The Profits Flywheel
I first came across the idea of a flywheel in Jim Collins’ book, “Good to Great.” Here is an excerpt:
Picture a huge, heavy flywheel—a massive metal disk mounted horizontally on an axle, about 30 feet in diameter, 2 feet thick, and weighing about 5,000 pounds. Now imagine that your task is to get the flywheel rotating on the axle as fast and long as possible.
Pushing with great effort, you get the flywheel to inch forward, moving almost imperceptibly at first. You keep pushing and, after two or three hours of persistent effort, you get the flywheel to complete one entire turn.
You keep pushing, and the flywheel begins to move a bit faster, and with continued great effort, you move it around a second rotation. You keep pushing in a consistent direction. Three turns … four … five … six … the flywheel builds up speed … seven … eight … you keep pushing … nine … ten … it builds momentum … eleven … twelve … moving faster with each turn … twenty … thirty … fifty … a hundred.
Then, at some point—breakthrough! The momentum of the thing kicks in your favor, hurling the flywheel forward, turn after turn … whoosh! … its own heavy weight working for you. You’re pushing no harder than during the first rotation, but the flywheel goes faster and faster. Each turn of the flywheel builds upon work done earlier, compounding your investment of effort. A thousand times faster, then ten thousand, then a hundred thousand. The huge heavy disk flies forward, with almost unstoppable momentum.
Now suppose someone came along and asked, “What was the one big push that caused this thing to go so fast?”
You wouldn’t be able to answer; it’s just a nonsensical question. Was it the first push? The second? The fifth? The hundredth? No! It was all of them added together in an overall accumulation of effort applied in a consistent direction. Some pushes may have been bigger than others, but any single heave—no matter how large—reflects a small fraction of the entire cumulative effect upon the flywheel.
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. There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no wrenching revolution. Good to great comes about by a cumulative process—step by step, action by action, decision by decision, turn by turn of the flywheel—that adds up to sustained and spectacular results.
The flywheel is what a proficorn entrepreneur looks for. What are the series of small steps and actions that can create a profit machine?
In IndiaWorld, it was the twin combination of our own portals and website development. The services business of developing websites kept the cash coming in. Advertising on our own portals for these new sites to get their own traffic helped accelerate the flywheel. The additional profits helped us build even more of our own sites and get more traffic. Each step helped make the flywheel go faster.
As I think about Velvet Rope Marketing, it can become a similar profitability flywheel for businesses – get more revenue from the Best Customers, acquire more like them, help them get to their maximum thresholds faster. What I still need to think about is how to make it even better – perhaps our owned properties which can reduce cost of acquisition even further.
Every entrepreneur needs to find their profitability flywheel – that is the difference between a good business and a great built-to-last business, one that can grow with its customers. When one sees a proficorn, there will inevitably be a flywheel as the secret to its success.
Will be continued soon.
