186. Explore Scalable Digital Solutions #6 - Value Flywheel
Have you wondered why Pilot projects, are often successful, however, scaling these pilots to full-scale implementations often presents significant challenges?
Why Pilots are Often Successful? Hard to scale?
Limited Scope creates focus, small batch work increase predictability, which improves quality of decision making in short interval
Dedicated Resources with cross functional skills with high levels of commitment and support, often endorsed directly by senior leadership
Flexibility and Agility with open arm towards risks and failures, encouraging experimentation and innovation
Controlled Environment with artificially reduced complexity with no legacy or technical debt to worry about
Sounds familiar? Almost like a classic scrum team.
However in case of large scale:
So we need to find a better way, a sustainable way to rapidly test ideas and improve scalability. Fortunately a company called AWS has solved this puzzle decades ago on how to balance innovation with scalability, with the AWS flywheel approach.
Why a value flywheel?
The flywheel – as popularized by author Jim Collins – is a self-reinforcing loop made up of a few key initiatives that feed and are driven by each other that builds a long-term business, in other words, a mechanism to continuously generate value through a cycle of stages, starts with Level 5 Leadership:
Collins’ research team found that the first ingredient for greatness was a leader with
“a paradoxical blend of personal humility and professional will”
In the early 90s, that leader is called Jeff Bezos, who incubated his initial idea for Amazon.com using the Amazon flywheel, an economic engine that uses growth and scale to improve the customer experience through greater selection and lower cost. It was claimed that Bezos has drawn it on a napkin in the early days of Amazon.
The Flywheel effect is a concept developed in the book Good to Great. No matter how dramatic the end result, good-to-great transformations never happen in one fell swoop. In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and?beyond.
The Flywheel and Doom Loop concept then goes on to explain that companies never make a leap from good-to-great with a magnificent moment or grand program. It comes down to consistently building momentum until there is a breakthrough.
Too abstract? Think about the success of YouTube as a scalable platform with compound value creation between creators and consumers
Youtube was initially created as a dating website, later people realized it could be a platform of videos of any kind.
The Hedgehog Concept - YouTube has changed their strategy on three dimensions, and expand this for their users:
1. What you can be best in the world at
2. What drives your economic engine
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3. What you are deeply passionate about
Later the content creators become the content consumers, while the consumer produces content, it then becomes an infinite loop to create an ecosystem of YouTuber, Organizations and Individual views with great success, the founder start first with who, later challenged their assumption and have applied.
How to create a value flywheel and make it work?
Like the CEO of Xiaomi once said:
99% of the problems have been solved by someone, simply ask
Fortunately David Anderson and his fellow colleagues has published a book back in 2022 called: the value flywheel effect. It is a framework designed to help organizations leverage technology, particularly cloud computing, to drive business value and transformation. The book introduces the concept of the
"Value Flywheel," a mechanism to continuously generate value through a cycle of stages.
1. North Star
what does the organization want to accomplish? What are customers' needs and business opportunities?
2. Inertia
recognize and address existing momentum within the organization, including established processes, technologies, and mindsets, that can slow down progress
3. Exploitation
leveraging existing assets, resources, and capabilities to maximize current value, optimize what you already have to generate immediate benefits while planning for longer-term transformation.
4. Sustainability
ensure that changes and improvements are durable and adaptable to future challenges and opportunities, maintaining and growing the generated value over time.
5. The Value Flywheel Cycle
Integration: The stages form a continuous loop where the organization revisits each phase to ensure ongoing alignment with the North Star, overcome inertia, exploit current capabilities, and sustain value creation with feedback loops.
Phase 1: Clarity of Purpose
Phase 2: Challenge & Landscape
Phase 3: Next Best Action
Phase 4: Long-Term Value
Continue Spinning the Value Flywheel
But the journey is not over. Once the wheel has spun, it is essential to return to clarity of purpose (the first phase of the Value Flywheel). A fast experiment should have supplied some valuable feedback so that the whole iteration (a turn of the flywheel) can start again. And again. And again. The faster your organization moves through these iterations (turns of the flywheel), the more you will learn, the more value you will deliver, and the more opportunities that will present themselves. The business strategy never stands still. There will be new ideas, new opportunities, and new developments. There will also be improvements to the technology stack and to the teams themselves. The Value Flywheel works as it absorbs changes from the business and technology (both never stop evolving).
Source: AWS Data Flywheel, it revolution, Amazon.com, David Anderson