I have been, or can be if you click on a link and make a purchase, compensated via a cash payment, gift, or something else of value for writing this post. Regardless, I only recommend products or services I use personally and believe will be good for my readers.
My notes from Scaling Up
- Introduction
- Leaders are readers.
- Overview
- To scale up a business… focus on 3 deliverables
- Reduce by 80% time it takes top team to manage the business
- Refocus senior team on market-facing activities
- Realign everyone else
- Organizations attain these 4 outcomes
- At least double the rate of cash flow
- Triple the industry average profitability
- Increase the valuation of the firm
- Help the stakeholders
- 3 Barriers to scaling up
- Leadership – capabilities to delegate and predict
- Scalable Infrastructure – lack of systems & structures to handle communication and decisions
- Marketing – attracting new customers, talent, advisors
- To overcome these barriers, 4 fundamentals
- In leading People – establish a handful of rules, repeat yourself a lot, act consistently
- Core Values
- In setting Strategy
- what you’re planning to do really matters to enough customers
- it differentiates you from your competition
- In driving Execution
- 3 Key Habits
- Seat a handful of Priorities
- Gather quantitative and qualitative Data
- Review weekly
- Effective daily, weekly, monthly, quarterly, annual meetings
- 3 Key Habits
- In managing Cash
- Pay attention
- In leading People – establish a handful of rules, repeat yourself a lot, act consistently
- Most people overestimate what they can do in 1 year and underestimate what they can do in 10 years
- Routine sets you free
- Goals without routines are wishes
- Routines without goals are aimless
- 4D Framework for growth firms (download at scalingup.com)
- Driver: Coaching, Learning, Technology
- Demands: People, Process
- Disciplines: Priorities, Data, Meeting Rhythms
- Decisions: People, Strategy, Execution, Cash
- Right Questions
- Help leadership teams formulate the right questions
- Which of the 4 Decisions (4D) need the most attention next?
- People
- Do you have the “right people doing the right things right” inside your organization?
- Would you keep all your existing customers?
- The tools
- One-Page Personal Plan (OPPP)
- 4 Key decisions
- Relationships
- Achievements
- Rituals
- Wealth
- Mirror 4Ds
- Having a strong and fulfilled personal life provides an important foundation for sustaining your efforts in the business
- 4 Key decisions
- Function Accountability Chart (FACe)
- Bottleneck is always at the top of the bottle
- List of seats (functions) that ll organizations must fill
- Delegate these functions to people who fit your culture
- Don’t need to be managed
- Regularly wow the team
- Designate 1 or 2 KPIs for each function
- What activities each senior leader needs to be focused on day-to-day
- Decide on outcomes accountable to each function
- Normally represent line items on the financial statements
- Process Accountability Chart (PACe)
- When functions aren’t working well together, the firm can stall
- Delineate the 4 to 9 processes that drive the business
- Designate who is accountable for each process
- Decide on 2 or 3 KPIs that track the health of the process
- Length of time, from start to finish, for a specific process
- One-Page Personal Plan (OPPP)
- Strategy
- Strategic thinking – senior leaders meting weekly… discussing a few big strategic issues including those outlined in the SWT and 7 Strate tools
- Execution planning – much larger team implementing the broader strategy.
- Annual and quarterly priorities, outcomes and KPIs
- Frontline employees
- Participation creates buy-in
- Think, Plan, Act, Learn cycle
- Vision Summary – simplified One-Page Strategic Plan (OPSP) framework
- SWT – Strengths, Weaknesses, Trends
- Focuses on exploring broader external trends beyond their own industry or geography
- Spot opportunities before the competition
- 7 Strata of Strategy – Designed to provide the kind of differentiation and barriers that allow you to dominate your niche
- What words to you own?
- Who are your core customers? What 3 Brand Promises are you making them? How do you know you’re keeping those promises?
- What if your Brand Promise Guarantee?
- What is your One-PHRASE Strategy that likely upsets customers but is key to making a ton of money & blocking your competition?
- 3 to 5 Activities that fit the definition of the essence of differentiation?
- What is your X-factor that completely wipes out any and all rivals?
- What are your Profit per X and BHAG?
- One-Page Strategic Plan (OPSP)
- You need this page first
- Designed to drive alignment, accountability, & focus
- Execution
- Are all processes running without drama?
