Top 5 Things CEO’s Should Know from the “Scaling Up” Book in Order to Grow Their Business
On a gloomy March morning last year, I was on a plane bound for New York. I was just launching my business coaching & advising practice and had meetings with CEOs and public company investors from my network. One was with a CEO of a $1.5B company, and I was feeling intimidated since I had never run a company that large. Surely the issues he confronted would be of such importance that I would not be able to relate, let alone act as a coach and advisor to him. As I flew that morning, I was deeply engrossed in reading the “Scaling Up” book by Verne Harnish, and I was transformed.
Later that day, in my meeting in the CEO’s glass-encased corner office with expansive views of the skyline and the Hudson River, I was able to reference back to the book topics that addressed every one of the business issues the CEO was experiencing. Since then, I’ve found in talking with CEOs of companies of all sizes, small to large, so many of their core issues remarkably similar. Culture, accountability, competing in ever-changing markets, and more. Deep issues that the resources and tools in “Scaling Up” can address and overcome on a foundational basis.
As a CEO of a small-cap public company, and then growing my own company before exiting, I used and loved the Entrepreneurial Operating System (EOS) as featured in the book “Traction.” So much so that I began helping other companies find success in growing using EOS. Until a CEO I met recommended, “Scaling Up” to me. It changed my life and inspired what I do today.
Where “Traction” is the ultimate beginner’s guide to business operating systems, “Scaling Up” is the college-level textbook and reference guide. As another CEO friend says, “It’s Traction on steroids.”
Top 5 reasons why smart CEOs choose “Scaling Up”:
1. They’ve Had Success but are Now Frustrated
They’ve implemented the Entrepreneurial Operating System (EOS) in their business successfully, grew it, but then became stuck on the growth curve and are unable to break through it. Harnish calls these the “Valleys of Death,” and points out they are a natural cycle in a business growth curve. There are many reasons for these valleys, but Harnish points out the top three: leadership, scalable infrastructure, and marketing. “Scaling Up” helps CEOs to pinpoint the issues and determine a winning strategy.
2. They Struggle with Cash
The faster and higher a plane flies, the more fuel it burns. The faster and higher a company grows, the more cash it requires. A “Scaling Up” cash mantra is “Revenue is vanity, profit is sanity, but cash flow is king.” Why do companies fail and go out of business? While there are many symptoms and issues that contribute, ultimately, they run out of cash, then crash and burn. In “Scaling Up,” cash is one of the “Four Decisions,” including people, strategy, and execution that a CEO and leadership team need to focus on. There are powerful tools in “Scaling Up” that enable CEOs to develop cash strategies to finance growth while in many cases limiting the need for outside capital.
3. Smart CEOs Understand that Strategy is the Key to Market Domination
Using Jim Collins’ bus metaphor for business, you can have the right bus, with the rights seats, and the right people in the seats, and be executing with perfection – but if the bus driver (the CEO), is continually making the right-hand turns circling the same block, it will never really get anywhere. A killer strategy is the key differentiator that sets apart the true growth companies from the rest. It’s a messy, non-linear process that required a lot of information gathering, thinking, and discussion. “Scaling Up” introduces the 7 Strata of Strategy tool as “the page behind the page.” This is the business’s secret weapon to define their unique space and positioning in the market, and developing it should be one of the CEO’s top job responsibilities.
4. They Are Insatiable Learners
Many of the world’s top business minds are readers. Bill Gates, Mark Cuban, and Warren Buffet all constantly read to find new ideas and get ahead of trends that are ever-changing. Harnish wrote “Scaling Up” to be an open framework for growth and learning, citing and recommending many business thought leaders, books and resources. This contrasts with “Traction,” where the EOS principle of being “pure EOS” keeps reliance on a simpler toolset repeated over and over. As a thought leader and author, Simon Sinek believes business is an infinite game where the rules and participants are constantly changing. The only winning is staying in the game, keeping your business going and not quitting. The way to stay in the game is to be aware and ahead of the changes. This requires continual learning and strategic thinking – not just excellence in execution.
5. Smart CEOs Understand the Key to Success is Decisiveness
The role of a CEO is not to have all the answers, it’s to inspire and lead a team toward a shared purpose, building a strong and transparent foundation that enables everyone in the organization to build upon. Having a clear and communicated strategy and culture empowers the people in your organization to make their own decisions that are aligned with the vision and goals of the company. In “Scaling Up,” Harnish challenges CEOs with a key question, “Can you state your firm’s strategy simply – and is it driving sustainable growth in revenue and gross margin?” I meet far too many CEOs that are unable to clearly articulate their company’s strategy, let alone communicate it to their organization. Many are preoccupied with running their business, putting out fires and dealing with day-to-day issues rather than having the courage to put aside the time and diligence to work ON their business versus IN the business.
If you’re a CEO that is truly committed to creating or sustaining a beginner’s growth company, and you’re confident and decisive enough to do what needs to be done, then “Scaling Up” is a must-read. It’s challenged me to reframe my thinking about growth, both personally and organizationally. If you’re ready to get your real-world business degree, start reading it today!