If I had a personal wish for the new ideas in this new book it would be that every parent, every counselor, every teacher, every professor, every sports coach that deals with young people would understand the three circle concept. —Jim Collins
What do Great Leaders Do?
They don’t give up!
Chapter 8: The Flywheel and the Doom Loop
In this chapter, Collins describes two cycles that demonstrate the way that business decisions tend to accumulate incrementally in either an advantageous or a disadvantageous manner. Both emphasizes, accrue over time. Despite the popular misperception that business success or failure often occurs suddenly, Collins asserts that it more typically occurs over the course of years, and that both only transpire after sufficient positive or negative momentum has been accrued.
Collins describes the advantageous business cycle that, in some cases, can foster the transition from Good to Great as "the flywheel effect." By making decisions and taking actions that reinforce and affirm the company’s "hedgehog" competencies, executives initiate positive momentum. This, in turn, results in the accumulation of tangible positive outcomes, which serve to energize and earn the investment and loyalty of the staff. This revitalization of the team serves to further build momentum. If the cycle continues to repeat in this manner, the transition from Good to Great is likely to transpire. In contrast, the doom loop is characterized by reactive decision-making, an over-extension into too many diverse areas of concentration, following short-lived trends, frequent changes in leadership and personnel, loss of morale, and disappointing results.
• Good to Great transformations often look like dramatic, revolutionary events to those observing from the outside, but they feel like organic, cumulative processes to people on the inside. The confusion of end outcomes (dramatic results) with process (organic and cumulative) skews our perception of what really works over the long haul.
• 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 miracle moment.
• Sustainable transformations follow a predictable pattern of buildup and breakthrough. Like pushing on a giant, heavy flywheel, it takes a lot of effort to get the thing moving at all, but with persistent pushing in a consistent direction over a long period of time, the flywheel builds momentum, eventually hitting a point of breakthrough.
• The comparison companies followed a different pattern, the doom loop. Rather than accumulating momentum - turn by turn of the flywheel - they tried to skip buildup and jump immediately to breakthrough. Then, with disappointing results, they'd lurch back and forth, failing to maintain a consistent direction.
• The comparison companies frequently tried to create a breakthrough with large, misguided acquisitions. The good-to- great companies, in contrast, principally used large acquisitions after breakthrough, to accelerate momentum in an already fast- spinning flywheel.
• Those inside the Good to Great companies were often unaware of the magnitude of their transformation at the time; only later, in retrospect, did it become clear. They had no name, tag line, launch event or program to signify what they were doing at the time.
• The Good to Great leaders spent essentially no energy trying to "create alignment," "motivate the troops," or "manage change." Under the right conditions, the problems of commitment, alignment, motivation, and change largely take care of themselves. Alignment principally follows from results and momentum, not the other way around.
• The short-term pressures of Wall Street were not inconsistent with following this model. The flywheel effect is not in conflict with these pressures. Indeed, it is the key to managing them.
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