- You have execution issues if
- There is needless drama
- Everyone seems to be working more hours, fixing things
- Company is generating less than 3x industry average profitability
- Tools
- Who, What, When (WWW)
- When is no longer than the time between meetings
- Break it into pieces so it can be accomplished
- Rockefeller Habits Checklist
- 10 fundamental habits that support the successful execution of your strategy
- Dramatically increase profitability
- Reduce the time it takes to manage the business
- “Preflight” checklist for keeping your company growing
- Focus on 1 or 2 each quarter
- The Habits
- Executive team is healthy and aligned
- See The Five Dysfunctions of a Team
- Executive team needs… level of trust… permits true debate and constructive conflict to occur.
- Everyone is aligned with the #1 thing that needs to be accomplished this quarter to move the company forward
- Communication rhythm is established and information moves through the organization accurately and quickly
- Every facet of the organization has a person aligned with accountability for ensuring goals are met
- Communication is #1 challenge; accountabilities is #2
- Both vertically (across functions) and horizontally (across processes)
- Ongoing employee input is collected to identify obstacles and opportunities
- Weekly qualitative data must come from your employees
- Sales & frontline
- Talk to one employee each week & ask what should we start/stop/keep doing?
- Weekly qualitative data must come from your employees
- Reporting and analysis of customer feedback data is frequent and accurate as financial data
- Core Values and Purposes are “alive” in the organization
- “Why” behind everything you do
- Employees can articulate the following key components of the company strategy accurately
- 10- to 25-year goal (BHAG)
- Who the core customers are
- 3 Brand Promises
- What the company does (elevator pitch)
- All employees can answer quantitatively whether they had a good or bad week
- Column 7 of the OPSP
- Priorities and KPIs for the week
- The company’s plans and performance are visible to everyone
- Executive team is healthy and aligned
- Who, What, When (WWW)
- Cash
- Consistent sources of cash
- Great by Choice (Amazon)
- Directly addresses growth firms
- Growth sucks cash – the first law of entrepreneurial gravity
- Great by Choice (Amazon)
- Modified cash flow statement
- Cash that came in past 24 hrs
- Cash that flowed out
- How cash is looking over next 30 to 90 days
- Cash Conversion Cycle (CCC)
- How long it takes after you spend a dollar for it to make its way back into your pocket
- HBR: How Fast Can Your Company Afford to Grow?
- The Power of One – 7 Main financial levers to improve cash
- Price
- Volume
- Cost of Goods Sold / Direct Costs
- Operating Expenses
- Accounts Receivable
- Inventory
- Accounts Payable
- Cash Acceleration Strategies (CASh)
- Break down the CCC into 4 components
- Brainstorm one of three ways to increase the cash flow in the business
- Goal is to reverse the first law of entrepreneurial gravity
- Build a company that can self-fund its own growth
- Consistent sources of cash
- Summary
- scalingup.com
- Sign up for weekly insights
- growthinstitute.com
- Alignwithgazelles.com
- Discipline and perserverance
- scalingup.com
- To scale up a business… focus on 3 deliverables
- Barriers
- Entrepreneurial life cycle: start, scale, sell
- … an investment firm to unlock the growth and profitability of additional companies. Incubating multiple firms…
- Grow Where You’re Planted
- stick to the businesses and markets you know best
- Conquer complexity – complexity generates 3 barriers (remove these barriers & the anchor you’ve been dragging will now be the wind at your back) to scaling up:
- Leadership
- Inability to grow leaders who have the capabilities to delegate and predict
- Predition
- Minutes ahead
- Frequent interaction with
- customers
- competitors
- employees
- Delegation
- Letting go
- Trusting others
- To get to 10 employees, delegate where you’re weak
- To get to 50 employees, delegate where you’re strong
- Strength of the top leader becomes the weakness of the organization
- How to delegate is one of the most important skills a leader must develop
- Priorities – One Page Strategic Plan. What needs to be done
- Data – KPIs. Measurement system for monitoring progress
- Meeting Rhythm. Feedback
- Recognition and Reward
- Emergence: The Connected Lives of Ants, Brains, Cities, and Software
- Holacracy may still need champions: quasi-team leaders.
