Flywheel Triangles

For a business to survive and become somewhat sustainable, it needs a self-sustaining business process to earn money, such as it would be very hard to destroy it by management errors or market changes.

I’ve heard it to be called “Flywheel” at StayFriends.

Business flywheels are positive feedback loops leading to business growth, and can be depicted as triangles. Here is for example how the flywheel of StayFriends looked like:

Users generate content. Content could be used to generate ads, or sold to other users, and the resulting revenue could be used to buy ads, bringing new users.

This effect was called “viral loop” back then, but now I understand that this kind of flywheels exist in any successful business and are not limited to social networks.

This is for example the flywheel of Axinom in its early years:

Any custom projects developed based on the AxCMS resulted to more generalized features being added to this CMS, and to more good looking references for it, so that it has attracted more customers, and thus it has generated new projects. Note how the quality of the produced software was not part of this triangle. Theoretically, you could run projects that have left customers dissatisfied, but you had still added something to AxCMS and could use it to win other customers.

Winning new customers might be harder than winning new projects of an existing customers, so that Axinom was working on a second flywheel:

Having several flywheels supporting each other seems to be a feature of companies demostrating sustainable growth. Here is for example the landscape of flywheels of Immowelt (including a potential new one):

It is interesting to see that even a damaged flyweel can support the business for decades. I can demonstrate it on example of Metz, a TV manufacturer. Initially, when television was not yet ubiquitos, the company was participating in the following flywheels:

Where Metz has owned only the lower triangle, but the growth has happened in the upper two: people discovered some new cool show they wanted to see, then needed to buy their first TV set for that, having done that, they became TV Viewers, that motivated creation of new TV shows both directly as well as because of more money from the advertisers. This worked until virtually every family had a TV set. From this time on, the link between TV Sets and TV Viewers became broken, so Metz remained with this:

Basically, they had only the pair of dealer -> TV sets, and a very weak third corner: by producing very high-quality TV sets, they could consistently win various Tests (eg. by Stiftung Warentest) and this could helped to win a little more electronics dealers.

I guess, the company has survived over 50 years in this state.

Every company is interested in having a healthy flywheel and in participating in to several flywheels at the same time. I think, the most realistic way adding a new flywheel would be reusing existing one or two nodes and adding a new triangle.

For example, Metz could try to grow true Metz fans, having basically the strategy of Apple and XiaoMi:

Well, in theory it looks good, but we all know that in the practice, there are all kind of problems, starting from missing investment budget, not enough innovation talents in R&D department, law and regulations preventing some flywheels, strong market competition, etc.

The reason I’ve written this post is that the idea of depicting the flywheels by triangles came to me in a dream, and for some reason, I was very sure in my dream that it absolutely must have at least three corners. I cannot explain this logically, but anecdotally, if we look at the Marx’s formula:

It is striking that it doesn’t provide any non-trivial insights of how to start growing business.

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