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The "Flywheel" -- The Secret Behind The Success Of Amazon, Google, Uber And Facebook

The "Flywheel" -- The Secret Behind The Success Of Amazon, Google, Uber And Facebook

Summary


Ever wondered how companies like Amazon, Google, Uber and Facebook grew to be so big? 

The answer isn't luck, chance, raising capital or timing...

It's something much deeper than that...

The secret behind all of these companies success is something called a "Flywheel".

If you have a flywheel in your business you will enjoy exponential growth. If you don't have a flywheel the best you can ever hope for is linear growth...

The truth is that most companies don't have a flywheel -- They actually have an "Anti-Flywheel".

In today's video I wanted to do something different... 

I wanted to take you behind-the-scenes of a live event I did recently for my mastermind group. 

This is my highest level group and most of them make multi 7-figures, some are approaching 8-figures. Long story short -- this is a group of killers.

One of the talking points at the event was "Flywheels" and why your business needs one. 

I recorded this session and now you can listen to it yourself -- for free. 

Check it out and let me know what you think in the comments section.


To Your Success! 

Sam Ovens & the team at Consulting.com

Further Reading: How To Start A Consulting Business

Transcript / MP3

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Sam: That was probably the first big point. The second one was a flywheel, and I shared in the Facebook, the Quantum Group, Amazon's flywheel. It's an image. Everyone can look at it now. This thing is really what made Amazon good. And really, there's two types of businesses, and there's two types of growth. One is linear, and one is exponential. There's two types. We'll say this is one, two, and linear is what pretty much every single business is. 99.99999% of businesses are linear. And what that means is their growth, let's say this is growth measured in dollars, and this is time, right? And it looks like this. Probably even makes that noise too, so that's what most businesses look like. This year, let's say this is year one. Let's say in one year, they grow to say 100,000. Then, they're like, "Oh okay, I kind of know the formula", so year two, we'll just do double of that. So they double the stuff, double the whatever. They make 200,000. Then, they're like okay, we'll just double that. And then, 300,000, right? They move like that. That's linear. And you know what? It's actually pretty hard to even do that. Most businesses don't even do that. Most businesses kinda go up linear, and then stay flat, and then decline. Some good businesses can pull this one off. These are very rare, but this still sucks. This is linear. No good companies are linear. None of them, zero. Look at their growth, and no rich people's incomes are linear. Look at Warren Buffett. Look at Jeff Bezos's, look at any rich person on Earth over all time, and it won't be linear, so this sucks. And then, exponential looks like this if we've got growth, time, dollars, years. It looks like that. So it's going kind of linear, and then it kind of goes woof, just bam, up like that. That is what all good companies have. So like this, say bad, good. This makes sense? Two types, linear, exponential. And I always wondered what the hell makes this exponential thing happens, like how can you get that instead of that? And what's also crazy is that with these businesses, like let's say you spend 100,000 on ads here, and you're 100 times bigger here, but you don't have to spend anything on ads. It has totally different relationships. In a business like this to make 10 times as much, you have to spend 10 times as much. In a business like this, sometimes you don't have to spend anything, and you make 1,000 times more. These are the ones that everyone gets rich on, and these are the companies that are the best. It took me a long time to figure out how these damn things worked, and it's all to do with having a flywheel in your business look Amazon does. So I'll just show you Amazon's. If we have growth, then we have sellers, selection. Then, over here, we're going to have experience, traffic. Then, there's another amplifier here, which comes up, which is lower costs, which leads to lower prices, which then feeds that again. So for every new seller that comes onto Amazon, they bring a wider selection of things. The wider the selection of things, the better the experience is for a customer coming on and looking for things. And the better that experience is, the more people come, and the more often they visit. And then, the more people that come and the more often they visit, the more sellers come because there's more of a market there. And then, the wider the selection, and then the better the experience. And then, the more customers that come and the more frequent they visit. And then, what happens is they also, because they have so much economies of scale, they've got lower costs. If you have a server in the initial stages and a team of developers, in the initial stages that might cost $100,000 per year for the developers and the server with let's say 1,000 visitors a month. But then, if you have a million visitors a day, and you might still have the same team. So