- Repetition
- Deliver frequent messaging and metrics to reinforce these key attributes of the company and culture
- Core Values
- Core Purpose
- BHAG
- Priorities / Themes
- Deliver frequent messaging and metrics to reinforce these key attributes of the company and culture
- Scalable Infrastructure
- Systems and structures handle complexities in communications and decisions
- Marketing
- Attract new relationships and address competitive pressures
- #1 functional barrier to scaling up is the lack of an effective marketing department
- Marketing’s role
- Determine the right what we should be selling
- to the best who’s
- how best we should sell
- at the right price
- Marketing meeting
- 1 hr / week
- List of top 25 influencers
- Spending time each week
- How to network to these people
- Convince these influencers to help
- The more influential the names, the more potential you have to scale bigger and faster
- 4 P’s of marketing
- Product
- Price – tends to get the least attention yet one of the most important decisions you’ll make
- Place
- Promotion
- Olgivy’s 4 E’s of Marketing – how to execute better the 4Es of the business
- Experience
- Exchange
- Everyplace
- Evangelism
- Marketing’s job is to identify and attract the right customers to the venture and arm the online marketing activities with plenty of information to help them make the sale.
- Market Dynamics
- Market timing trumps all
- Too early or too late with your great idea and you miss the wave
- As the firm scales from $1m to $10m in revenue is the time to establish healthy organizational habits and a scalable infrastructure
- Startup to $1 or $2m in sales, focus on revenue
- $1m to $10m in sales, focus on cash
- Growth sucks cash
- Company will make a 10x jump in size
- Demands for cash will soar
- Market timing trumps all
- Main function of a business leader: build a predictable revenue and profit engine in an unpredictable marketplace and world
- Maintain a steady pace
- Predictability, driven by effective processes, key to generating significant wealth
- Scaling Up People
- Introduction
- Are you happy? Do you enjoy coming to work?
- Would you rehire everyone?
- Crucial Conversations Tools for Talking When Stakes Are High
- The Leaders
- Recognize and prioritize the People challenges
- Amazon’s 2-pizza rule
- no team should be so big that it can’t be fed with two pizzas
- Accountability
- Belongs to ONE person
- “ability to count”
- tracking the progress
- doesn’t mean makes decisions
- If more than one person is accountable, then no one is accountable
- As leaders advance up the ranks, more accountability less control
- Gap between accountability and authority is bridged by communication, persuasion, education, visioning, etc.
- Responsiblity
- Anyone with the “ability to respond” proactively
- Includes all the people who touch a particular process or issue
- Authority
- Person or team w/ final decision-making power
- One-Page Personal Plan (OPPP)
- framework for people to plan their personal life
- Establish personal priorities and align them w/ your professional goals
- 4 Decisions to build a thriving business
- People, Strategy, Execution, Cash
- Parallel areas in personal life
- Relationships
- 5Fs
- Faith, Family, Friends, Fitness, Finance
- Reminder to set priorities
- Top of Column 1
- People with whom you want a lasting relationship (10 to 25 years)
- Employees, customers, family, friends
- Communities
- Strong correlation between happiness and the number of diverse communities in which you are active
- People with whom you want a lasting relationship (10 to 25 years)
- Look at groups listed & pick a few key relationships to focus your attention next 12 months & next 90 days
- People who are destructive or distract you from your higher goals
- Relationships you want to end gracefully
- 5Fs
- Achievements
- Major ways you’d like to make an impact beyond reaching monetary goals
- set objectives in these key areas
- Personal life – how you can make a real difference to the key people in your life
- Short- Medium- and Long-term Achievements relative to the people listed in the relationship column
- Might include stopping the pursuit of achievements that are taking you away from the relationships that matter most
- Major ways you’d like to make an impact beyond reaching monetary goals
- Rituals
- Routines will help you achieve your larger goals
- Establish rituals with people supports your bigger goals
- Have a peer coach
- Bad habits you wish to stop
- Wealth
- Financial wealth is a resource for supporting the rest of your personal plan
- Wealth-producing assets or cash-draining liabilities that need to be addressed
- How your wealth will service others
- This attracts more wealth
- The Soul of Money: Transforming Your Relationship with Money and Life
- Relationships
- Function Accountability Chart (FACe)
- clarifies the people who are accountable for scaling the business
- “right people doing the right things right”
- Common set of functions that must exist in ALL companies
- To scale, figure out which function to delegate next. Delegate to leaders who
- Fit culturally
- Do not need to be managed
- Regularly wow the team
- To scale, figure out which function to delegate next. Delegate to leaders who
- 1 or 2 KPIs for each function
- Outcomes expected
- Normally represent line items on financial statements
- Helps you diagnose where you have people and performance gaps on the leadership team
- Move people up or over into these positions at any time
- Only bring in from the outside every 6-9 months
- Take it slow when bringing outsiders into senior leadership roles
- Whatever the strength of a leader often becomes the weakness of the organization
- Leaders have a tendency to hold on too tight
- Leaders must make a counterintuitive decision and find people who exceed their own capabilities
- Illuminates immediate change at the top of the organization
- Completing the FACe
- Step 1
- Don’t list titles – focus on the jobs that need to get done
- Step 2
- Agree on people accountable for each function
- Do you have more than 1 person accountable for a function?
