Verne Harnish has helped around 40,000 companies scale up. He knows business and he’s made a big impact on my life, so it was a pleasure to chat to him for this week’s podcast.
Verne is the founder of the world-renowned Entrepreneurs’ Organization (EO), heads up an international coaching organisation and hosts an international summit, plus he’s written books Mastering the Rockefeller Habits and Scaling Up which are must-reads for any business owner.
In our chat Verne talks about how lonely it can get for entrepreneurs, offers advice on scaling-up and how identifying constraints can actually help a company grow. It’s good stuff. Enjoy!
On today’s podcast:
- On a mission to support entrepreneurs
- The number one barrier to scaling up
- Most common challenges
- The theory of constraints
- Taking advantage of market timing
- Verne’s book recommendations
On a mission to support entrepreneurs
The mid-market companies ($10 million-$1 billion) are really the ones that drive most of the innovation and jobs around the planet. They’re critical to economic growth and ultimately to political and economic freedom. This is why Verne finds it important to support them.
The number one barrier to scaling up is knowledge. When Verne founded the Young Entrepreneurs’ Organization (YEO, now known as the Entrepreneurs’ Organization) the idea was to:
- Develop tools and techniques that make it easier for company leaders to scale up
- Support entrepreneurs. It can be a really lonely job at the top.
Most common challenges scaleups face
There is a unique set of scaleup challenges that Verne outlines in one of the chapters in Scaling Up. He calls these “The Three Barriers”:
- Leadership development. Verne and his team worked hard to make it easy for people to get practical education on sales, marketing, negotiations, hiring and so on. They bundled up together an MBD (Master of Business Dynamics) which is a nice augment to anyone with an MBA.
- Scalable infrastructure. What is the practical use of AI? It’s the number one topic right now.
- A robust marketing function. You need marketing not just to attract new clients, but to attract talent, attention in the marketplace and investors.
The theory of constraints
One of Verne’s key suggestions is to always focus on one thing at a time. Identify the main thing that’s going to give you the most leverage today/this week/this quarter/this year. This is part of the idea of the sprint process in Agile/Scrum methodology. You need to figure out at the beginning of each week what is the key thing you need to get done that week.
Another suggestion is to identify your key constraint. Eliyahu M. Goldratt wrote more about this in his book “The Goal”, which is in Verne’s opinion the most important business book ever written. Goldratt described the theory of constraints. The idea is to put your resources and effort anywhere else but in your constraint.
The number one constraint businesses face right now is finding and hiring great talent. Verne has three recommendations for overcoming this obstacle:
- Most scaleups could double/triple/even quadruple their revenue without adding an additional person if they would just clean up their processes.
- Make sure you have a consistent talent pool to pull from.
- Try and stop turnover.
Market timing and book recommendations
At Idealab, Bill Gross researched the four essential scaling up areas (people, strategy, execution and cash), trying to determine which of these is the most important one. He found out two interesting things:
- All four are essentially equal.
- There is a fifth one that is even more important than the others: market timing. Understand what the current trends are, not only in your industry but in general, and try to take advantage of them and apply them to your particular scaleup.
What books would Verne recommend?
- The Goal: A Process of Ongoing Improvement by Eliyahu M. Goldratt
- Great by Choice: Uncertainty, Chaos, and Luck–Why Some Thrive Despite Them All by Jim Collins and Morten T. Hansen
- The Five Dysfunctions of a Team: A Leadership Fable by Patrick Lencioni
- Hidden Champions of the Twenty-First Century: The Success Strategies of Unknown World Market Leaders by Hermann Simon
- Who by Geoff Smart and Randy Street
- Topgrading, 3rd Edition: The Proven Hiring and Promoting Method That Turbocharges Company Performance by Bradford D. Smart
- Prediction Machines: The Simple Economics of Artificial Intelligence by Ajay Agrawal, Joshua Gans and Avi Goldfarb
Uncommon Service: How to Win by Putting Customers at the Core of Your Business by Frances Frei and Anne Morriss