Improve Strategic Planning with the Flywheel

“Failing to plan is planning to fail.” It's estimated that,

less than 25% of small and medium businesses (SMBs) use a formal strategic planning process.

Why is that? Maybe it seems to abstract, too visionary, or the world we operate in just changes too fast to stick to a plan?

Typically, strategic planning becomes more of an iterative exercise to shift or adjust the current plan incrementally. After all, if the business is alive and functioning now, it's operating system must be pretty good, right? Such an approach means potentially missing out on substantial growth. Incorporating the "power of strategic compounding" as described by business expert, Jim Collins in his monograph, Turning The Flywheel is essential scaling business growth.

The concept of the "flywheel effect" emphasizes the idea of consistent, incremental efforts leading to significant and sustained growth. The flywheel metaphor illustrates how small actions, consistently applied, can build momentum over time, eventually resulting in substantial progress. A clear and well known example of the Amazon Flywheel. Remember Amazon was started out of a home garage in 1994 by one person! Each step in the flywheel impacts the following step(s) so execution of each step is critical and connected to overall success.

This concept can be applied to strategic planning for SMBs, helping them achieve long-term success. Here's how you can apply it along with examples and exercises:

Identify Core Values and Goals:

Example: Conduct a session with your team to define or update your company's core values and long-term objectives. These should be guiding principles that align with your business's purpose and aspirations. There is a temptation to often skip reviewing and updating core values - don't omit this because values change.

Exercise: I appreciate David Friedman's approach as outlined in Culture by Design where he suggests defining essential positive behaviors first, then group and combine them into clear, concise value sentences. Instead of making statements about what "we" do, you create descriptions that explain what you want people to do. This really helps businesses use their values to help drive performance.

Discover the Key Drivers:

Example: Imagine a retail business aiming to enhance customer satisfaction. Key drivers might include excellent customer service, high-quality products, and efficient operations.

Exercise: Brainstorm with your team to identify the core activities that drive your business forward. These could be marketing strategies, product innovation, customer service initiatives, etc. Start with high-level process mapping or identifying your Critical Client Flow (CCF) as described by David Jenyns in SYSTEMology. He suggests keeping it simple with no more than 7 to 12 steps.

Build Momentum Through Consistent Action:

Example: If superior customer service is a key driver, ensure every interaction with customers reflects your commitment to service excellence. Consistently train and empower your employees to deliver exceptional service.

Exercise: Develop a plan to consistently implement your identified key drivers. Assign responsibilities, set milestones, and establish regular review sessions to track progress. This is where establishing the right type of meetings based on specific, required agenda topics at the right cadence becomes very important. Every meeting is NOT the same!

Reinforce Positive Feedback Loops:

Example: As your business delivers excellent service, customers are more likely to return and recommend your brand to others, leading to increased sales and loyalty.

Exercise: Monitor feedback loops and metrics related to your key drivers. Analyze customer satisfaction surveys, repeat purchase rates, and referrals to identify areas of improvement and reinforce positive outcomes. One of the best tools is Net Promoter Score (NPS). Using a single question such as, "How likely are you going to recommend me to others?" provides a short, customer-focused question, usually with a very high response rate.

Based on the answer, respondents are grouped as Promoters (score 9-10), Passives (score 7-8) or Detractors (score 0-6).  Subtracting the percentage of Detractors from the percentage of Promoters yields the Net Promoter Score, which can range from a low of -100 (if every customer is a Detractor) to a high of 100 (if every customer is a Promoter).  Given the NPS range of -100 to +100, a “positive” score or NPS above 0 is considered “good”, +50 is “Excellent,” and above 70 is considered “world class.”

Optimize and Iterate:

Example: Continuously analyze and refine your strategies based on feedback and performance data. Adapt to changing market dynamics and seize opportunities for growth.

Exercise: Conduct regular strategic review sessions to evaluate the effectiveness of your actions. Monthly and quarterly reviews are essential to adapt and update your plan to stay agile. Identify areas for optimization and iterate on your strategies accordingly.

Sustain Momentum and Growth:

Example: Over time, as your business consistently delivers value and improves its operations, it gains a competitive advantage and strengthens its market position.

Exercise: Foster a culture of continuous improvement within your organization. Encourage innovation, adaptability, and a relentless focus on delivering value to customers.

By applying the flywheel concept to strategic planning, small and medium businesses can cultivate sustainable growth and achieve their long-term objectives. The Flywheel Effect is a part of my strategic planning toolkit as I work with SMBs, non-profits, and leaders to transform their business through people. Beyond any strategic planning session(s), it requires a concerted effort, consistency, and a relentless focus on executing key strategies that drive the business forward.

Jerome Dickey