Flywheel effect (Part One)

As is my wont, I was reading the inflight magazine on my flight back from NYC–I never fail to find something to blog about in an inflight magazine–and I saw an article about Starbucks, so of course I had to read it. (This particular flight was Delta, so their inflight magazine is Delta Sky.)

Actually, the article is called Howard Schultz and is about how he bought and managed Starbucks as its CEO. He started as CEO, left, it went through a downturn, and he came back and managed it back to success, so it’s interesting to read his story. What’s his secret?

The article claims that he attributes part of his success to the corporate culture of Seattle (“There is a way of doing business [in Seattle] that is alive to natural friendliness and gratitude.”); sounds great, but logically I can’t buy that one–if that was true, every business in Seattle would succeed, and he wouldn’t have had to come back as CEO to save the company. But some of his other answers make more sense to me (“Treating people with respect and valuing them is a universal language. Culture trumps strategy.”), but what ended up catching my eye was Schultz’s mention of what he calls the “flywheel effect.”

I didn’t think it was totally clear from the article what the flywheel effect was, so I googled it. I found a website/blog that describes it as:

I’ve always liked the flywheel analogy, because it’s a great mental image of how a business gets from Point A to Point B. Getting a flywheel started takes a lot of effort – you push, and you push, and you push. Then, it becomes a little easier to turn it. And finally, it starts to generate momentum all on its own, and suddenly, what once took so much effort becomes effortless, and self-sustaining. You’re “in the groove”.

So what I gather is that what flywheel effect is that something gets easier after you have been working at it awhile. Armed with this information, what Schultz says in his interview makes sense:

One thing tying all the various initiatives together is what Schultz likes to call the “flywheel” effect. “We can introduce a product in our stores, and then use social media and mobile payments to expand the brand into grocery stores.” Already, La Boulange pastries and Evolution Fresh juices are sold at many Starbucks stores, and Teavana tea products will soon follow. Consumer familiarity with those brands will help expand grocery store sales, a business Schultz believes could grow to $10 billion.

So here what I think Schultz means is that by selling it first in their (Starbucks) stores they build brand recognition, so that when it hits the grocery stores it’s already a known brand and sells itself.

So I want to talk about why this might work. How it works is you build brand recognition. But does brand recognition always lead to success? We like to think so, but if that was true, again, Schultz wouldn’t have had to come back and bail Starbucks out–it certainly already had brand recognition. So why does the how work (when it does)? Figuring that out always means we have to find the mental seed.

So what could the mental seed for Schultz’s flywheel effect be? In other words, why do things get easier (sometimes)?

I’m saving my answer for my next post, in the meantime, what do you think?