Flywheel
If you could apply a key framework that has taken Amazon from the lows of the dot-com bubble bust into one of the biggest companies in the world today - what would it mean for your business?
Amazon’s rise to the one of the biggest companies in history was not a straightforward journey. Starting out as an online bookstore, Amazon quickly rose on the waves of the dot-com bubble. They enjoyed a good run all the way up to mid-2000 where the crash happened, and Amazon shares dropped almost 90% from highs in the $100+ down to $8 per share.
During these dark days at Amazon, Jeff Bezos came across Jim Collins’ “Good To Great” book. In it, Jim talked about the concept of the “Flywheel Effect”.
Jeff Bezos proceeded to invite Jim to his office, and over a few days they re-engineered Amazon’s business model around this concept of the “Flywheel Effect”. Jeff Bezos saw this to be so critical to Amazon’s future that he ordered every department to apply the same model into their operations. With this paradigm shift in the fundamental way the business operates in place, Amazon’s revenues started to grow exponentially and led the way for its monumental success today. The same framework is still displayed in Amazon’s offices and in central to everything they do - looking something like this:
The flywheel effect can be found in highly scalable businesses around the world and is critical to start applying to your business today.
So what is a flywheel exactly?
This is a 3,000 pound flywheel. Imagine your task is to turn this wheel around as fast as you can. It takes a lot of elbow grease and brute strength, but in 2-3 hours of persistent effort you make a full rotation. After this point, the second rotation becomes easier, and third even more so and so on. The momentum generated from the initial push keeps the flywheel turning on it’s own with lesser effort over time.
When you set up a flywheel effect in your business, you create a momentum that allows your business to grow faster with less effort.
Again the key here is generating momentum - we need to identify key components that contribute to the goal (revenue) and create a causal link between them so the energy gets propelled forward.
Moving the flywheel equals output /energy (which is what we want) and faster equals better.
But the problem is:- It is difficult to get it moving
- And get it to move at high speed /fast
- How to do it with very little resources?
- How to do it quickly?
Building A Flywheel System In Business
In a normal flywheel system - you would just apply force/ strength and that will translate to moving it.
But it is very linear - in terms of application of force translating to movement.
Within our E-commerce Flywheel Framework that we have designed - we will get the force from several places to get it moving.
Very little force translates to a lot more movement.
The force is amplified, creating a compounding effect over time.
The force /momentum is fed into several parts of the flywheel and they feed off each other - and back to each other creating a Virtuous Cycle.
This is why the flywheel model is superior to other models - like funnels.
Marketing funnels are still important and have proven results so we also use a hybrid model where the flywheel has funnels as well.
How much of a big difference does it make in terms of numbers? (flywheel vs no-flywheel)
We’ve seen in cases a “negative flywheel effect” - there is no momentum in the business, and the parts that would make up the flywheel in our framework do not work with each other. This is the scenario where the business owner or marketing team keeps putting in energy and money with little results. Symptoms of this include a negative ROI on ad spend, or unpredictable revenue growth (e.g. good months and bad months).
Compare this with a business with a strong flywheel effect in place and fine tuned, we’ve had a 7-figure client grow exponentially by 486% in just over a year and was on track to make 8-figures before COVID hit (they had a travel based product offering).
But then why don't more e-commerce
businesses do this?
All successful ecommerce businesses are set up with a powerful “flywheel effect” in place. They have the components in the framework set up and optimised - Traffic, Store Experience, Sales and Customers. We’ve seen this while working with one of the biggest retailers in Australia ($6bil annual revenue) and the flywheels they had in place to grow their online store from $10mil to $300mil in 4 years. Even at that size they continuously fine-tune the components of our “flywheel” framework.
What is the challenge and why do they fail?
The challenge is usually with knowing how to get the components of the flywheel working together - propelling the energy forward. Most of the components are often worked on in isolation. For example the e-commerce store is built by a web design agency, the pay-per-click campaigns run by a different agency, and email campaigns run in-house. In this scenario individual components are not set up and optimised with the full flywheel framework in mind - this causes energy leakages in the flywheel momentum (slowing it down).
What's actually involved in implementing the flywheel effect?
Below is a screenshot of examples of the different tasks/functions/skills involved:
| Traffic | Store Experience | Sales | Audience | |
|---|---|---|---|---|
| Elements | Traffic Sources Paid vs Organic Costs:CPM/CPC Ad Creative Effectiveness |
Product Range Availability Pricing Selection Offers UX Trust Product Information Design Navigation Checkout/Payment Methods Chat Bots Shipping Information Mobile Experience |
Up-sell/Cross sell Cart Abandonment Shipping Offers |
After Sale Email Marketing SMS Push Notifications Referral Program Loyalty Program |
| Measurement/KPIs | Website Visitors
Impressions Reach Clicks |
Conversion Rate Home>Product>Cart>Checkout>Transaction |
Transaction Average Order Value |
Returning Customers Customer Lifetime Value |
| Example WDM Services to improve KPIs | Facebook Ads Google Ads Shopping Ads Email Marketing E-commerce SEO Marketplace integrations Affiliates Marketplaces Audience Targeting Ad Messaging |
Speed Optimisation Product, Collection , Cart and Checkout flow optimisation Mobile First Design (?) Audit based on Baymard’s 48,000 Hours of UX research Integrations (Stock on hand check) |
Product Sales Analysis Value Based Audiences |
Klaviyo Email Automation Push Notifications Marketing Newsletter |
| By-Products | Brand Awareness | Returning Customers | Customer Database Revenue | Trust & Credibility Reviews Word of Mouth |
How much is it worth (in terms of numbers) to have a flywheel for your ecomm business?
Take your last 5 months of revenue - what would it mean to you to see that number in a single month of sales? Our flywheel framework when applied in full has helped our clients scale up to 5X faster than they would have on their own.
How We Applied The E-commerce Flywheel Framework For Our Clients
Case Study #1
Simcorner - 486% Growth In Total Business Revenue in 14 Months
Case Study #2
Chemist Warehouse - 52% CPA Reduction and 385% Increase in Google Shopping Revenue
Case Study #3
Bladnoch Distillery - 364% Growth In Facebook Ads Driven Online Sales at 1270% ROAS
Are you ready for your business to scale?
There are 4 parts to this model to help you scale the business: Traffic, Sales, Store Experience and Customers. Get started with us to achieve all 4 and get your flywheel in motion.
Get Started