- Does someone’s name show up in more boxes than everyone else’s?
- Do you have any boxes with no names in them?
- “All of us” really means “none of us”
- Pick someone
- Doesn’t mean this person is the boss
- Means they monitor the situation, report to leadership team, alert the team if there are issues
- Are you enthusiastic about the person you have in each box?
- Step 3
- 1 to 3 KPIs
- Daily and weekly activities
- KPILibrary.com
- Key Performance Indicators (KPI): The 75 measures every manager needs to know
- Head of Company
- KPI is ratio of all of the other boxes on the FACe that are right
- the main job of the head of the company is to make sure she has the right people doing the right things right
- Step 4
- Results / Outcomes
- Use P&L and Balance Sheet
- Assign a person for each line item
- Rotating the P&L clockwise 90 degrees exercise (pg 50)
- Step 1
- Executives with good companies tend to share their titles; executives at strong and great companies share what their accountabilities are in a very measurable fashion
- Organizational Structure
- Matrix Organization
- Heads of the business units need to lead as if they are individual CEOs
- Your company is a living organism that needs to survive in an environment that’s always changing
- Matrix Organization
- Process Accountability Chart (PACe)
- lists the processes, and people accountable, that keep the business running smoothly
- who is accountable for each of the 4 to 9 processes that drive business
- how each process will be measured
- Lean
- The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses
- Eliminate time wasted on activities that don’t add value for customers
- https://www.lean.org/
- Completing the PACe
- Step 1
- Name the 4 to 9 key processes
- Step 2
- Assign accountability for each process to a specific person
- Job is to
- monitor the process
- let the team know if there are any issues
- lead a regular meeting to fix or improve that particular process
- Step 3
- Identify KPIs
- Time, cost or quality
- Identify KPIs
- Step 1
- Mapping the Process
- Map out the steps and decision points as the process currently flows
- Begin streamlining the process
- Eliminate wasteful steps
- Remove obstacles
- Set KPIs at critical steps
- Also becomes how-to manual
- Revisit and examine one process every 90 days
- With 4-9 processes, each will be reexamined every 12 to 24 months
- Checklists
- The Team
- Get the Best Talent
- Job Scorecard
- details a person’s purpose for the job
- desired outcomes
- competencies, technical and cultural
- specific and measurable outcomes… need to be accomplished in 1-3 years
- candidate competencies that align with your culture and strategy
- more important to hire for this kind of fit than for specific skills
- Best Hires
- Team of absolute specialists
- Teams need to be well-rounded but their individual members don’t have to be.
- Recruiting / Marketing Function
- Minimum of 20 applicants per position
- The best candidates are probably working somewhere else
- Fish where there are fish
- Topgrading Interview
- Job application asks questions that align with values
- Gatekeeper questions
- Assess Systems’ pre-employment tests / OMG’s Sales Assessments
- Who
- Topgrading: The Proven Hiring and Promoting Method That Turbocharges Company Performance
- Certified Master Practitioner via scalingup.com
- Screening interview
- Narrows list from 10 to 3 candidates
- 5 powerful screening interview questions
- 30 to 45 minutes
- Chronological In-Depth Structured (CIDS) interview
- 3- to 4-hour interview or middle or senior leader, 1- to 2-hour for entry level
- Entire career history
- Discovering behavioral and performance patterns
- Past performance is the best indicator of future performance
- Checking references
- “What will ___ say about you?”
- Threat of Reference Check, ToRC
- Job application asks questions that align with values
- Culture Fit
- Test-Drive
- Temp to permanent
- Consulting
- Pay to Quit
- $2,000 first year
- Goes up $1,000 every year until hits $5,000
- Will, Values, Results, Skills (in this order)
- Will – desire to excel
- Values – test for culture fit
- Results – can they deliver on KPIs?
