We are getting closer to the end of “Good to Great”. This is about chapter 8 which is titled “The Flywheel and the Doom Loop”. Sounds a bit like something from Indiana Jones. Seriously, it hits upon the nature of success. Most people, from the media’s coaching, believe that things happen overnight. Most people and companies have to work at it. I remember years ago when Sharon Stone became an “overnight success”. It turns out that she had already been trying to get ahead for more than a decade.
The flywheel is associated with momentum. It takes energy to get it going, but it gets easier to make it go faster if the energy is applied in the same direction. If energy is consistently applied, the flywheel will continue to accelerate and will eventually reach great speeds.
Companies are similar. Instead of a flywheel, the momentum is a chosen path to a chosen focus. As long as the ideas are attached to, the momentum builds and the company pushes forward. It is difficult to be consistent but as long as it is, the velocity of improvement and change will increase. “Good to Great” companies with their hedgehog concepts are more like to stick with it. The temptations to be distracted are so huge but focus sees the true mission.
Companies have a potentially unlimited lifespan. Unlike humans, they can live on long after the start. This makes them an organism of their own. The workers and managers and executives are only elements of a much larger story. This brings in one of my favorite topics of emergence. The sum is a quite different beast from the individual parts. And, even more important, the company is composed of an intelligence that would be seen to exceed any individual employee.
Anyways, back to the point. In order to achieve any kind of consistent vision, everyone has to see it as their own vision. With the hedgehog concept, it is possible to crystallize the employees around a common vision what the company should be doing. I would like to introduce this analogy. Rowing!
Given that there is a goal, if everyone rows in time and in the right direction, there will be momentum and the goal will be reached. However, if like most companies, not everyone is in sync and the leaders are always changing directions, you are not going to reach the goal.
The fox cannot stay on the same track for too long. This explains the shift in direction and lack of momentum. Every time the fox changes the flow, the momentum is lost. Not only that, it pretty much guarantees that no goal will be reached simply because the goal is always changing. It looks like much is happening but it is actually more like spinning wheels with no momentum at all.
Given that momentum builds, it will eventually hit a breakthrough. This breakthrough is where things are actually growing in strength and with less and less effort. There is no magic instant where the breakthrough happens. The momentum is built from many many turns of the flywheel. It is impossible to identify which push created the change. The point is that it was all the changes that brought about the breakthrough. This thinking goes against what business leaders like to think.
Also important to mention is that there was no magic program or policy or other enthusiastically promoted internal company goal that created this transition. Essentially once started, it happens on its own. It is similar to the difference to cheering on a team versus playing the game. Cheering might help some but the actually players with real internal motivation that are going to make the biggest difference.
There is always going to be resistance to becoming consistent with the flywheel. One of the first thoughts might be to worry about the “Wall Street” reaction to long term versus short term focus. Based on the summary for the book, the flywheel is actually completely compatible with “Wall Street”. This makes sense too given that the flywheel brings great success. Which investor is going to complain about consistently high gains over the long term?
The greatest driver in “Wall Street” is not money but rather fear. Emotions cripple the desire to see the long term view. Why wait when you can push for more money now? But why? Greed. But what is greed? I would propose that it is the fear of not having enough money. Any unsatisfied want is likely to grow, even when it is being satisfied. The point is that short term investing is bound to run a company into the ground. It also burns up lots of energy and wastes time. Many a company has been driven by the “Wall Street” gods without realizing that it could actually be the other way around.
Great companies don’t have to worry about the markets. They exceed the market easily. They have bigger fish to fry. They love their jobs and know what they are supposed to do. They also happen to be the best in the world. Who wouldn’t want that?
The momentum is so strong that it brings along the whole company in a way that could never be dictated from above. It is more like a realization that everyone reaches over time that “We can be the best at this and we will be”.
On the other hand, the Doom Loop is found at most other companies. The doom comes from a lack of understanding that drives the company deeper and deeper into the abyss. It starts with bad results that lead to a bad decision that leads to changes that bring more bad results and so forth. It smells of fox. It also brings a company down fast. Obviously it is much easier to fall into this trap.
The Doom Loop is all about stopping momentum. It takes a working company and brings it virtually to a halt. All the easy changes are tried (laying off, changing CEO, changing focus, employee education) but it just makes things worse. Part of this comes from sheer bravado/ego. The new leaders think they can make things much better but fail to realize that there is something still good about the existing company. They also tend to want to make it theirs and discard that which is associated with the previous leaders.
From the outside, the Doom Loop is easy to recognize. Any long term gain is either negative or very small. It is kind of like going on a family holiday with a destination in mind. As the trip begins, the parents squabble over the destination. Half way there, the driver changes direction. The next day, the direction is changed again. The car is in turmoil since no one is getting what they want. Eventually they have to turn around and go home because they don’t have enough time to make the destination. The holiday is ruined. The family is unhappy. No one wins.
A company with a mixed up purpose is only going to give you a mixed up result.
There is only one more chapter after this. It’s been good writing about “Good to Great” and hopefully some of you will get the chance to read the book.
Just remember “healthy flywheel with momentum is good, doom loop bad”. 🙂