Welcome to Leadership from the Balcony. My name is Shawn Griesemer with my co-host Justin Dorroh. And each week we bring you a new leadership concept to inspire your growth and effectiveness as a leader in every area of your life.
Today we're exploring the gold standard for developing your organization's business strategy leading to unprecedented growth in Vern Harnish's groundbreaking framework, Scaling Up. We'll briefly review the key elements that are crucial for steering a company toward an envisioned future. Long term goals, short term goals, aligning your organization's activities around those goals and everything in between.
We trust you continue to enjoy this format in today's episode as you join us on the balcony and peer over the railing to gain an expanded leadership perspective.
On today's episode we're going to dive into the book Scaling Up by Vern Harnish, which was a great read for us and it really is this ultimate guide to how to take your business to new heights or scalability. It gives practical strategies, actionable insights for kind of how to take your company to the next level.
What I appreciate about the book is it's more of a roadmap. What does it take to do this effectively? It's not the typical business book. It's very practical. It's more of a toolkit, very actionable in terms of what you can do with the information. Where Harnish starts is kind of four key areas that he calls the four decisions. Those four decisions are people, strategy, execution, and cash.
Before we get into those four decisions, I think it's helpful if we start by looking at the barriers that Harnish lays out that leaders will likely face in scaling their business. The first one being truly leadership barriers. What he does a great job of doing in the book is outlining what are those barriers that leaders commonly face. The first one is founder's dilemma.
Anybody who's been a founder or has worked with a founder, this one is very easy to see. It's their baby. They have birthed this and oftentimes they become one of the greatest pinch points for that scaling. They become that bottleneck. If they are relying too heavily in an organization on founder decision-making, if they are relying on that leader to really learn and to delegate well and so forth, founders oftentimes have a hard time of letting that go.
It's true. And then you lean into what do they do? What does that leader do as the organization's growing in complexity? It's growing in size, in personnel, and in customers and so forth. Are they growing?
Correct.
So, while they may have had what was needed to launch the business, it doesn't mean they have what's needed at the stage that it's at. So, the founder dilemma is the first one. Their own personal leader development is another one. And then cultural alignment. It's one thing for a leader to be able to launch a business and set a culture when they're the only employee. But when you have 50 or 100 employees, culture creep is a real thing. It's inevitable. And do they have the ability to actually bring alignment back in toward the culture that they are seeking to maintain, sustain, to grow, whatever the case may be?
That's right.
So, he gives three basic barriers. You just enumerated leadership barriers. The next two are infrastructure and marketing barriers. On the infrastructure side, I know in the clients we've worked with, this is typically not the strong suit of most founders is building infrastructure. But it really is required to have a scalable infrastructure for sustained growth. And the common infrastructure barriers he enumerates, number one would be technological scalability, outdated or inefficient technology scalability is one of the infrastructure barriers he enumerates. So, whether it's outdated or inefficient technology systems, these really can slow down growth. Companies need to invest in scalable IT solutions in order to support the expansion of the demand that their customers are putting on them.
Second thing, again, not a typical sweet spot for most founders is operational processes. Inconsistent or inefficient processes can impede scalability because nothing's repeatable, nothing's consistent. And that can create problems for customers and employees. So, learning how to streamline and optimize those operations is really essential to accommodate that increased demand.
And then supply chain challenges. Some businesses are going to be more sensitive to this than others. But if you are a business that relies heavily on supply chain, companies have to face these bottlenecks when scaling. They have to ensure there's a robust and flexible supply chain to meet the customer demand in an efficient manner. So that really kind of summarizes infrastructure barriers.
The last one he talks about is marketing barriers. Effective marketing is essential for continuing to attract and retain customers as you're scaling, and some of the marketing issues or barriers that he talks about customer acquisition costs. So as businesses grow, often customer acquisition costs go up, which is challenging. And scaling is where we're scaling at a revenue size that's greater than the cost associated with that acquisition. So, learning how to balance those customer acquisition expenses to revenue generation really is a strategic challenge that marketing efforts have to learn how to meet.
Brand consistency. So, now you're in more markets with more customers and you're wanting that consistent brand, just like you were talking about with culture. Now that brand consistency to the market is something that leaders have to start taking into account.