- Skills – least important / updated every 5 years
- Job Scorecard
- Get the Best Talent
- The Managers
- Investments in training and coaching provide best returns to your business
- People join companies; they leave managers
- Keep Your Talent Engaged
- Periodic 1-1 coaching ranked as the #1 key to being a successful leader
- Coaching sessions with “direct supports” on five topics (aligned w/ 5 main activities)
- 5: Hire fewer people, but pay them more
- One great person can replace 3 good ones
- Rigorous selection
- Get the absolute best talent
- Pay above-market rates
- Invest heavily in training
- Fairness does not mean sameness
- 4: Give recognition, and show appreciation
- Positive vs. negative ratio of 3:1
- Thank people each and every day
- 3: Set clear expectations and give employees a clear line of sight
- How their work contributes to the greater objectives of the company
- Align their individual priorities with those of the firm
- Define the “what” not the “how”
- Employees find their own way
- Adequate and measurable targets – OPSP
- KPIs – 2-3
- Prioriteis
- Critical Number – main bottleneck / must fix during the quarter
- 2: Don’t demotivate, “dehassle”
- Nothing is more frustrating for A players than having to work with B and C players
- Hire only A players
- Focus on ways to make your team’s job easier
- Fire clients
- Provide appropriate tools and resources
- Policies and procedures frustrating?
- Nothing is more frustrating for A players than having to work with B and C players
- 1: Help people play to their strengths
- A strength isn’t just something you’re good at; it’s only a strength if it literally gives you strength
- Weakness drains the life out of you
- Help employees refocus and prune their jobs
- Focus on activities that give them strength
- Less on activities that make them weak
- Take a couple of weeks & document all activities you love or loathe
- Eliminate activities no one should have to do
- Use the remaining list to create a Job Scorecard for a new position
- StrengthsFinder assessment @ gallupstrengthcenter.com
- Help your people achieve self-awareness of their strengths
- Now, Discover Your Strengths
- tmbc.com / Trombone Player Wanted Marcus Buckingham
- How to become a strengths-based organization
- 5: Hire fewer people, but pay them more
- Manager or Leader?
- Good manager speaks in generalities
- Great manager describes each team member in specific detail
- Managing is about differences; leading is about sameness
- The One Thing You Need to Know: … About Great Managing, Great Leading, and Sustained Individual Success
- Leader until 50 employees
- Team of Managers at 100+ employees
- Grow Your Talent
- Onboarding
- Needs to be a celebration, not paperwork
- Orientation
- Doing real work while emphasizing company’s values and purpose
- All new recruits would spend a week working on a list of nagging internal projects
- One Core Value reinforced each day
- Scavenger Hunt
- Excuse to meet and greet the new colleagues
- Answer their questions about the company and culture
- Involvement of senior management in the onboarding process is critical
- Excuse to meet and greet the new colleagues
- People are exceptionally positive, receptive and willing to learn during this phase
- Deep attachment to whatever you expose them to
- Training
- The only way to grow a company is to grow the people first
- How many hours annually?
- 12 hrs for frontline
- 25 hrs for middle management
- 45 – 60 hrs for senior leaders
- Training and development increases loyalty
- How much should you spend on training?
- 2-3% of your payroll
- Focus first on your middle management
- What is the one takeaway that you are going to commit yourself to working on?
- Takeaways on which they plan to act
- 5 key points they want everyone to know
- The Weekly Coaching Conversation: A Business Fable about Taking Your Team’s Performance and Your Career to the Next Level
- Growing People Through Coaching
- Situational Leadership
- right about of direction and support
- depending on the competency and confidence of the person being coached
- Development Cycle
- reduces step-by-step the need for direction and support until a task can be fully delegated
- One task might require specific how-to instructions, another might call for only some encouragement or nothing at all
- Leadership and the One Minute Manager Updated Ed: Increasing Effectiveness Through Situational Leadership II
- Requires a rhythm
- Specific day each week or month
- 1 hour if monthly
- 20-30 minutes if weekly
- Specific day each week or month
- Review Individual KPIs, Priorities, Critical Numbers
- Recognize good performance & analyze underperformance
- Discuss activities needed to get back on track
- Put the focus on the process
- Feedback on Core Values
- Develop strategies to correct behavior
- Timely feedback is the most effective
- Prevents bad habits
- Expose them to different experiences
- Present new challenges
- Experience learning occurs
- Question employee’s task list
- Love & Loathe exercise
- Refocus activities on areas that the person is naturally drawn to but represents a challenge
- Help Them Grow or Watch Them Go: Career Conversations Employees Want
- Great coaches consistently get the most out of their people because they consistently put the most into their people
- People are not resources you consume
- Situational Leadership
- Onboarding
- Introduction
- Scaling Up Strategy
- Intro
- say yes only until you have the luxury to say no
- Hidden Champions (1): what German companies can teach you about innovation
- Core
- Values, Purpose and Competencies
- Link between People and Strategy
- Left side of the OPSP
- Core Values
- Rules and boundaries… define the company’s culture and personality
- Should / Shouldn’t test
- Personality
- Discerning the Core Values is a Discovery process, not the creation of a wish list of nice-to-haves.
