"If you want to teach people a new way of thinking, don’t bother trying to teach them. Instead give them a tool, the use of which will lead to new ways of thinking."
When starting a business, most entrepreneurs dream of the day when everything falls into place and the business really starts to take off. This is the point when all the blood, sweat and tears it takes to get a business off the ground start to make sense.
Having got to the top of this mountain, the next mountain now looms. You can either stay at this summit or choose a higher mountain, i.e. scale the business.
So how do you scale up without crashing and burning?
John Warrillow, founder of the Sellability Score and author of The Automatic Customer says “Scaling Up is a blueprint for building a growth company. With this book, Verne Harnish has pulled back the curtain on how the fastest-growing companies in the world fuel their growth. Scaling Up gives you an insider’s view into the inner workings of the most successful companies on earth. A must-read for an ambitious entrepreneur”.
The Big Idea
Stop Doing ‘Stuff’, Focus on Strategy
"Senior leaders know they have succeeded in building an organization that can scale – and is fun to run – when they are they are the dumbest people in the room"
Building a business requires top management to be focused on strategy not operations. As soon as this function is delegated, senior leaders can then concentrate on the strategic thinking and planning that is required to take their company to the top.
This means that the senior team will be required to focus on their market, i.e. find out what really matters to your customers then find a way to deliver this value whilst differentiating yourself from the competition.
Ongoing and never-ending market research will give the senior team the valuable data needed to guide decisions and be ready to capitalise on opportunities when they present themselves.
Insight #1
Hire ‘A’ Players
"Scaling up a business requires both visionary leadership and great managers."
The main job of the head of the company is to make sure she has the right people doing the right things right. Jim Collins, in his book How the Mighty Fall, And Why Some Companies Never Give In shares that executives with good companies tend to share their titles, whereas executives at strong and great companies share what their accountabilities are in a very measurable fashion, e.g. ‘I am accountable for driving revenue into this company’.
Attracting and hiring A players at all levels of the organization is critical to the successful scaling up of a business. A Job Scorecard which details a person’s purpose for the job (i.e. the specific and measurable outcomes that a potential hire needs to accomplish) is the specific tool that will help you hire these A players.
Once you’ve hired the A players, “periodic one-on-one coaching (rather than superior technical knowledge) ranks as the key to being a successful leader.”
At the end of a training/coaching session, ask “What is the one takeaway that you are going to commit yourself to working on?”
The five main activities of successful managers can therefore be summarised as:
- Help people play to their strengths.
- Don’t demotivate, rather “dehassle” i.e. remove energy drains (both people and processes).
- Set clear expectations, and give employees a clear line of sight.
- Give recognition, and show appreciation.
- Hire fewer people, but pay them more.
Insight #2
Keep Your Eyes on Cashflow
"Constantly improving the cashflow of the company – and better understanding how cash moves through the business – is a powerful driver for improving the firm as a whole"
Get into the habit of having your available cash reported daily by the CFO, with a short explanation of why it changed in the last 24 hours, and chart it against accounts receivable (AR) and accounts payable (AP) weekly. This helps to keep cash top of mind.
There are three general categories where improvements can be made:
- Shorten cycle times, i.e. get paid sooner.
- Eliminate mistakes and make sure customers are satisfied with your product or service and are therefore happy to pay invoices on time.
- Change the business model. For example, Dell structured their business model to collect full payments in advance before the production and delivery cycle, meaning the company ended up generating cash instead of consuming it.
There are seven main ways you can improve cash and returns in your business:
- Increase the price of your goods and services.
- Sell more units at the same price.
- Reduce the price you pay for raw materials and direct labour.
- Reduce operating costs.
- Collect from your debtors faster.
- Reduce the amount of stock you have on hand.
- Slow down the payment of creditors.
When Verne Harnish was asked what distinguishes the business leaders who make it to greatness, his answer was “Success belongs to those who have these two attributes; an insatiable desire to learn and an unquenchable bias for action”.
So keep on learning and acting as you scale up and success is inevitable.
See you at the top!
