Recently we’ve entered a period of preparation. Preparation for what you may ask? Growth. You mean you actually have to prepare to grow? Absolutely! To help guide us along this path, our CEO David Schnurman gave us all a copy of Scaling Up: How a Few Companies Make It...and Why the Rest Don’t by Verne Harnish. The book shares tools and techniques for building a superior company.
The book focuses on four major areas companies have to get right in order to ensure success: People, Strategy, Execution, and Cash. From a big picture, it all seems so simple. Of course you need to have the right people working for you, yes you need a strategy, sure flawless execution, and duh… cash! But as I dove into this book I realized it’s much more than the macro perspective.
For one, it’s not just getting the right people. To dive in a little further, it’s about making sure each person knows what he/she is responsible for and holding said person accountable. From there, you have to retain your employees and keep them engaged. How might you ask?
- Help play to their strengths
- Don’t demotivate; de-hassle
- Set clear expectations and give employees a clear line of sight
- Give recognition and show appreciation
Now for strategy, you need to get rid of “strategic planning,” and break it down further to strategic thinking and executive planning. First, you need a vision summary. This summary is a one-pager that communicates key aspects of the company’s vision to employees, customers, investors, and the broader community. Next, is a SWT. You’re thinking I mean SWOT, right? Nope, SWT: strengths, weaknesses, and trends. This analysis is designed to explore broader trends beyond just the industry and geographic area. Finally, there’s the 7 Strata of Strategy.
Which are as follows:
- What words do you want your customers to think of when they think of you?
- Who are your customers, what 3 promises are you making them, and how are you keeping them?
- What’s your brand promise guarantee?
- What is your one-phrase strategy that upset customers but keep you ahead of your competition?
- Three-five activities that fit Michael Porter’s essence of differentiation?
- What’s your X-Factor?
- What are your profit per economic driver and BHAG for the company.
In order to have the proper execution, there are a few things you have to avoid. First, no drama within the organization! Second, you shouldn’t have individuals spending most of their times fixing things that were executed wrong in the first place. How are you going to grow if you keep corrections mistakes from the past? Finally, the company is generating three times less than the industry average. I think that one pretty much speaks for itself, right?
Another major thing you have to do is hold people accountable. After each meeting there has to be a discussion of the WWW. This next acronym will bring you back to your early years of writing, except it has a slightly different meaning. WWW: WHO said they will do WHAT, WHEN.
The final area companies should focus on to grow is cash. One thing that might be scary to those trying to grow is that growth sucks cash. In order to invest in the right people, infrastructure, products you have to pay. In order for you not to go under, it’s important to monitor your cash daily and then see what you have coming in and out within the next 30-90 days.
In order to improve cash and returns, Harnish mentions The Power of One. These are seven financial levers you can pull.
- Price: you can increase the price of your goods and services
- Volume: you can sell more units at the same price
- COGS/Direct Costs: you can reduce the price you pay for raw materials and direct labor
- Operating expenses: reduce your operating expenses
- Account receivable: you can collect from debtors faster
- Inventory/WIP: you can reduce the amount of stock you have on hand
- Accounts payable: you can slow down the payment of creditors
Overall, I’m excited to continue to read Scaling Up. If these few chapters did anything, it reignited my flame for helping Lawline reach new potentials in the months and years to come. I highly, highly recommend any person who wants to be apart of the opulence of a company to read this book.