Good To Great Chapter Eight

The Fly Wheel and the Doom LoopMamie Dupre

Bess LukerAlicia EstradaRyan Dupriest

Taylor Watts

Each turn of the flywheel builds upon work done earlier

“What was the one big push that caused this thing to go so fast?”◦ An accumulation of effort

BREAKTHROUGH!

There was no one single defining action Good-to-great comes about by a cumulative

process Media does not cover a company until after

transformation Circuit City

◦ First national article on August 27, 1984◦ After transition-97 articles

What’s so Important?◦ Outside vs. Inside

There was no miracle moment!

Buildup and Breakthrough

UCLA Bruins Basketball◦ 1960s and early 1970s◦ Won ten NCAA Championships in twelve years◦ A sixty-one-game winning streak, under Coach

John Wooden Before Wooden’s first NCAA Championship

◦ Coached 15 years ◦ From 1948-1963, 1964

An Example

Circuit City◦ Nine years

Nucor◦ Ten years

Gillette◦ Five years

Fannie Mae◦ Three years

Pitney Bowes◦ Two years

The Breakthrough Stage

Same basic pattern◦ Accumulating momentum◦ Turn by turn of the fly wheel◦ Until buildup transformed into breakthrough

Good-to-Great Transformation

Following the buildup-breakthrough flywheel model is not just a luxury of circumstance

The key◦ To harness the flywheel to manage short-term

pressures

Not Just a Luxury of Circumstance

The simple truth:◦ Tremendous power exists in the fact of continued

improvement and the delivery of results

◦ ADD THE CHART TO THIS SLIDE…IF IT FITS!

The “Flywheel Effect”

“The one about commitment, alignment, and how they managed change”

Want to be consistent across the interviews. ◦ We’ve got to understand how they overcome

resistance to change and got people lined up. They expected “creating alignment” would be

one of the top challenges faced by executives They did not find the question of alignment to

be a key challenge

The Question

Good-to-great companies tended not to publicly proclaim big goals at the outset

They began to spin the flywheel◦ Understanding action◦ Step after step◦ Turn after turn

After the flywheel built up momentum◦ “There’s no reason we can’t accomplish X”

The Flywheel

Began turning the flywheel in 1965 Discovered they had a knack for making

steel better and cheaper◦ Built more mini-mills◦ Gained customers

Took over two decades, but Nucor generated greater profits than any other steel company on the Fortune 1000 list

Nucor

When you let the flywheel do the talking, you don’t need to fervently communicate your goals

As people decide among themselves to turn the fact of potential into the fact of results, the goals almost sets itself

Cause and Effect

The comparison companies start in one direction and then go in a complete direction

After back and forth the comparison companies would fail to build sustained momentum and fell into the doom loop

The Doom Loop

Doom Loop

Good-to-Great Companies: used acquisition as an accelerator of the flywheel momentum not as the creator

Comparison Companies: tried to jump right to breakthrough with acquisition◦ Never learned while you can buy your way to

growth you cannot buy your way to greatness

Misguided use of Acquisitions

New leaders would stop the motion the company was already headed in◦ Harris Corporation, applied many of the greatness

concepts in the early 1960’s◦ 1978 Joseph Boyd became CEO◦ Boyd moved head quarters to Melbourne, Florida

from Cleveland

Leaders who stop the flywheel

It is only through consistency over time, through multiple generations

Every factor work together to create the pattern

Each component produces and push on the flywheel

Starts with level 5 leaders Example right people right seat

Flywheel as a Wraparound Idea

Follow a pattern of buildup leading to breakthrough Confront the brutal facts Attain consistency with a clear Hedgehog Concept Follow the pattern of disciplined people Harness appropriate technologies to your

Hedgehog Concepts Make major acquisitions after breakthrough Spend little energy trying to motivate or align

people Maintain consistency over time

Signs That You’re on the Flywheel

Skip build up and jump right to breakthrough Embrace fads and engage in management hoopla Demonstrate chronic inconsistency Jump right to action Run about like Chicken Little in reaction to

technology Make major acquisitions before breakthrough Spend a lot of energy trying to align and

motivated people Demostrate inconsistency over time

Signs That You’re in the Doom Loop