Then the final one is market expansion. So, how do you continue to expand into new markets, demographics that you've maybe never sold to, and the marketing research that's going to go into solving that problem?
Businesses must continually conduct that thorough market research in order to tailor those marketing strategies appropriately and I think it's important to remember he goes through these barriers. He does a tremendous job of outlining what the barriers are. It doesn't mean that every company has all these barriers. They potentially could have any one of these barriers, two of these barriers, or all three, but you might be a leader that's gone out there and you nail it in marketing.
So, you're scaling really fast from the marketing side of doing customer acquisition and so forth, but your infrastructure is deplorable. It's not, oh, I don't have every one of those problems. The chances are one of these areas is probably an Achilles heel for you and another one may be a strength for you. It's why your business still exists. But don't just hear the three of them and think, oh, I'm doing really well here and it's making up for the others. It's probably not.
So anyway, coming out of those barriers, let's look back now at what are those four decisions that you mentioned earlier.
He lays out the decisions, the four decisions into people, strategy, execution, and cash. So, when he starts talking about people, he's really emphasizing the significance of building high performance teams and he introduces what are called the Rockefeller habits and how successful, you know, again, tipping his hat back to John D. and how successful he was and what did it look like in utilizing people and sets of routines that include clear communication rhythms, setting priorities, fostering accountability.
These habits help to keep teams aligned. They keep the culture at the center, and they help to drive that growth, not just hope for that growth, but really plan and strategize for that growth, which leads into his next decision, which is strategy. And in this section, Harnish really provides a tremendous framework, and that's the thing with this book. There are so many good frameworks. It's almost like a book and a workbook just integrated into it. But it's going through a framework to create in the end, how do you concisely bring all that your strategy has developed into a single page. So, you have in front of you answers that you're looking to give critical questions that you're looking to answer, like what's our core purpose? What's our, our BHAG, our big hairy audacious goal as Jim Collins likes to call it. This section really helps to develop clear, actionable plans for your company's envisioned future.
That's right.
The next decision point is execution and if we're honest, execution is where the rubber meets the road.
That's for sure.
And Harnish really emphasizes the importance of establishing a culture of discipline and accountability. Harnish's vernacular for this system he calls it priority data rhythm, or the PDR system and it's designed to ensure your company is executing its strategy efficiently and then the final piece is cash and how you manage cash. And he makes the comment that cash really is the lifeblood of any business. Any business owner that's ever had a cash flow crunch understands that the need for cash as things are growing is really high.
Very high.
Because you're hiring new people, you're building new systems. There often can be a delay in investing that cash before you see the return in revenue. He gives a lot of insight as well as practices for effective financial management. He introduces some tools called growth cash tools or the power of one to really help businesses manage their cash flow and maximize profitability. And really, throughout the book, Harnish shares case studies, practical examples from successful companies who have implemented the Scaling Up or the Rockefeller Habits as you mentioned earlier. Whether you're a company that's a startup looking to scale, or you are already established and you're just aiming for that exponential growth, Scaling Up really does offer valuable insights to navigate the challenges of expansion.
You know, there are a lot of books that seek to lay out frameworks and there are lots of different methodologies to get at a lot of this information. We just think Scaling Up does a really good job in book form of communicating that, aligning it, building on top of it.
We have a blog on our website that goes through a lot of those different models. If you want to check it out, we'll link to it in the show notes. But this is more than just a book to read on the concepts. It really is a blueprint for businesses that are looking to scale. And it not only helps you in developing the strategy, but actually implementing it and installing it in your business.
So, we highly recommend this book for companies, both in the early stages, as well as relatively developed organizations that have not yet put it into a reproducible system. We do recommend this. So check it out. Scaling Up by Vern Harnisch.
We appreciate you tuning in and hope you enjoyed the show. Before you take off, do us a quick favor. Please subscribe and leave a review on Apple Podcasts or your favorite podcast platform. If you try our Leadership Challenge, send us an email and let us know how it goes. To stay informed, sign up for our newsletter in the show notes.
We look forward to seeing you again on the balcony.