- Listed as phrases, not words
- Not all feel-good
- Values are neither good nor bad; they just are!
- Describe each Core Value w/ a phrase, defined in a sentence or two & anchored w/ an actual story (or legend)
- Bonus: create an avatar (see: Disney Institute)
- Purpose
- Core Values are the Soul, Purpose (mission) gives it heart
- Purpose answers the question, “why?”
- Why does what we do matter?
- Powerful purpose trends to revolve around a single word
- Central word or idea is then expanded into a phrase or two
- Start w/ the question, “what do we do?”
- Then ask “Why” several times
- Keep asking until you get to your version of “Save the World” and then back up one step
- Do not describe your Brand Promise
- Out of this single idea should emerge a “stump speech”
- reminding everyone of the big picture & “why we do what we do”
- Mission = Purpose
- Core Competencies
- Company’s inherent strengths
- The Core Competence of the Corporation
- 3 attributes:
- Not easy for competitors to imitate
- Can be reused widely for many products and markets
- Contribute to the benefits the end customer experiences and the value of the product or service to customers
- Don’t define too narrowly
- Core weaknesses is equally important
- Storytelling (See DI)
- Stories provide the explanation for Core Values
- Identify some “legends” and current stories that represent each Value
- Recruitment and Selection
- Interview… how candidates align w/ your Core Values
- Rate candidates
- Goal = hire for a culture fit
- Look for people who light up when talking about a core value
- Onboarding
- Design the process around the teaching of your Values & Purpose
- Performance Appraisals & Handbooks
- Core Values = framework for reviews
- Organize your employee handbook into sections around each Core Value
- Employees’ performance scored on how well they act on the Core Values
- Recognition & Rewards
- Organize your recognition & reward categories around your Core Values
- Stories about people putting these Core Values to work for the betterment of the company
- Themes
- One of… Core Values… theme for the quarter
- Everyday Reinforcement
- Most important routine of the 8
- Every time you praise or reprimand someone, tie it back to a Core Value or Purpose
- 7 Strata of Strategy
- Intro
- framework for construction an robust strategy that differentiates your company from the competition & helps you establish the kind of roadblocks that allow you to dominate your niche in the marketplace
- “page behind the page” (OPSP)
- Columns 2 & 3
- Keep it confidential!
- senior leadership team should work on strategy, free from day-to-day firefighting
- CEO’s primary job to set and drive the strategy of the business
- Worksheet
- The Council (Collins’ Good to Great, p 114-116)
- Strategic Planning = Strategic Thinking & Execution Planning
- 7 Strata framework + 4P’s of marketing = strategic thinking
- product, place, price, promotion
- 3 – 5 people, 1 hour each week
- Discuss Strata
- Iterate
- Make a few decisions
- Test them
- Come back
- Discuss
- 11 guidelines for structuring a council
- Don’t look for consensus – council gives advice to CEO
- Job of CEO to make decisions
- Words You Own (Mindshare)
- Key is owning words that matter
- Most important in driving revenue
- tiny.cc/success-one-word
- Sandbox and Brand Promises
- Who / Where are your core customers
- Juicy red core customer
- Mine for the most profit over time
- Profit Pools = Niche within any industry… 10% of the total customers… disproportionate percentage of the profit
- Where to find them
- What are you really selling them?
- All sales are emotional, initiated through the heart then justified logically by the head
- Must encompass a 100% solution – completely does the job a customer needs to accomplish
- What are your three Brand Promises?
- One that leads the list
- Define quantitatively so they can be measured and monitored
- Refrain from “quality,” “value,” or “service” – too vague
- What methods do you use to measure whether you’re keeping those promises?
