Introduction to The Value Flywheel Effect

Our book,'The Value Flywheel Effect', published by IT Revolution Press is based on the value flywheel concept in the real world, we have discovered during our many years of working.

Aug 22, 2024

The Value Flywheel Effect Concept

Things start to work well when you join business and technology strategy. We, David Anderson, Mark McCann and Michael O'Reilly, developed the Value Flywheel Effect concept to describe how to embrace strategic thinking in a company.

Jim Collins has also written about the flywheel effect. But, in our version, we see this happening within the concept of value and the value of our work. There are things you need to put in place and techniques you need to leverage to enable the right mindset for value. We are constantly iterating and evolving this concept. This distils down and captures all the things we've been working on. It's a distillation of what we have held dear for quite some time since we worked together at Liberty Mutual. Also, it's incremental. You continuously go around the flywheel to build up momentum. And you move faster and more efficiently to where you're trying to go.

Why is it a flywheel and not a linear thing? It's because you keep going around. So you don't spend one year going around, and then you're done. You continually go around. Because when you go around it once, the circumstances will change. The value flywheel effect is intentional because the flywheel builds momentum as things go faster.

Photo by Christian Bass on Unsplash.com

The four phases of the Value Flywheel

There are 4 phases in the Value Flywheel. Phase one is 'clarity of purpose', Phase two is 'challenge', and Phase three is 'next best action'. And phase four is 'long term value'. We will dive deep into these in our next articles and episodes. But for now, we will quickly summarise them.

1. Clarity of Purpose

So the first phase is 'clarity of purpose'. Let's talk about getting this work done in a company similar to what we did when we joined Liberty Mutual.

One thing most organisations don't have a problem with is enthusiasm for what they've been doing, what they could be doing and what is the right thing to be doing.

Clarity of purpose is a very difficult thing to establish. Business and IT must consider 'What is our mission'? How can we add value? What is it we want to do? There are many different ways to establish clarity of purpose and situational awareness. Does everybody understand it? Has everyone bought into it? I think the first phase is super important. In your organisations, how do you prioritise? How do you decide on what you should do over something else? How do we establish that clarity of purpose?

It's also about getting aligned to deliver business value. And trying to clarify what your clarity of purpose is. Or what your North Star is. And what your key input metrics are. They are valuable conversations to have. They won't be perfect interactions, but they spark the thoughts and conversations you must have with teams. And it doesn't need to be perfect. It needs to start getting alignment and people pointing in the right direction together.

Your purpose is not to write code

There are two interesting things to consider.

It's not what your boss says! Your boss should explain what the clarity purpose is, but they may not. So don't blindly follow what your boss says.
And it is interesting for an engineer or developer to hear that their purpose is not to write code! Don't come to work to write code. Come to work to achieve clarity of purpose for the team and the company. You may do that by writing code. But writing code is not your job. Writing code is what your company or team does. It's quite a subtle thing. But we've met developers in the past who feel happy and productive when they are writing code. But that's not why they should be here. The goal for an engineer, leader or manager is to know what they are working on. And how it aligns with the value being delivered for the company. How does it align with the company mission? And how does it deliver an impact? Just answering those questions is a worthwhile endeavour for any individual or team. And to understand if what you're doing has an impact or not.

2. Challenge

The first two phases are linked to business strategy. Challenge does not argue with Clarity of Purpose. Once you're clear on the clarity of purpose, you need to focus on how to achieve it. That's when you need a healthy environment for embracing strategic thinking. Challenge is not fighting with someone. It's about thinking and challenging ideas.

It also acts as a form of verification. We've decided on the priorities, and these are the things that we're talking about. But what's the best way to go about it? The best way is by having a conversation to look at the landscape and evaluate our position. Are we being realistic? Good conversation and rationale form the basis of this phase.

Similarly, do we have an environment that invites challenges? You need to make sure that socio-technical systems are set up. And challenge is invited and not punished. It's also a diversity thing. Is everyone getting a chance to challenge? Are we bringing in experts? Who should we be talking to? Where are all the voices?

Wardley Mapping is a powerful technique to achieve this because it facilitates challenging the idea and not the person. You're not challenging the individual telling the story; you're challenging the approach. It's healthy, and it promotes psychological safety, which is well understood within the Wardley Mapping community.

3. Next best action

The third phase is the next best action. And this is about having a bias for action. What can you do to prove your direction quickly? This is where Serverless and the serverless first mindset comes in. And we are moving into the tech that drives business results.

We are assessing the rate of turn. How quickly can you make a change? And how quickly can you get change into the hands of real users and customers? Or how quickly can you have an impact?

Sometimes you have good priorities, you've challenged, and you know what you want to do. But then it can get locked up in technical bureaucracy. What is the quickest path to getting something in front of a customer? Are we being efficient and effective?

We're big fans of the serverless paradigm. Because it helps us to understand how to get there. And the next best thing we can do is to action what we've discussed in the Challenge and Clarity of Purpose phases.

It's also about removing impediments to fast flow. To quickly get an idea into the hands of real users to get valid feedback. And to understand the blockers and what we can do to improve. Or remove those inertia barriers and navigate future challenges.

The 'Next best action' phase drives transformation within organisations. When you add in DORA and deploy quickly, you've got to make changes and embrace a modern cloud journey and serverless. It's a very important phase for the organisation to embrace. We get into practical tools applied in more detail in The Value Flywheel Effect book. The cloud aspect of this is important. If you've got an urgent business problem, you don't want to be distracted by low-level stuff.

4. Long-term value

The fourth phase is long-term value. It's about bringing in architectural and sustainability standards. How can you ensure you're not building poor quality products which will not last for the business And how can you go fast without burdening yourself with lots of technical debt? Or how can you go fast and sustainably while delivering a well-architected solution? With capabilities that enable the flywheel to turn faster and don't clog everything up and slow you down.
And when you achieve that, you're back into clarity of purpose again. And so the value flywheel keeps turning.

The Value Flywheel Effect is Continuous Improvement

What we've found by going through these phases is that each time you get better at them. You keep revisiting, and you keep improving. So there's a constant evolutionary improvement. Continuous improvement.

As you turn the flywheel, you create more space for innovation and emerging value. You are putting building blocks in place and getting the flywheel to turn, so you will start to spot where you should invest next. What is the next best action? Or what is the right thing to do for long-term value? It becomes a good muscle that you can exercise.

It's also healthy to continue to talk about these things as you bring the value flywheel to life in your company. So you're not shifting the goalposts, etc.

Make space for your innovation concept. Most well-run and mature organisations in this space are good at that. The value flywheel helps you to create it.