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Coffee with Verne: Top 12 Takeaways from the Scaling Up Q&A

by Verne Harnish

7 minute read

    The first cohort for Scaling Up Master Business Course 2.0 filled up so quickly, and we had far more applications than spaces available. So I’m excited to announce that we have decided to open up applications for a second cohort.

    I know many business leaders who are interested to apply for the course may still have some questions. That’s why, last Thursday, I decided to join Growth Institute for a live Facebook session to answer your most pressing questions about the methodology.

    If you missed your chance to join me live, don’t worry. Chances are, one of the business leaders there, asked the same questions you’re dealing with. So in this article, I’m recapping the biggest questions and most important takeaways from the Q&A session.

    [Question 1] How often does the One-Page Strategic Plan (OPSP) need updating?
    At least annually. Quarterly is the usual rhythm. A lot of companies are now updating the OPSP every two months. If you’re growing single digits a year, you're probably okay with just the annual plan—and that's the minimum. If you're running at 10 to 15% growth, you really need to look at it quarterly. And if you're growing at something like 50-100% a year, you really need to look at it at least every two months.

    [Question 2] How do you determine where to start with this scaling up process?
    So, there are four main areas to look at: People, Strategy, Execution, and Cash. If it looks like you're going to run out of cash this Friday, then you better get focused on cash. Or if you’re missing some key players on the team or have run into some partner issues, then you need to address those first or you won’t have the emotional energy to deal with the rest.

    To help you figure out with your team which area you need to focus on next, we've also got some assessment tools.

    [Question 3] Is there anything between being a startup and scaling up. Because I want to scale up but I don’t feel like I’m ready. I’m still working a lot in the business.
    I wish there was something between startup and scale up, but there isn’t. You can just decide to be a small business. We know that 96% of small businesses in the United States are under a million in revenue.

    But when you decide you really want to scale, and that is have decent annual growth of 10-20% or more, then that’s when our Scaling Up ideas really start to kick in.

    [Question 4] So how does the company know when they're ready to scale?Fblive_quote1
    First, the best indicator is your market. If you have a lot of people wanting something from you, and you're just trying to run to keep up, then it’s time to scale up. If you don’t, you will either leave money on the table or your organization will burn out.

    Second, you've got to be mentally prepared to scale. Because there are a lot of additional challenges that come with scaling up.

    Third, if you’re not scaling and you want to, then you need to go in and closely examine the four areas, People, Strategy, Execution, and Cash. All four need to be in place to handle the scaling and get yourself prepared to grow.

    [Question 5] You talked about being mentally prepared. So how do you scale up without actually burning out?
    Well, that's why this I wrote the book, Scaling Up. Because I saw folks working 60 to 80-hour workweek just spinning the wheels. In the opening chapter of my book, I talk about this guy, Alan Rudy, who was working these long hours. Then, he used our Scaling Up tools and was able to basically run the company one day a week while still allowing him to do things out in the marketplace.

    [Question 6] How do we create a performance culture to drive growth?
    The fundamentals begin with the 10 Rockefeller Habits. I like to use the analogy of a thermostat. Imagine if you had a heating air conditioning system without a thermostat. It would just run wild, right? We would be uncomfortable, and it would waste a lot of energy and money. Well, this describes a lot of people's companies. They waste a lot of money and energy, not much gets done, and everyone is just uncomfortable in the end.

    Today, we have dashboarding tools that can act like your company’s thermostat so you’ll always know how your company is performing. So to me, the thermostat is our best analogy, and that's what the Rockefeller habits mirror.

    [Question 7] So other than dashboards and visibility, do you have a must-have list when you're looking to scale?
    Well, that's why I created the original 10 Rockefeller Habits checklist. They aren’t in any particular order, except for the first one. By the way, you don't have to have any of these habits in place. But if you don’t, get ready to waste a lot of time and energy having to work 80-hour workweeks, and still not get the kind of outcomes or results that you're looking for!

    [Question 8] Do you have any insights on how to create good metrics?
    A couple of things that come to mind. First, I'm a big fan of the book, “Moneyball”. When John Radlett applied the “Moneyball” concept to his call center business, he discovers that his call centers with the lowest quality score actually had the highest customer retention, while the centers with the highest quality score actually had the lowest customer retention.

