How to Scale Up Your Business
The Scaling Up Methodology works regardless of industry. Scaling Up can and will bring results to those who commit to doing the work. And Scaling Up is just as effective with non-profits as for-profit companies.
What is Scaling Up?
Scaling Up is more than just another fad business book or business “theory.” Scaling Up is a “blueprint for building a growth company.” In his book, Scaling Up: How a Few Companies Make It…and Why the Rest Don’t (2015), Verne Harnish shares how the fastest-growing companies drive their growth. Harnish shares a methodology that has iteratively improved over 30 years of advising countless CEOs and executives.
Verne Harnish authored Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Growing Firm (2002), which is the core curriculum for the Entrepreneurial Master’s Program (EMP) at the Massachusetts Institute of Technology (MIT). Scaling Up is often referred to as Rockefeller Habits 2.0. The Scaling Up Methodology focuses on strengthening the following four main areas of a business: People, Strategy, Execution, and Cash.
Terms to Know
Big Hairy Audacious Goal (BHAG®): Although silly-sounding, this is an actual term to refer to ambitious long-term goals (along the lines of 10 to 25 years) used to motivate all people within an organization to drive success. BHAG® referenced from Built to Last by Jim Collins and Jerry Porras.
Blue Ocean: An untapped market space with zero competition — essentially every business’ ideal environment. Read Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne.
Business Operating System (BOS): A framework for how to run a company. A business operating system is a model used to run a business that, when executed properly, can help you rapidly grow. Think of a business operating system as the “playbook” that drives growth by helping ensure your People work together in pursuit of the objectives. Your business operating system defines a company’s mission, vision, values, strategy, processes, and action plans.
Without a business operating system, a team will likely waste valuable time, talent, energy, and resources. A business operating system helps a company focus on building the required commitment, discipline, and accountability to succeed.
I believe Scaling Up is one of the most comprehensive business operating systems available.
Economic Moats: Was popularized by Warren Buffett and refers to a business’s ability to maintain a competitive advantage over its competitors that protect long-term market share and profits.
Four Decisions® Methodology: The core components of the Scaling Up framework which include business decisions surrounding People, Strategy, Execution, and Cash.
Gazelles: Just as the animal is agile and makes leaps and bounds, the same applies to companies. A “gazelle” in the business sense is a company with minimum base revenue of $100,000 that doubles revenue every four years or fewer. Read Mastering the Rockefeller Habits by Verne Harnish.
Meeting Rhythm: The cadence for meetings held within a company that specifically points out meeting frequency, length, agenda topics, and attendees.
Red Ocean: A saturated market space with heavy competition. Cut-throat players fight for decreasing market share and muddy the waters with blood.
The Anatomy of Scaling Up
Scaling Up helps the CEO and their organization align around a clear growth plan. Scaling Up focuses on the Four Decisions® methodology that every company must get right to scale: People, Strategy, Execution, and Cash. Scaling Up provides several one-page resources, including the Rockefeller Habits Checklist(™) and the One-Page Strategic Plan.
By adopting the Scaling Up methodology, a company can enhance their “economic moats” - their competitive positioning.
Working with a Scaling Up Coach / Consultant helps shape discipline and accountability.
People Decisions
Having the right people in the right seats is imperative to scale effectively; otherwise, the business will face constant resistance. Consider these questions to determine whether you have the best people who contribute to the company’s success (rather than create internal dysfunction):
- Are stakeholders (your People, Customers, and Shareholders) happy and engaged in the business?
- Is there unnecessary friction and drama in the relationships in your business?
- Would you enthusiastically rehire your People? Do you have the right People doing the right things right?
- Is your culture one of Radical Candor, or does your culture avoid constructive conflict?
- Do each of your Customers reflect your target persona - your ideal Customer?
Focusing on improving your People decisions results in less friction, less drama, and freed up time, energy, and resources.
Strategy Decisions
Scaling businesses face challenges when goals are not clear. How can everyone work together towards the same goal when siloed departments exist or milestones do not actually contribute to the big picture? The time to crystallize your Due North is now:
- Can you and your People state your strategy simply - and is your strategy driving sustainable growth in revenue and gross margins?
- Is everyone crystal clear about your strategy?
- Is your business growing at the desired speed?
Execution Decisions
Proper execution requires getting the Priority, Data/Metrics, and Meeting Rhythms right. Your People must be clear about the goals, key performance indicators (KPIs), feedback from your employee team members, as well as a regular cadence or rhythm of daily, weekly, monthly, and quarterly meetings to synchronize the team around strategic thinking and execution planning. There is no room for complacency. The main thing to think about here is:
- Are all processes running without drama and driving industry-leading profitability?
Cash Decisions
Cash flow and reserves help companies better weather storms and maintain their growth trajectory. Cash flow is important because it provides liquidity. Liquidity helps secure financing:
- Do you have consistent sources of cash, ideally generated internally, to fuel the growth of your business?
- Do you know how long it takes to earn back every dollar spent?
Growing companies “suck up cash.” The Cash Acceleration Strategies tool can help identify ways to accelerate the cash’s movement through the business. The Power of One tool helps identify the seven “levers” or variables that drive the most cash flow.
Resources for Scaling Up
- 7 Strata of Strategy
Your worksheet to create a killer business strategy based on the 7 Strata of Strategy outlined in Scaling Up. - Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne
An influential resource for business strategy planning that has sold over 4 million copies. - Rockefeller Habits Checklist - A one-page summary of how to implement each of the ten Rockefeller Habits.
- Scaling Up by Verne Harnish
This book builds off of Verne Harnish’s first book The Rockefeller Habits. It goes in-depth into the necessary steps that result in business growth. This is a great place to start if you are struggling to take your business to the next level. - The Function Accountability Chart (FACe)
As part of the People Decision, this chart lays out each person’s role and responsibilities, plus KPIs that measure their contribution to overall goals. - The Process Accountability Chart (PACe)
Processes are just as valuable as output. Ensure that processes are running smoothly by assigning accountability and measuring relevant KPIs. - The One Page Vision Summary
Helps to guide you in creating a vision, a compass if you will, for your business. - Work with a Certified Scaling Up Coach (Rainmaker Group)
As a certified Scaling Up Coach, we can work together to implement its principles within your organization.
Why You Need a Scaling Up Coach
Those seeking to scale their business successfully should follow a growth strategy. Shape your economic moats through a powerful business operating system.
CEOs and entrepreneurs of closely-held companies engage me because of my experience and data-driven approach. My Clients seek to scale their business and wish to deploy a performance platform that helps them lead more effectively and drive sustainable, profitable growth. I bring an experienced, outside perspective that will be instrumental in identifying blind spots as well as shaping accountability regarding various metrics that measure your progress.
Over the past twenty-one years, I have been privileged to work with companies preparing for sale.