What we found is that the most durable results happen as a series of good decisions that accumulate one upon another over a very long period of time, that create a massive compounding effect. And just like investing, where it’s buy quality assets you would presume to hold forever, then largely do and let them compound, this is the idea that you get a really good thing and you build strategic compounding over a very long period of time, and then you end up with this spectacular result.
He calls that the “flywheel effect.” And, as you might expect, there’s an opposite phenomenon:
Let me just describe the inverse of the flywheel, which is the doom loop. Something happens that produces disappointing results. And it could be that it was a random event or something just happened that was out of your control or something that you just made a mistake or you bungled something, whatever. You get disappointing results. But unlike really understanding why that happened so that you can correct, what happens is a company reacts without understanding. “Oh my gosh, we had disappointing results,” and often what happens is they panic. They look for a new direction or a new program or a new leader or a new acquisition or a new technology or something, and because that never really produces a great result, it produces a burst of false hope, but it’s like drinking a sugar drink as opposed to getting back to your core training. It doesn’t give you any accumulated momentum, which then creates another negative inflection, more disappointing results, which then more reaction without that understanding. Then another new direction, new fad, new program, new whatever, and then another failure to build momentum, more disappointing results, and then you’re in the doom loop.
If you’re honest, how many quality initiatives have you seen as a true flywheel of progress and not just a spoke in the doom loop?