- Kept Promise Indicators
- Who / Where are your core customers
- Brand Promise Guarantee
- Turning Goals into Results: The Power of Catalytic Mechanisms
- It needs to hurt to break a promise
- One-Phrase Strategy
- Key to making money
- Key lever in your business model that drives profitability and helps you choose which customer desires to meet and which to ignore
- Great brands don’t try to please everyone
- Be the absolute best at meeting the needs/wants of a small but fanatical group of customers & the absolute worst at everything else
- Ignore 93% of customers and focus on 7% that are fanatical
- Differentiating Activities
- 3-5 How’s
- How you will execute your business differently from the competition
- “activity” level of the business where true differentiation occurs
- Something your competitor won’t or can’t do without great effort or expense
- Can take years to develop
- Different from norms of the industry
- Helps you drive profitability
- Blocks the competition
- X-Factor
- 10x – 100x Underlying Advantage
- What is the one thing I hate most about my industry?
- What is the choke point constraining the company?
- You’re often too close to the situation and as blind as everyone else to the real problems that have been accepted as industry norms
- Keep it confidential!
- Profit per X & BHAG
- Underlying economic engine of the business
- Single KPI
- Numerator can be any metric you like
- Denominator is fixed
- Represents company’s unique approach to scaling the business
- Ties back to the One-phrase strategy
- Ex: profit per long-term client
- Big Hairy Audacious Goal (BHAG)
- Best unit of measure for the BHAG is the X from the Profit per X
- Measured in the same units as the X
- Must align w/ the Purpose of the company
- Summary
- Payoff is huge if you can figure all this out
- Nail down what you can & keep moving
- It’s very difficult work; trust the process.
- Intro
- One Page Strategic Plan
- Vision Summary
- Simplified OPSP for firms w/ 50 or fewer employees
- A vision is a dream with a plan
- Answer 7 basic questions:
- Who, what, when, where, how, why, should we or shouldn’t we?
- Forces prioritization and simplicity
- Must be concise
- Git it down, then get it right.
- Preserve the core / stimulate progress
- Columns 1-3 preserve the core / holds steady over time
- As you move right, becomes more dynamic
- Summary
- Framework that details your corporate vision
- Common language to express that vision
- Well developed routine for keeping the vision current
- Column 1 – Core Values / Beliefs (Should / Shouldn’t)
- Describe the personality of the organization
- Core Values, Beliefs, Rules
- Column 2 – Purpose, Profit per X and BHAG (Why)
- The soul of the organization, then the heart
- Actions
- drive a quarterly conversation: what’s necessary, in the short run, to keep these long-term Vision items alive?
- specific ways to reinforce the Core Values, Purpose & BHAG over the next 90 days
- Column 3 – Targets, Sandbox and Brand Promises (Where)
- Specific financial targets and priorities over next 3-5 years
- In what time frame do we plan do double the revenue / size of the company?
- 15% / year = 5 years
- 25% / year = 3 years
- 100% / year = 1 year
- Sandbox / Strarum 2 off of the 7 Strata worksheet
- Core customers (who) and what you plan to sell them
- Brand Promises
- Key Thrusts / Capabilities that must be pursued over next 3-5 years
- Significant medium-term priorities
- Clear strategic direction for the next several years
- Assemble a board of advisers
- Column 4 – Goals (What)
- What are the #1 Priority and Key Initiatives for the company year
- Start with financial outcomes at the top of the column
- Jump to bottom and determine the Critical Number
- Specific to one metric each year
- People / Balance Sheet or Process / P&L
- Pick a counterbalancing number on the other side to monitor, too
- Middle of column – Key Initiatives to complete this year to achieve financial outcomes and hit Critical Number
- Corporate New Year’s resolutions (less is more)
- Revise them each time you close the books on fiscal year
- Column 5 – Actions (How)
- Mirrors column 4
- How you’re going to contribute this quarter to accomplish the one-year goals
- Rocks
- Priorities that must be accomplished to achieve the quarterly financial outcomes & Critical Number
- Who is accountable for each Rock
- Simultaneous 13-week sprints
- Column 6 – Theme, Scorecard Design, Celebration / Reward (Finish Lines and Fun)
- Column 7 – Your Accountability (Who)
- What every individual can do over the next quarter to help the organization succeed
- Everyone is able to see how his or her daily actions link to the company’s goals
- Your KPIs – Did we have a productive day / week
- Your Quarterly Priorities
- Critical Number
- Make a connection between their day-to-day efforts and the goals and vision of the company
- Along the top
- People
- Continually improve the company’s reputation with employees, customers and shareholders
- Cash flow: Customers – Employees = Shareholders
- Processes
- Continually improve the company’s productivity in make/buy, sell, and record keeping
- Make/buy = expenses
- Sell = revenue
- Recordkeeping = tracking it all
- Choose 1 or 2 KPIs & track weekly
- People
- Along the bottom: Strengths, Weaknesses, and Trends
- Strategic Planning Session
- Download bonus chapter at scalingup.com
- See Fortune’s Leadership Summit (spring) & Growth Summit (fall)
- 4 main activities
- Managers gather feedback from employees & customers
- What should we start / stop / keep doing?
