Flywheels have been seen in use as early as the Industrial Revolution in steam engines. Certainly now, they have their place enhancing renewable energy sources and driving cost-effective solar and wind generation energy storage.
Outside of the literal mechanical application of a flywheel, the term “flywheel” is often mentioned in business contexts. But beyond merely regurgitating business jargon, what might the term “flywheel effect” mean for the construction industry?
In this article, we unpack the flywheel effect and offer three lessons business owners can learn from this phenomenon.
What Is the Flywheel Effect? Unpacking Jim Collins’ Flywheel Business Model
The “flywheel” concept is a business model first popularized by Jim Collins in his 2001 book, "Good to Great."
In an excerpt from this book, Collins describes the flywheel effect as a process that “resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.”
In other words, while this process involves considerable upfront exertion, the resulting momentum can sustain a business and keep it moving with less effort applied to routine maintenance over time.
1. HubSpot Flywheel: Disrupting the Traditional Marketing Funnel
HubSpot, a popular Software as a Service (SaaS) company offering digital tools to help small businesses scale, describes how its own flywheel works, akin to this momentum-generating flywheel Collins describes. The traditional marketing funnel, HubSpot explains, is one where customers were “an afterthought,” whereas the HubSpot flywheel puts customers at the center. In turn, when marketing, sales, and service are built around the customer, the customer helps the company grow by becoming “delighted” business advocates, offering word-of-mouth referrals, rave reviews, etc.
2. Amazon’s Momentum: Underpinning Customer-Centricity Spins the Flywheel
It is generally believed that Amazon’s “flywheel,” supposedly drawn on a napkin by Jeff Bezos in the early days of the company and the nexus of its ability to overcome the dot com bubble popping, was inspired by Collins.
OMR describes Amazon's flywheel as such: “Setting growth at Amazon in motion … is ensuring a positive customer experience, [which will] lead to an increase in customers, which, in turn, boosts the relevance for merchants. And when more merchants sell their wares on Amazon, the product offer increases, which has a positive impact on customer experience.”
3. Most Advanced Yet Acceptable (MAYA): How Apple Changed How We Interact with Smartphones
Similar to Amazon’s customer-centricity is Apple’s “ecosystem” or “walled garden,” supports the idea that customers can immerse themselves with complimentary devices and services that deliver a seamless experience. In doing so, Apple inspires a deeper customer investment into the ecosystem, which translates to brand loyalty.
At the same rate, arguably, what makes Apple’s flywheel compelling is its maniacal attention-to-detail, quality, and interactive design that makes these products not only compatible but also delightful to use. A concept known as “MAYA” (an acronym for: Most Advanced Yet Acceptable) is also likely at work inspiring continuous engagement with Apple's ever-growing product ecosystem. This concept was brought to life by the father of industrial design, Raymond Loewy, who is quoted in the International Design Foundation as saying:
"The adult public's taste is not necessarily ready to accept the logical solutions to their requirements if the solution implies too vast a departure from what they have been conditioned into accepting as the norm."
Consider, for example, the smartphones we all have in our pockets today, where the norm is a giant screen, and virtually no tactile buttons, which vastly changes how much can be accomplished through the software interface. Steve Jobs famously described this “revolutionary UI” in the launch of the first iPhone, which allowed, for the first time in the smartphone industry, for the concepts of continuous improvement (e.g., kaizen) to be applied to hardware products. “Every application wants a slightly different user interface, a slightly optimized set of buttons just for it,” Jobs noted in 2007, describing the limitations of tactile buttons of the time: “The buttons and the controls can’t change for the application, and they can’t change down the road if you think of another great idea you want to add to this product.”
Despite how revolutionary the iPhone was, it’s critical to explain the set of circumstances that facilitated mass adoption. Remember the critics: Then-Microsoft CEO Steve Balmer famously laughed at the iPhone, calling it “the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard.”
In fact, as the International Design Foundation reminds us, the product designers at Apple were subliminally preparing us for a UI devoid of tactile buttons for years prior:
“The iPod’s designers gradually pushed the product design further and further as the iPod gradually lost the extra buttons and got a lot more streamlined interface. It is very likely that this gradual development from the first iPod in 2001 was what made the iPhone acceptable to users when it was launched in 2007. By applying the MAYA principle, the designers at Apple provided the users with the most advanced design within the boundaries of their acceptance.”
Similarly, technological advancements in our industry, like BIM, may at the onset of adoption seem challenging. For example, according to JBKnowledge, 27.8% of contractors do not bid on projects involving BIM. An industry survey coordinated by the Chartered Institute of Building (CIOB), too, found that 59% of companies state that their workforce doesn’t have the skills needed to work with BIM.
That said, data from Dodge Data & Analytics (via Autodesk) and others continue to show BIM’s promise: e.g., 61% report BIM processes reduced project error, 55% report BIM processes reduced the time required for communications, and 82% of BIM users report a positive return-on-investment.
As the industry continues to evolve, and so do evolving roles like BIM specialists within construction companies, it’s likely, the extent to which BIM falls within the boundaries of companies’ boundaries of technology acceptance.
How to Leverage the Flywheel
Now that we’ve discussed what the flywheel business model is and how it’s at work in three of the largest names in big tech, how might you leverage the same effect to drive profitability and business resilience at your company?
There are generally three components at work in a flywheel:
1. Customer Acquisition – how you drum up business.
2. Customer Experience and Engagement – how you retain business.
3. Operational Excellence – how you empower the teams to do their best work and delight your customers for repeat business.
A worthy flywheel:
At the center of the flywheel—like HubSpot, Apple, and Amazon—is the customer. As new customers are fed into the flywheel, improving the customer experience—e.g., improving customer relationship management through open communication and improving collaboration through BIM modeling, etc.—can keep it moving.
But beyond customer experience, adopting the continuous improvement mantra toward promoting operational excellence ultimately completes the cycle, improving the degree to which the team can continually exceed your customers’ expectations.
This may be achieved through improving cross-team software integration, adopting lean management principles to eliminate waste and refocus efforts to prioritize customer value, or even supplying workers with the right tools to get the job done (e.g., smart tools can help deliver application-specific repeatability, standard Bluetooth® tracking compatibility for better inventory management and security, reporting for quality assurance purposes; etc.
Final Word
The first revolution of a flywheel dates back as early as the Industrial Revolution, but the breakthroughs that facilitated mass transportation are the same sources of momentum you need to build in your company to keep it afloat and continually revolving around your customers.
Making the upfront investment to build a flywheel-inspired cycle of virtuous growth for your company can seem daunting; however, in contrast to traditional models that often sideline infrastructure spending in favor of short-term gains at the expense of future growth velocity, defining your own business flywheel is one of the most efficient strategies available.