    After John figured out what his moneyball statistic was, he began to drive on that single statistic. The result? His customer retention went up, his employee retention broke industry record levels by a factor of 10, and performance was five times higher than the industry average in terms of his profitability.

    So first, is just finding that right measure. And that's just looking at a lot of correlations which again, machine learning can help you do. Once you do that, then stay laser-focused on it.

    [Question 9] Are there effective ways to get your business partner to commit and buy into the scaling-up methods and practices?
    Rather than hand the book to a partner, pull out a few pages or chapters. I recommend getting them to read the “Barriers” chapter first. It’s a good, fun read that gets into the spirit of what Scaling Up is about. Then, have them read the “Core” chapter because it is core to the business. Then, if they want to read more, have them ready the execution section. This way will be much less daunting than being given a whole book to read.

    [Question 10] Our daily huddles seem like a drag race where speed is a priority. Is this correct, or should it be more like a relaxed walk in the park?


    It should align with your culture. If you’re a fast-paced working culture, then that will be reflected in your meeting style. If you're more of a relaxed kind of laid-back culture, then obviously that's going to be felt in your meetings.

    Generally, daily huddles should be no more than 15 minutes. Each person in the daily huddle should not take more than a minute to give their updates. In the beginning, it might feel rough because people take too long to explain things. But once it's up to speed and everyone gets the rhythm, it’s easy to stay on time. To an outsider, it might look like a horse race. To people inside, it's a nice pace.

    [Question 11] What's the number one thing that blocks companies from scaling up?
    There's not one. That's why we created the four main categories: people, strategy, execution and cash.

    Bill Gross of Idealab wanted to see which one of those four was more important. His research came back with an interesting conclusion that it's like a table with four legs. All four are equal and if you're missing one of those legs, it can stand but it will be wobbly.

    [Question 12] Is it possible to scale up a business with seasonal swing?
    Yes, you can. A lot of companies would love to have this challenge, because it means you can spend six months preparing, then six months of executing. So businesses with seasonal swing allow you to take a rest.

    Like this guy I know, Harrison, he scaled his company to a billion dollars. His company would experience a seasonal swing where the first three quarters of the year would require them to continually push for revenue, but the fourth quarter would be slow. Harrison used the time in the slower last quarter to let the system catch up.

    Another thing you could do is acquire a business that is counter-cyclical so you can smooth out the flows. But I know plenty of folks with seasonal businesses who embrace the cycle. They make a year's worth of revenue in six months, then enjoy the time off. So seasonal swings can be a blessing.

    That’s all the questions I was able to cover in the 30-minute session. If you would like to learn more about any of the concepts I talked about here, check out the articles we have on these topics by following the links in the post. 

    If you really want to get deeper into implementing these Scaling Up methodologies, I suggest checking out the Scaling Up Master Business Course 2.0.

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    Verne Harnish

    Verne Harnish

    Verne Harnish is founder of the world-renowned Entrepreneurs' Organization (EO) and chaired for fifteen years EO's premiere CEO program, the "Birthing of Giants" and WEO's "Advanced Business" executive program both held at MIT.

    Founder and CEO of Gazelles, a global executive education and coaching company with over 150 coaching partners on six continents, Verne has spent the past three decades helping companies scale-up.

    The "Growth Guy" syndicated columnist, he's also the Venture columnist for FORTUNE magazine. He’s the author of Scaling Up (Rockefeller Habits 2.0); Mastering the Rockefeller Habits; and along with the editors of Fortune, authored "The Greatest Business Decisions of All Times", for which Jim Collins wrote the foreword.

    Verne also chairs FORTUNE Magazine's annual Leadership and Growth Summits and serves on several boards including chairman of The Riordan Clinic and the newly launched Geoversity.

    Nombrado por la revista FORTUNE Small Business como uno de los “Top 10 Minds in Small Business”, empresario, autor y columnista de la revista FORTUNE, Verne Harnish, es un consultor de gestión muy buscado, especializada en liderazgo, planificación estratégica y el crecimiento del negocio. Su libro, “Dominando los Hábitos de Rockefeller: qué debe hacer para acrecentar el valor de su empresa en rápido crecimiento” ha sido traducido al español, chino, japonés y coreano. Verne es también el fundador de EO, la Organización de Empresarios (http://www.eonetwork.org), y el CEO de Gazelles Inc.