the costs got shared over more units of scale, and that means that they've got lower costs, and then they can lower the prices. And then, when they lower the prices as well, that makes the experience better, which means that more people are going to come. And really, this all feeds growth, and it spins like a flywheel. Every time one of these things gets better, it spins faster, and every time that happens, the increase gets bigger. So not only is this happening faster but bigger, every single time. And that's why if you look at Amazon's value on the stock market, that's why if you look at Jeff Bezos's net worth, it's unstoppable, really. And all other businesses work look this too, the big ones. So with Google, the more people that search on Google, the more websites want to be found on Google, the more content they create. The more people search on Google, the better the algorithms get, the better the search results are, the more people that ... So, all right. That's how Google's gotten so good. Everything's on it, and the results are pretty damn good. And so, Google has a flywheel, and also Facebook has a flywheel. The more people are on it, the more content they create. The more often they're on it, the more other people are on it, the more advertisers want to sell on it. It is a flywheel. Uber has a flywheel. The more drivers that drive with Uber, the faster the time Uber can get a driver to you. If you pull out your Uber and you look at it, it could be three minutes. If they didn't have much drivers, it might be 20, and then you're not going to use it because you'll just get a yellow cab. So the more drivers they have on Uber, the more people come onto Uber. And then, the more people that come onto Uber, the more drivers that come onto Uber, and then it goes [inaudible 00:11:59]. The same with Airbnb, the same with all of these things. So all of them have a flywheel, this makes sense, right? And the flywheel is what creates exponential growth. But what's interesting is that most businesses, the ones that have linear curves, they have a negative flywheel. They go down. So I'll give you an example. I'll use a done-for-you services and one-on-one consulting as an example, right? Seriously. This is it. This is why that model breaks. So we'll say this is done-for-you or one-on-one, alright? I can't put that there because I need to put the flywheel stuff there, but this is for done-for-you or one-on-one. And let's say here, you've got attention to clients or attention on clients, clients' results, new clients, time. So as soon as this reaches a certain limit, for every new client you bring on, you get less time. And for every time you get less time, you can give less of it to your clients, or it has to be spread thinner. And the less attention you give your clients, the less results they get. And the less results they get, the less new clients you get. And so actually, it works fine up until a point, but then it works adversely, and it goes [inaudible 00:14:13]. The same with one-on-one consulting. It has an anti-flywheel. Speaker 3: So how is it anti if you can buy other's people time to do the work and just keep adding more and more people to the company? I mean when does it flip at a certain point? Sam: It gets less and less and less efficient for every new human that gets added. Speaker 3: So it doesn't become more efficient? Sam: How could it possibly get more efficient? Speaker 3: Okay. Sam: There's never a time when things get more efficient by adding more humans, you know what I mean? Generally, that makes things worse. Speaker 5: You can only control [crosstalk 00:15:15] Sam: I'll use a perfect example, the Yellow Pages. Anyone using them to manage their ads? Speaker 3: Yeah, but I thought adding people would make things easier. Sam: That's what Yellow Pages thought. Yellow Pages actually had a flywheel when they had one book. Because for every new person that came, the more people used the book. The more people that used the book, the more they could charge for their ads. They had a system that ... it was a flywheel, and that's how they made a ton of money and they were crushing it for a long time. But then, when things came online, they thought "let's offer services now". Bad move. I'll give another example. Let's say you're a mechanic and you've got a shop. Let's say that you can do one job a day, serve one customer a day. And for every new customer you get up to 30 is good, making more money. You're getting more utility from your machines, your rent, your time, all that. But then, let's say you get 60 customers one month. Now, every customer is gonna have to wait twice as long, or every job you do is going to have to be half as good. Speaker 3: [inaudible 00:16:39] Sam: Which is going to mean customers don't come back. Customers don't come in the first place because you take a long time, or you don't do a very good job. Speaker 6: So how does the training model work in the flywheel then? Sam: So the training one is interesting. There's tons of dynamics to it. First of all, you've got to think about it as a system with training. It can handle a huge amount more volume because instead of delivering the advice yourself, well really, the model goes in different stages. Doing the work is the most time-intensive thing there is. After that, one-on-one advice