktake camera 1995-Power Macintosh 9500 1998-iMac At this point, Apple wasnt doing so hot because Steve Jobs had been ousted back in 1985, so they brought Jobs back; after the release of this product, brought Apple back to their all-in-one basics. This product set Apple back onto a profitable track and could be considered the first of Apples many breakthroughs in the computer industry
The media gives a completely different account of what happens during the good- to-great transformations Often, the media will not cover a company until the flywheel is already turning at a thousand rotations/minute This skews our perception of how such transformations happen, making it seem as if they jumped right to the breakthrough overnight
August 27 th, 1984: Forbes magazine published the first national-level profile ever published on the company. Talked about Circuit Citys growth and made it seem like an overnight success story From 1973-1982, Alan Wurtzel rebuilt his executive team and experimented with a warehouse showroom style of retailing and transformed the concept into the first-ever Circuit City store; began transforming its stereo stores into Circuit City stores From 1982-1999, Circuit City generated cumulative stock returns 22 times better than the market, and this is when Circuit City found itself a prime subject for media attention
Steel company; 1965-1975, no media attention 1975: transition point for the company Had already built its third mini-mill, well on its way to becoming the most profitable steel company in America First Business Week article didnt come out until 1978, thirteen years later 1976-1995: 96 articles on Nucor, with 40 of them being major profiles or nationally prominent features
Allowed the way transitions look from the outside to drive our perception of what they must feel like to those going through them on the inside. From the outside, they look like dramatic and revolutionary transformations From the inside, they feel completely different, more like an organic development process
Good-to-great companies had no name for their transformations No launch event, no tag line; some executives said that they werent even aware that a major transformation was under way until they were well into it It was often more obvious to them after the fact than at the time
The transition to focus on the superstore didnt happen overnight. We first considered the concept in 1974, but we didnt convert fully to Circuit City superstores until about ten years later, after wed redefined the concept and built enough momentum to bet our whole future on it.-Circuit City
John Wooden coached the Bruins for fifteen years before his first NCAA Championship in 1964 Bruins then went on to win ten NCAA Championships in twelve years, at one point assembling a sixty-one-game winning streak Like the Wooden Dynasty, lasting transformations from good to great follow a general pattern of buildup followed by breakthrough In some cases, the buildup-to-breakthrough stage takes a long time, in other cases, a shorter time No matter how short or long it took, every good-to- great transformation followed the same basic pattern- accumulating momentum, turn by turn of the flywheel- until buildup transformed into breakthrough
The buildup-breakthrough flywheel model is not just a luxury of circumstance Companies may believe their current circumstances or constraints prevent them from taking this long term approach However, the good-to-great companies followed the flywheel model no matter how serious or urgent the short term circumstances
FANNIE MAE & ABBOTT LABORATORIES Effectively managed Wall Street during their buildup- breakthrough years Communicated with analysts by educating them on what they were doing and where they were going Focused on accumulating results, often by underpromising and overdelivering Results began to accumulate, flywheel built momentum, and investors became supporters
Simple Truth- Tremendous power exists in the fact of continued improvement and the delivery of results. Tangible Accomplishments Show how steps fit into context of overall goal People see and feel the buildup of momentum Line up enthusiastically to join
Do we really have to keep asking that stupid question? The one about commitment, alignment, and how they managed change. a lot of the executives who made the transition-well, they think its a stupid question. Some dont even understand the question! Yes we have to keep asking…besides, its even more interesting that they dont understand the question.
Commitment Good to Great Companies have incredible commitment and alignment Spend minimal time thinking about it Transparent to the Companies Commitment takes care of itself Keep Pushing Let momentum do the talking Hey if we just keep doing this, look at where we can go! People turn potential into the fact of results The goal sets itself
Kroger 50,000 employees Cant change through one big event or program Jim Herring initiated the transformation Created tangible evidence that the plan made sense To get people lined up turn the flywheel consistent with the vision See what were doing and how well its working? Extrapolate from that, and thats where were going. Nucor Initiated Flywheel to avoid bankruptcy Built first steel mill to avoid unreliable suppliers Knack for creating steel better and cheaper Flywheel built momentum and Nucor kept pushing 2 decades later generated more profits than all other steel mills on Fortune 1000 list
A winning team Involved in something that just flat out works Apple Culture…people want to be there Plans developed from understanding not bravado Thatll work, count me in. Unity of Executives Simple plan Dedicated level 5 leadership Steve Jobs makes people believe as a level 4 leader Employees stand behind the leaders and company
The comparison companies did not follow the flywheel effect like the good to great companies, but instead fell into the doom loop Comparison companies continuously launched new programs to motivate workers towards the companys goal, and the programs would fail Companies would push the flywheel in one direction the stop and change directions multiple times Comparison companies were not able to buildup the sustained momentum the the flywheel requires
Some version of the doom loop was found in every comparison company Two prevalent patterns were found in the doom loops of the companies: 1)The misguided use of acquisitions 2)Leaders who stopped the flywheel
The good to great companies had a higher success rate with acquisitions than the comparison companies This occurred because good to great companies used acquisitions and mergers as a way to accelerate flywheel momentum, and comparison companies used acquisitions to create flywheel momentum Comparison companies made acquisitions to increase growth, diversify away problems, or make a CEO look good
Leaders coming into the organization, must focus on the already spinning flywheel, rather than throwing it in an entirely new direction Do not turn from your Hedgehog concept- focus and do not deviate from what you can be the best in the world at Just because you are seeing fast growth does not mean that you will achieve sustained growth
Leaders stepping into an organization should first recognize what is working and what makes them the best in the world Harris company revolted with new leadership- and by deviating from their Hedgehog concept (applying technology to printing and communications and entering into the office automation market), the flywheel came to a halt Tim Cook, Apples CEO describes their hedgehog concept as being able to say no to good ideas- its unlike any other company
Avoiding the Doom Loop To avoid the Doom Loop, leaders should stay consistent with the process that is working Apple has designed the process behind their products to focus on their consumers, in summary they focus on the user experience being easy and in turn the EXPERIENCE of their customers is what drives their flywheel
When looking over the good-to-great transformation what words should come to mind? Consistency Going through the Flywheel continually Coherence The magnifying effect of one factor upon another
Signs of the Flywheel Follow a pattern of buildup leading to breakthrough Reach breakthrough Confront the brutal facts of the company Attain consistency with a clear Hedgehog concept Follow pattern of disciplined people, disciplined thought, and disciplined action. Harness appropriate technologies. Make minor acquisitions to accelerate momentum. Little energy spent to motivate or align people.
Signs of the Doom Loop Skip buildup and jump right to breakthrough. Implement big radical change programs. Embrace fads and management hoopla instead of confronting brutal facts. Jump right into action Run around crazy because of the technology. Spending a lot of time and effort trying to motivate people.
Everything starts with Level 5 leaders, who naturally gravitate toward the flywheel model. Less interested in flashy programs that make them look good. More interested in quiet, deliberate process of pushing the flywheel to produce Results Right people on the bus in the correct seats Wrong people off the bus All of these are crucial steps in the early buildup
Buildup and Breakthrough No Miracle Moment Not just a Luxury of Circumstance The Flywheel Effect The Doom Loop The Misguided use of Acquisitions Leaders of Stop the Flywheel The Flywheel as a Wraparound Idea