The document discusses key concepts from the book "Good to Great" about building momentum through a "flywheel effect" and avoiding a "doom loop". It explains that good-to-great companies achieved breakthroughs through consistent, small improvements over time, like turning a giant flywheel, rather than dramatic changes. They focused on their "Hedgehog Concept", avoided technology fads, and used acquisitions to accelerate momentum, not create it. In contrast, comparison companies frequently changed strategies and leaders, stopping and restarting the flywheel and falling into a "doom loop" of underperformance.

1. Good to GreatGood to Great
Chapter 7Chapter 7
Technology AcceleratorsTechnology Accelerators

2. Level 5
Leadership
First Who…
Then What
Confront the
Brutal Facts
Hedgehog
Concept
Culture of
Discipline
Technology
Accelerators
Disciplined People Disciplined Thought Disciplined Action
Buildup
Breakthrough
Technology
Accelerators
Good to Great

3. Technology Accelerators
Yet they often become pioneers in the
application of carefully selected
technologies.
Does it fit directly with
your Hedgehog Concept?
Good-to-greats used
technology as an
accelerator of momentum,
not a creator of it.
Good-to-greats avoid technology fads and
bandwagons.

4. Technology Accelerators
Technology by itself is never a root cause of
either greatness or decline.
“Crawl, walk, run”
can be a very
effective approach,
even during times of
rapid and radical
technological
change.

5. CHAPTER 8
The Flywheel and the Doom LoopThe Flywheel and the Doom Loop

6. Level 5
Leadership
First Who…
Then What
Confront the
Brutal Facts
Hedgehog
Concept
Culture of
Discipline
Technology
Accelerations
Disciplined People Disciplined Thought Disciplined Action
Buildup
Breakthrough
Flywheel
Good to Great

7. The Flywheel
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.
Instead they followed 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 . . .

8. The Flywheel
With persistent pushing . . .
In a consistent direction . . .
Over a long period of time . . .
In good-to-great companies problems of
commitment, alignment, motivation, and
change largely take care of themselves.
Alignment follows from results and
momentum, not the other way around.
The flywheel builds momentum . . .
Eventually hitting a point of breakthrough.

9. THE FLYWHEEL AND THE
DOOM LOOP
““Step by step, action by action, decision by decision,Step by step, action by action, decision by decision,
turn by turn of the flywheel – that adds up toturn by turn of the flywheel – that adds up to
sustained and spectacular resultssustained and spectacular results” (p.165).” (p.165).

10. THE FLYWHEEL AND THE
DOOM LOOP
““Tremendous power exists in the fact ofTremendous power exists in the fact of
continued improvement and the delivery ofcontinued improvement and the delivery of
results. Point to tangible accomplishments …results. Point to tangible accomplishments …
people see and feel the buildup of momentum,people see and feel the buildup of momentum,
they will line up with enthusiasmthey will line up with enthusiasm” (p.174).” (p.174).

11. Media’s influence on our perceptionsMedia’s influence on our perceptions
Often, the media doesn’t cover a company untilOften, the media doesn’t cover a company until
the flywheel is already turning at a thousandthe flywheel is already turning at a thousand
rotations per minute.rotations per minute.
Skews our perception of how theSkews our perception of how the
transformation happenstransformation happens
Portrays the transformation as some sort of anPortrays the transformation as some sort of an
overnight metamorphosisovernight metamorphosis

12. Circuit City – turning the flywheelCircuit City – turning the flywheel
Alan Wurtzel – CEO in 1973Alan Wurtzel – CEO in 1973
Struggling with a crushing debt loadStruggling with a crushing debt load
Implemented a warehouseImplemented a warehouse
showroom styleshowroom style
1982 – with 9 years of turning the1982 – with 9 years of turning the
flywheelflywheel
Within the next 5 years C.C. shiftedWithin the next 5 years C.C. shifted
entirely to this conceptentirely to this concept

13. Circuit City Cont.Circuit City Cont.
Generated highest total return toGenerated highest total return to
shareholders of any company on the NYSEshareholders of any company on the NYSE
Cumulative stock returns 22x better than theCumulative stock returns 22x better than the
marketmarket
(Intel, Wal-Mart, GE, Hewlett-Packard and(Intel, Wal-Mart, GE, Hewlett-Packard and
Coca-Cola)Coca-Cola)
There were not any articles of significance inThere were not any articles of significance in
the decade leading up to the transitionthe decade leading up to the transition
After the transition there were 97 articlesAfter the transition there were 97 articles
worth examiningworth examining
22 with significant information22 with significant information

14. What is this Transformation called?What is this Transformation called?
• The good to great companies had no nameThe good to great companies had no name
for their transformationsfor their transformations
• No launch event, no tag line, noNo launch event, no tag line, no
programmatic feel whatsoeverprogrammatic feel whatsoever
• Some say that executives weren't evenSome say that executives weren't even
aware that a major transformation wasaware that a major transformation was
under way until they were well into it.under way until they were well into it.
• Often more obvious to them after the factOften more obvious to them after the fact
than at the timethan at the time

