For business owners of any scale, there exists a powerful concept known as the Flywheel Effect.

Used correctly and it can help to promote continuous, steady growth of your business. With that in mind, it’s a very important concept to define and implement if you’re looking to build sustained success.

The Flywheel Effect is something we explore in great length in our Ascentis Business Club meetings. We work with you to define your flywheel and reinforce your progress towards continual growth. 

In this blog, we will explore the origins, purpose, and real-world examples of the Flywheel Effect, highlighting how it can shape the trajectory of a business and ensure continuous growth.

Origins of the Flywheel Effect

The concept of the Flywheel Effect, while it has roots in the industrial world, was popularised as a business methodology by Jim Collins in his book “Good to Great.” 

Collins introduced this idea to explain how certain companies achieved extraordinary long-term success. 

The Flywheel Effect draws inspiration from the image of a massive, heavy flywheel that takes significant effort to set in motion initially. However, once it gains momentum, it becomes a self-sustaining force, requiring less effort to keep it spinning and generating greater results over time.

This is exactly the type of momentum you want to build within your business. While at first it might take a while to gain traction, it can soon become a steady growth generator if utilised correctly.

The Purpose of the Flywheel Effect in Business

The primary purpose of the Flywheel Effect in business is to create a self-reinforcing cycle of positive activities that compound over time, driving continuous growth and success. Much like the description of the Flywheel highlighted above.

It is achieved by identifying key components in a business’ operations that, when improved and synchronised, create a positive feedback loop. 

As these components reinforce one another, the business becomes increasingly efficient and effective, ultimately leading to sustained growth and profitability.

To provide further context to the Flywheel Effect, and the powerful impact it can have, we’ve provided examples from two highly successful brands, who have both shown continuous and sustained growth from very early on. 

What’s more, both of them use this methodology to guide their progress as they continue to expand.

Examples of the Flywheel Effect in Action

Uber: Revolutionising Transportation

Uber is a prime example of how the Flywheel Effect can revolutionise an industry. Uber’s flywheel consists of three key components: riders, drivers, and geographical coverage, which inform six key elements of their flywheel, as you can see below.

As more demand grows, more drivers are brought on board which leads to more geographical saturation for the company. From there, there’s less down time for drivers, which leads to lower prices for riders and increased demand. 

On top of that, the increased coverage also means faster pickups for drivers, which once again, brings us back to more demand. 

As this cycle continues in a self perpetuating manner, we continue to see the growth and expansion of Uber as a company. 

This positive feedback loop continues to propel Uber’s growth, making it a global giant in the ride-sharing industry.

Amazon: The E-commerce Behemoth

Amazon’s Flywheel Effect centres on customer experience and satisfaction, which is used to gain traction and continually move the flywheel along around the growth of the business. 

With good customer experience comes more traffic to the website. And, with more traffic, more sellers are inspired to use the platform to sell from.

With more traffic comes a greater selection of products, which further increases customer experience. 

From the completion of the wheel comes growth, which allows for a lower cost structure and lower prices, which also feeds into the customer experience. 

This is at the core of the Amazon growth success and is something that has led to continuous, fast expansion of the organisation into the international behemoth we recognise today. 

Key business components to consider

Your key business components are crucial to consider when it comes to creating your flywheel. But, they can be a huge range of different things, and are often unique to you. 

Here’s a list of business components that you might need to consider. And, if any jump out at you as a key driver of growth in your business, you might want to think about adding them to your own flywheel. 

• Staffing – Expertise, skill, ability to do more, establishing authority
• Customer services – Customer satisfaction, demand for your business, customer retention, testimonials and recommendations
• Marketing strategy – Driving customer awareness, lead generation, brand awareness, sales growth
• Products – Variety of product, selection, cost structure, quality of product
• Services – Speed of service, quality of work completed, access to expertise 

These are just a few key business components you might like to consider when it comes to building your flywheel and developing momentum within your business.  

What does this mean for your business? 

When it comes to you and your business, creating a flywheel model can be extremely beneficial and help you to create sustained growth. And, with the right discipline and the right plan, you can really make it happen.

So, let’s take a moment to think about how you could apply the flywheel effect in your own business. 

Think about the key business components that have provided growth for you in the past and how they feed in to each other. 

For Uber, their growth driver was more drivers, leading to greater ability to cover more area, which lead to faster pickups, cheaper prices and ultimately, more customers. 

For Amazon, customer experience led to more traffic, more sellers, greater choice and lower pricing structure, which fed back into greater customer experience again. 

So, what is your key business component that has provided you with success? This is your starting point. 

Perhaps you own a building company, and your customer satisfaction, from the quality of your work and your customer service is your biggest growth generator. 

From there, this leads to more demand for your business through recommendations and retained customers. 

In order to grow your business and meet this demand, you now need more people on your team. But, if you’re going to maintain your high customer satisfaction, you need the right people. 

So the third component is employing highly skilled, customer-centric individuals, not just hiring more people to get the work done, but to meet the expectations you’ve created with your customers. 

From there, you can work on more jobs across a greater area, bringing you back to the starting point of delivering excellent customer satisfaction to more customers. Which in turn increases demand as the flywheel keeps spinning. 

This is another example of how the flywheel effect can lead to incremental, consistent. From this, try to map out your own flywheel effect, based on the key business components you have in your business. 

Conclusion

If you’re looking to gain traction and develop a self-sustaining pattern of growth, the Flywheel Effect is a compelling concept. 

As experts in business development, we can work with you to help identify and optimise the key components that make up your business’s flywheel as part of our Ascentis Business Club. 

With Uber and Amazon as examples, you can see how effective it can be. Embracing the Flywheel Effect can set your business on a trajectory toward long-term prosperity, transforming the way it operates and thrives in an ever-changing business landscape.

If you want to find out more about how we can support you in developing long term, sustainable growth, get in touch with our team today.