Learnings from a rotisserie fueled flywheel
This is similar to the Costco founder's now infamous conviction around the $1.50 hot dog. When new’ish CEO Craig Jelinek went to former CEO and Costco founder, Jim Sinegal, complaining that the hot dog price needed to increase because the company was losing money on it, the founder replied, “If you raise the <expletive> hot dog, I will kill you. Figure it out.”
To figure it out, aka manage costs, this behemoth retailer built their own hot dog factory to supply the more than 100 million hot dogs sold per year. They also moved upstream into the chicken business, building out an entire poultry complex just to supply their need for more than 85 million rotisserie chickens per year.
That is conviction about a proven tactic in service of a larger strategy, one part of a system. The tendency of a Costco shopper is to do large infrequent trips so the rotisserie chicken is a bet on getting people in the door more often and when folks are in the door....well, you know how it goes at Costco. That $2-3 loss on the rotisserie chicken is more than made up for when the shopper walks out with a $100+ basket of other items.
This reminds me of the Amazon flywheel, a mega theme of the book ‘Amazon Unbound’. Bezos' core conviction was that customers want lower prices and more selection, and that those two expectations would not change over time. So the Amazon flywheel goes like this:
