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