The Flywheel and the Doom Loop
John ShonkBob Odgers
Donald Ewalt
I’ve Got to Be Unstoppable
http://www.youtube.com/watch?v=GA8z7f7a2Pk
Buildup and BreakthroughView from the outsideNo single defining actionNo name for their progress
◦UCLA Bruins (1948-63)
Not Just a Luxury of Circumstance
Short-term constraintsBlue Plans
The “Flywheel Effect”Steps forward consistent with the
Hedgehog ConceptAccumulation of visible resultsPeople line up, energized by
resultsFlywheel builds momentum
The Doom LoopThis occurs when:
◦Flywheel is going in one direction◦Then stopped◦Change course◦And continue in another direction
The Doom Loop
What Causes A Doom LoopMisguided Use of
acquisitions:◦ When core
business is treading water
◦ Dive into a big acquisition in to: Increase growth Diversify away their
troubles Make CEO look
good
Leaders who stop the flywheel:◦ Current CEO
Gets the flywheel going
Builds momentum Identifies hedgehog
◦ New CEO takes over Stops the flywheel Changes direction Tries to save
company again
Flywheel and SummaryConsistenceLeadingFollow hedge hog conceptFollow discipline people
disciplined actions disciplined thought
Takes time, after momentum BOOM.
Flywheel and SummaryFLY WHEELFollow pattern of buildup that leads to break
throughAttain consistency with clear hedgehog
conceptMake acquisition after breakthrough, build
momentumSpend little energy motivating people
DOOM LOOP Skip buildup and jump to breakthrough Embrace fads management hoopla lurching back and forth outside of 3 circlesMake acquisitions before breakthrough, fear of
left behindSpend a lot for energy trying to motivate
people
Schlotzsky’s• 1971 muffuletta stuffed with three meats, cheeses, lettuce, tomato, olives, and dressing on a sourdough bun.• Wanted market share of Subway, Quiznos, and Panera. ( diversified from six sandwiches to 15 and adding pizzas and salads and cafe)• Big building, lounges, like star bucks, computers.• Crazy advertising campaigns promotions• buy back restaurant development rights 28 million.•1994-2000, turnkey program, too many stores.
http://www.austinchronicle.com/gyrobase/Issue/story?oid=oid%3A232204
Schlotzsky’s