is. After that, coaching is. And then, after that, creating an automated product is, right? So each system can handle more and more volume with really the same or less human resources. Speaker 6: And still giving the same overall value to the client? Sam: Yeah, well that depends on the program and everything, right? So ways that I've used ... I mean things which I've come up with, and I started out with done-for-you and I experienced this exact thing. Then, I went to one-on-one, experienced this exact thing. Went to a hybrid sort of model, experienced the same thing. Each time though I got up to a higher plateau. And then, one huge breakthroughs have been like Facebook Group. That thing helps you really apply a bit of a flywheel because for every new customer you get, there's the ability of someone's question is going to everything answered faster, and they're going to get more responses and better answers, right? So for every additional ... Can you stop making that noise? So for every additional unit of customers you get, actually your customer experience in the group gets better, right? And then, you've also got to think about time. So now that we are doing the recordings and all that, and our business ... the more mastermind events we do, the more Q&A calls we do, the more people that join them, the more questions that are asked, the deeper our archives of content. Which means when a new customer joins, the better the experience. Like never before were we in a position where new mastermind members could instantly watch an event. So you attended two events, did you say you watched both? Speaker 7: I watched the first one in full, then part of the second one. Speaker 8: I watched both look every day, back to back. [crosstalk 00:19:37] Sam: So you got to attend two events before attending an event, how many masterminds can do that? But then, I also thought about search. That's another thing. So with our search, the more people that search, the better the search results get because it has an algorithm and it optimizes it. So the more customer we get, the better this gets. And the longer we have been in business, the better this gets. The more customers we get here, the better these get. The longer we've been in business, the better this gets, and the lot, the same here. To have a flywheel, only one thing has to be true for you to have a flywheel, and it is this. For every one customer, the experience must get better. That's what makes it happen. So with a mechanic, up until a point, he is fine. But then, for every one customer, the experience gets worse, right? So if you have a machine where with every new one customer, the experience gets worse, the worst thing you can do is try and get morning customers. That's actually not what you want to do. And every single system in the universe has a threshold limit. For example, a basketball team, I think there's what, five players on the court or something? Speaker 9: Yeah. Sam: Yeah. So imagine if you put 100, is that going to get 20 times better? Probably no one will be able to score a point, so it doesn't work like that. It's probably at its threshold right at five. That's probably where it's really good because people come up with these numbers based on things like this, right? Hm. So this is the main thing you want to think about all the time, how can we ... This is called different things. It's network effects. This is a network effect. A classic example is if one person has one phone, it is totally useless. Imagine the person who bought the first telephone. No one going to call them. They ain't going to call no one. That's an actual joke about network effects because it truly is useless because no one is going to call you, it's just not doing anything. But the more people that have a phone, the more people can call you, the more people you can call, so there is a network effect. No one's like, "Aw, man. Please don't add anymore telephones to the public." But how often do people say that to one-on-one consultants? "Please, man. Don't take on anymore clients. I like the attention you give me." You know what I mean? So this makes sense? Speaker 3: Isn't that what sort of happened to you when you took on that big corporate client in New Zealand? And everybody would come into the offices, and you'd just put your hand up? Sam: Yeah, it sucked. Speaker 3: Yeah. Sam: Yeah, I keep finding the limit all the time, and I just keep trying to think how can I get around this damn thing, and I can figure it out. Just like one-on-ones, when I started up [Upheaval 00:24:13], I used to do one-on-ones in Upheaval. And then, it was fine at first, and then more customers, oh my God, this thing is just out of control. So then, I was like let's just force people onto the Q&A calls. Like Joe Kashurba with his emails, allowing people to do that. You with allowing people to do emails, right? If you allow emails, it gets worse. If you allow one-on-one calls, worse. Speaker 10: It's so easy to change it. One email. One message on the group [crosstalk 00:24:45] Sam: But those things make it worse. If you're doing emails, this is getting worse. If you're doing one-on-one calls, this is getting worse. Speaker 11: What would be a few other features other than Facebook Group, recording, and search and well consulting services that could help that. Sam: Sure. There's tons of things. So some other things we did is like I spoke about there's some masterminds where the teacher of the mastermind will recommend that everyone just be a carbon copy of them. And then, what happens is the opportunity might be good, but then the only thing those people know how to do is create a mastermind teaching other people how to be them. And the only thing their students know how to do is create a mastermind teaching their people how to do them. We have an anti-flywheel here. The thing is going to blow up. One key thing that I had to do to really think about this could get better was the niche. Now, you can do niches within niches. So if Andrew ... Like I used to start off by teaching people how to start a digital marketing consulting business to fund their [SAS 00:26:16] business. That was how narrow my niche is. Who was in it at that point? You were in it, right? And Paul, Paul Ryan was in it too. And you were in it, yeah. So that's literally how narrow it was back then because that's what I was doing, and then it went a bit ... There's only so far I could go in that before I was like, all right, how to do digital marketing, which was mostly how to sell websites to local businesses. Then, there was only so far with that. How to sell digital marketing retainers to local businesses, and then it turned into how to start a digital marketing consulting business. Now, it's getting a bit more broad. And now, it could include SEO, it could include website design and digital marketing for AdWords, Facebook. Now, I'm getting some more stuff in there. And then, it became how to start the consulting business in really any niche. I've made it broader every time. And this time, with Accelerator 2.0, we didn't recommend anyone any specific niche. And then, we get variations like Hunter's, so porn addiction consulting. And then, his one, someone else saw that and did irritable bowel syndrome consulting. Someone else is going to see that and do something else, so that's a flywheel, right? For every new customer who picks a unique niche, we get better. Speaker 12: For gaming addiction? Sam: Yeah. Someone saw that and he got that idea from you, video game addiction. So you can already see the flywheel spinning, and it's just early days. Speaker 13: Just a few days, somebody starting doing alcohol and drug addictions. Sam: There you go. Flywheel. Nowhere near as badass as Amazon's one, but at least it's spinning the right way. And Andrew asked me about this, he was like, "But I'm in accounting, what do I do?" And all of this. I said, "Yeah, but there's niches within that." I was like, "Every different accountant is different." There's tax. There's all sorts of stuff, and then there's the type of business that they might do it for. There's the type of person there are. There's all sorts of stuff, right? So in the beginning, Andrew used to just show people to just do this. Honestly, do this. And he forced people to do the same thing, and he ended up with ... You've got to kind of think about it like just a fish tank sort of thing and your students are in there, these organisms, and he was just producing carbon copy organisms that were all the same, and that's not very good. It'll work for a while, but people who are just carbon copy, they don't enjoy it that much because it's not really them. It's not personalized. That's why kids don't like wearing uniforms. That's why no one wants to just be the same as something else. That's why suburbs with those houses that are just the same, people who live in those places are miserable. Speaker 14: Your [inaudible 00:29:30] Sam: Yeah, they hate those places. But somewhere that has so much variation like in Europe, like how it's all old and there's all this different stuff, or in New York, how there's modern buildings, old buildings, new buildings. There's so much variation there that people like it. And so all of these things create network effects or create a flywheel, and Andrew was able to solve it still within the niche of accounting by stopping forcing all of his people to do the exact same thing. He allowed people the freedom to take the core training and apply a piece of themselves to it to create a unique variation. And the easiest way to think about it is with DNA. You have an equation where you might have X and Y, alright? So let's say this is one element, this is another element. Well, you want to think of pretty much you and your program as this, and then every customer you have as this, and this is program. And what a lot of info businesses do is they take in a unique individual with their program and they force the X over the Y, and they produce an XX. And now, they're just creating XX's everywhere, and all the XX's are created XX's, and it's going to blow up. But with what I did with Accelerator 2.0, and what Andrew's done with his latest program is we're producing X and Y. But every new customer that comes in is a different one, XZ, XBB. So they are taking a strand of this and applying it with them, and creating something, which is impossible that anything else is because every unique individual has their own thing, which they bring. And because there's no two people in the world that share the same DNA, it's impossible for there to be. You see?

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