15. There is no miracle moment!There is no miracle moment!
It may look like a single-stroke breakthrough toIt may look like a single-stroke breakthrough to
those viewing it from the outsidethose viewing it from the outside
People on the inside see it as a deliberatePeople on the inside see it as a deliberate
process of figuring out what needs to be done toprocess of figuring out what needs to be done to
create the best future resultscreate the best future results
Then take those steps, one after the other, turnThen take those steps, one after the other, turn
by turn of the flywheel.by turn of the flywheel.
Consistent pushing of the flywheel over anConsistent pushing of the flywheel over an
extended point of timeextended point of time
Inevitably you will hit a point of breakthroughInevitably you will hit a point of breakthrough

16. Not Just A Luxury of CircumstanceNot Just A Luxury of Circumstance
• Good-to-Great companies paid noGood-to-Great companies paid no
attention to long term constraints.attention to long term constraints.
– Instead, they embraced those constraintsInstead, they embraced those constraints
• This also applies to the short-termThis also applies to the short-term
pressures of Wall Streetpressures of Wall Street
• The key is to harness they flywheel toThe key is to harness they flywheel to
manage these short-term pressuresmanage these short-term pressures

17. “The good-to-great companies were
subject to the same short-term
pressures from Wall Street as the
comparison companies. Yet, unlike
the comparison companies, they
had the patience and discipline to
follow the buildup-breakthrough
flywheel model despite these
pressures. And, in the end, they
attained extraordinary results by
Wall Street’s own measure of
success.”

18. Blue PlansBlue Plans
• Blue Plans- One method for managing short-term
pressures --- Abbot Labortories
• Each year, Abbot would tell analysts that it expected to
grow 15%, for example. At the same time, it would set an
internal goal of a much higher growth rate, say 25%
– Meanwhile, it kept a ranked-ordered list of proposed
entrepreneurial projects that had not yet been funded,
Blue Plans
– Abbot would then take the difference between the
analysts growth rate and the actual growth rate and
channel those funds into the Blue Plans
– This managed short term pressures while systematically
investing in the future

19. Wall Street
• Good-to-Great companies, such asGood-to-Great companies, such as
Abbot, effectively managed Wall StreetAbbot, effectively managed Wall Street
during their buildup-breakthrough yearsduring their buildup-breakthrough years
• These companies simply focused onThese companies simply focused on
accumulating results, often underaccumulating results, often under
promising and over deliveringpromising and over delivering
• As the results began to accumulate – asAs the results began to accumulate – as
the flywheel built momentum – thethe flywheel built momentum – the
investing community came along withinvesting community came along with
great enthusiasmgreat enthusiasm

20. Flywheel EffectFlywheel Effect
Tremendous power exists in the fact ofTremendous power exists in the fact of
continued improvement and the delivery ofcontinued improvement and the delivery of
results. Point to tangibleresults. Point to tangible
accomplishments.accomplishments.
When you do this in such a way that peopleWhen you do this in such a way that people
see and feel the buildup of momentum,see and feel the buildup of momentum,
they will line up with enthusiasm. – This isthey will line up with enthusiasm. – This is
the flywheel effect and it applies not only tothe flywheel effect and it applies not only to
outside investors but also to internaloutside investors but also to internal
constituent groups.constituent groups.

21. Flywheel Effect

22. Flywheel EffectFlywheel Effect
Collins found the question of alignmentCollins found the question of alignment
was not a key challenge faced by goodwas not a key challenge faced by good
to great companies.to great companies.
“Clearly, the good to great companies did get
incredible commitment and alignment – they
artfully managed change – but they never really
spent much time thinking about it. It was utterly
transparent to them. We learned that under the
right conditions, the problems of commitment,
alignment, motivation, and change just melt away.
They largely take care of themselves.”

23. The Doom LoopThe Doom Loop

24. The Doom LoopThe Doom Loop
Instead of a quiet & careful process of
figuring out what needed to be done and
simply doing it…
Comparison Companies
1. Frequently Launched New Programs
2. Made it a big deal to Motivate
3. Programs failed to produce lasting results
4. Fell inside the doom loop

25. The Doom Loop Continued…

26. The Doom Loop ContinuedThe Doom Loop Continued…
• For Example:
– Warner-Lambert ( Comparison Company to Gillette)
• 1979 – Aimed to be a Consumer Products Company
• 1980 – Decided aim towards Health Care (went after Merck)
• 1981 – Went back to Consumer Products
• 1987 – Once again went back to Health Care
• 1990 – Went back AGAIN to Consumer Products

27. The Doom Loop Continued…The Doom Loop Continued…
– Warner LambertWarner Lambert Continued…Continued…
• Went back and forth from 1979 to 1998Went back and forth from 1979 to 1998
• Each CEO tried to make a mark with him ownEach CEO tried to make a mark with him own
programprogram
• Fired 20,000 people in search of a breakthroughFired 20,000 people in search of a breakthrough
• They would get results, but slack off, and couldn’tThey would get results, but slack off, and couldn’t
sustain the momentum of a breakthrough flywheel.sustain the momentum of a breakthrough flywheel.
• Finally Stock Returns Flattened and they disappearedFinally Stock Returns Flattened and they disappeared
as an independent company to Pfizer.as an independent company to Pfizer.

