Flywheel

The Flywheel Model create virtuous cycles through focusing on enhancing customer experience to build trusted relationships via continuous learning from feedback data. This combination of insights into human behaviour and with weight of goodwill for delivering core promises, provides a platform to experiment with tangential opportunities to drive growth across multiple domain problems.

• Concept Origin: Jeff Bezos sketched Amazon's flywheel, also known as the virtuous cycle, in 2001, during the aftermath of the dot-com bubble burst.
• Core Strategy: The flywheel model focuses on enhancing customer experience through low prices, a wide selection, and a great delivery experience. This generates traffic, which is monetized by allowing third-party sellers on the platform, further expanding the selection and reinforcing the cycle.
• Implementation: This strategy transitioned Amazon from an e-commerce company to a platform business model over a decade, with most products sold by third-party stores by 2017-18.
• Financial Strategy: Amazon operates on tight profit margins, reinvesting cash into the business to lower prices and improve customer experience, similar to Costco's model.
• Broader Application: The flywheel concept can be applied to any business by focusing on building momentum and releasing energy to drive growth and success

Context

• Feedback Loops
• Snowball Effect
• Business Models
• Business Strategy

Concept

Initially, allowing the flywheel to spin around takes a lot of force and brute momentum.

As you build up momentum, the flywheel rotates more efficiently.

As it turns out, it also stores energy for later release.

When the flywheel has built momentum, it keeps releasing energy.

At that point, it becomes harder to stop!

Examples

Amazon

The virtuous cycle of the flywheel starts with customer experience, focusing on low prices, a wide selection, and a great delivery experience.

Traffic generated from a positive customer experience is monetized by allowing third parties to sell their products on Amazon, expanding the selection.

Amazon operates efficiently at tight profit margins and passes the cash generated through lower prices to customers.