What is the Flywheel Effect?

Building a company from scratch often feels like pushing a massive, heavy wheel. You push with all your might, and it moves an inch. You push again, and it moves two inches. It is exhausting, slow, and discouraging. But if you keep pushing in the same direction, eventually the wheel starts to turn on its own momentum. This is the Flywheel Effect.

The Flywheel Effect is a concept where small wins accumulate over time, creating momentum that keeps a business growing. Popularized by Jim Collins, it argues that great companies are not built by a single defining action or a lucky break. They are built by a series of good decisions that compound upon one another.

For a founder, this is a mental model for sustainable growth. It shifts your focus from chasing the next quick win to building a system that feeds itself.

To understand the flywheel, you have to visualize a closed loop system. In a standard business process, you put energy in, you get a result out, and then you stop. In a flywheel, the result becomes the energy for the next cycle.

The most famous example is Amazon. Their flywheel looks like this:

• Lower prices lead to more customer visits.
• More customers attract more third party sellers.
• More sellers expand the store selection and distribution.
• Better selection and distribution decrease fixed costs per unit.
• Lower costs allow Amazon to lower prices further.

The cycle repeats. Each step feeds the next. The system gets faster and stronger with every rotation, not because they are working harder, but because the physics of the business are aligned.

Most startups are obsessed with the Sales Funnel. This is a mistake.

A funnel is linear. You pour leads in the top, and customers drop out the bottom. Once the customer buys, the process ends. To get the next dollar, you have to go back to the top of the funnel and start all over again. It requires a constant, exhausting input of fresh energy.

A flywheel is circular. It assumes that the customer coming out of the bottom should provide the energy to bring new people into the top. This happens through referrals, data network effects, or brand reputation.

If you treat your business like a funnel, you are on a treadmill. If you treat it like a flywheel, you are building an engine.

There is a catch. The flywheel is incredibly heavy. In the early days, getting it to move at all requires a disproportionate amount of effort for very little return.

This is the “trough of sorrow” where many founders quit. You are doing all the right things, but the momentum has not kicked in yet. You might be writing blog posts that no one reads or building features that only ten people use.

You have to have the discipline to keep pushing. You cannot change direction every week. If you push the wheel north on Monday and south on Tuesday, the wheel never moves. The Flywheel Effect only works if you apply consistent pressure in a single direction over a long period of time.

If your flywheel is not spinning, you likely have friction in the system.

• Is your product difficult to share?
• Does your customer support team treat users like a nuisance?
• Is your pricing model confusing?

Every piece of friction acts as a brake on the wheel. Your job as a leader is to find these brakes and remove them. You want to create a zero friction environment where the output of one happy customer naturally leads to the input of the next.