Speed, Value, and the Power of the Innovation Flywheel

• Three quarters of leading digital businesses say that their governance model maximizes team empowerment.
• Twice as many of their teams have end-to-end responsibility for product and business outcomes as do the teams at legacy incumbents, and the majority of teams have full budget ownership.
• The model also increases the chances of building the next “game-changing” product by 60%. Game-changing products are ones that radically transform the business and provide significant commercial value. (See Exhibit 3.)
• And companies with an empowerment leadership model tend to go bold—trusting their teams with an average $200,000 more budget per product. These investments pay off with 50% greater revenue growth per year.

While this approach isn’t appropriate for every company, the principles are useful guideposts for any incumbent organization looking to evolve. Each company’s unique contextual circumstances, including leadership, culture, talent, and technological orientation, will dictate how best to apply these elements.

A New Transformation Pathway

Thousands of companies over the past decade have launched full-scale digital transformation initiatives, most of which have proven notoriously difficult to pull off. In fact, a separate BCG study found that nearly 76% of digital transformation initiatives fail to achieve their stated objectives.

The flywheel approach offers an alternative path. Its transformative potential extends to every critical element of the enterprise, including culture and talent, organizational design, ways of working, and technology. To get started, organizations should follow three practical guidelines.

Start small (but think big). Transformation efforts typically kick off big, bold programs with fanfare and a heavy investment. Companies should start instead by picking one problem—a point of customer friction or operational inefficiency, for example—with obvious potential for unlocking value. They should then assemble a multidisciplinary flywheel team and task it with solving the problem in a novel way. They should also empower its members to follow the playbook, clearing the runway for the team to build and launch a product and create business impact as quickly as possible.

Demonstrate value to leadership. Flywheel teams must build something useful quickly and get it into the hands of users so the team can get feedback, adjust, and make improvements. The leadership should therefore give flywheel teams a license to start testing their concepts with customers immediately. This creates two sources of momentum: the team can quickly demonstrate business impact, and the leadership can witness and support the success of the flywheel model.

Build on success to scale across the organization. The pilot product team can serve as proof of the flywheel concept. Once the value is understood, leaders can empower other flywheel teams to build products based on the same approach. And they can build management systems, reporting mechanisms, and a portfolio of technology services to support the flywheel. In this way, the first team accelerates organizational learning about what works and helps eliminate the barriers to scaling the flywheel operating model across the entire enterprise.

The authors would like to thank Marc Roman Franke and Patrick Laske for their valuable contributions to this article.