28. The Doom Loop Continued…The Doom Loop Continued…
• Two common patterns of the Doom
Loop from company to company:
1. The Misguided Use of Acquisitions
2. Leaders Who Stop the Flywheel

29. The Misguided Use of AcquisitionsThe Misguided Use of Acquisitions
• ““When the going gets tough, we goWhen the going gets tough, we go
shopping!”shopping!”
– Pete Drucker observed that that thePete Drucker observed that that the
drive for mergers and acquisitionsdrive for mergers and acquisitions
comes less from sound reasoningcomes less from sound reasoning
and more from the fact that doingand more from the fact that doing
deals is a much more exciting way todeals is a much more exciting way to
spend your day than doing actualspend your day than doing actual
work.work.

30. The Misguided Use of AcquisitionsThe Misguided Use of Acquisitions
• Why did the good-to-great companiesWhy did the good-to-great companies
have a substantially higher success ratehave a substantially higher success rate
with acquisitions, especially majorwith acquisitions, especially major
acquisitions?acquisitions?
– The key to their success was that theyThe key to their success was that they
used acquisitions as an accelerator ofused acquisitions as an accelerator of
flywheel momentum, not a creator of it.flywheel momentum, not a creator of it.
– In contrast, the comparison companiesIn contrast, the comparison companies
frequently tried to jump right tofrequently tried to jump right to
breakthrough via an acquisition or merger.breakthrough via an acquisition or merger.

31. Leaders Who Stop the FlywheelLeaders Who Stop the Flywheel
The other frequently observed doom loop
pattern is that of new leaders who stepped in,
stopped an already spinning flywheel, and
threw it in an entirely new direction.
For example: In 1978, Joseph Boyd became the
new CEO of Harris Corporation. His first key
decision was to move the company headquarters
from Ohio to Florida. In the early 80’s he also
decided to divest the their printing division (their
primary and very successful division) and go
headlong into the office automation business. By
1988 the company had fallen over 70% behind its
competitors.

32. The Flywheel as a Wraparound Idea
Each piece of the system reinforces the other parts.
An integrated whole that is much more powerful than the sum of the parts.

33. How to Tell if You're on the Flywheel
or in the Doom Loop
Flywheel Doom Loop
Follow a pattern of buildup
leading to breakthrough.
Reach breakthrough by an
accumulation of steps, one after
the other, turn by turn of the
flywheel; feels like an organic
evolutionary process.
Confront the brutal facts to see
clearly what steps must be
taken to build momentum.
Attain consistency with clear
Hedgehog Concept, resolutely
staying within the three circles.
• Skip buildup and jump right to
breakthrough.
• Implement big programs, radical
change efforts, dramatic
revolutions; chronic restructuring-
always looking for a miracle
moment or new savior.
• Embrace fads and engage in
management hoopla, rather than
confront the brutal facts.
• Demonstrate chronic
inconsistency-lurching back and
forth and out of the three circles.

34. Flywheel or Doom Loop cont’
Flywheel Doom Loop
• Follow the pattern of disciplined
people (“first who”), disciplined
thought, disciplined action.
• Harness appropriate technologies
to your Hedgehog Concept, to
accelerate momentum.
• Make major acquisitions after
breakthrough (if at all)
• Spend little energy trying to
motivate or align people.
• Let results do the most of the
talking.
• Maintain consistency over time.
• Jump right to action, without
disciplined though and without
first getting the right people on
the bus.
• Run about like Chicken Little in
reaction to technology.
• Make major acquisitions before
breakthrough.
• Spend a lot of energy trying to
align and motivate people.
• Sell the future.
• Inconsistency over time.

35. How to Start
• Level 5 Leaders
• Getting the right people on the bus.
• Completely understand the three circles of
your Hedgehog Concept.

36. Takeaways
• Buildup and Breakthrough
• Not just a Luxury of Circumstance
• Flywheel Effect
• Doom Loop
• What to Do and What to Avoid

37. The Doom Loop

38. The Flywheel Effect

39. Building Vision
• Do we know what is core
and what is not?
• What is our vision?
• Do we have a good
BHAG?
• What should be some of
our base camps?

40. Level 5
Leadership
First Who…
Then What
Confront the
Brutal Facts
Hedgehog
Concept
Culture of
Discipline
Technology
Accelerators
Disciplined People Disciplined Thought Disciplined Action
Buildup
Breakthrough
Good to Great