- Middle management completes SWOT analysis & submits Top 3 Priority list
- SWOT
- introspective focus
- great for execution planning
- SWOT
- Senior Leadership completes SWT analysis & submits Top 3 Priority list
- SWT = Strengths, Weaknesses & Trends (beyond their own industry or geography)
- Strategic thinking = coming up with a few big-picture ideas
- Execution planning = figuring out how to make them happen
- Trends
- significant changes in technology, distribution, markets, consumer & social developments
- 4-6 trends that could shake up your industry
- Strengths & Weaknesses anchor the “preserve the core” side of the OPSP
- SWT = Strengths, Weaknesses & Trends (beyond their own industry or geography)
- Everyone aims to learn & grow
- Managers gather feedback from employees & customers
- Vision Summary
- Intro
- Scaling Up Execution
- Intro
- Rockefeller Habits Checklist – review every 3 months
- Priority
- Rockefeller Habits 1, 2
- Less is more in driving focus and alignment
- Too many priorities = no priorities
- Single priority: today, this week, this quarter, this year, the next decade
- Cannot implement any of this without Habit #1
- Order of other habits doesn’t matter; pick 1 or 2 each quarter
- Over 24 to 36 months, you’ll have moved through all 10 habits
- Habit #1 – Healthy Team
- Unhealthy situations (5 Dysfunctions of a Team)
- Absence of trust
- Fear of conflict
- Lack of commitment
- Avoidance of accountability
- Inattention to results
- Build trust:
- Personality and leadership style assessments = appreciate each others’ differences
- Meal and social time
- Shared learning
- Unhealthy situations (5 Dysfunctions of a Team)
- Habit #2 – The #1 Priority
- One Critical Number
- makes it easier to accomplish everything else
- Identify the constraint (bottleneck) address it first
- What is the most important and measurable choke point you need to fix / control in your business this coming year?
- 3-tiered target
- Red
- Green
- Super Green
- Quarterly Themes
- What is the single most important thing going on in the business in the next 90 days that we want everyone to be aligned on?
- Within each theme, list smaller Rocks (column 5 of OPSP)
- 30 minutes at weekly meetings address progress toward theme
- Employees are asked to take ownership of the Rocks in their areas of responsibility
- Alternate between one focused on People side and one focused on Process side of the business
- If the organization misses the mark
- Repeat the Critical Number
- Move on to another Critical Number
- or Do a root-cause analysis and choose one of the reasons to fix next quarter
- No one’s paycheck should suffer because the senior team chose an overly aggressive goal
- Pick celebrations and rewards that are mostly for fun
- 2-day, Get in the Game, workshop
- Powerful Celebration Question: How did you do it?
- Pick someone who you know contributed to reaching the Critical Number, have that person share his story
- One Critical Number
- Data
- Rockefeller Habits 5, 6, 9, 10
- Qualitative and quantitative feedback provides clarity and foresight
- Fundamental job of a leader is prediction; heart of leader’s ability to predict is data
- Intelligence Gathering
- Learn fast, act fast. Speed is key
- Communicate daily… what they are hearing about competitors & learning in the field from customers
- Metrics Everywhere
- Quantitative metrics alone… incomplete. Qualitative insights… customers & competitors, advisors & experts
- Habit #5 – Gather Employee Input
- Have a Start / Stop / Keep conversation with 1 employee weekly
- 15-45 minutes, focused
- Employees who work directly w/ customers
- New Hires
- Discuss at Weekly Management Meeting
- 10 minutes
- Ongoing Feedback
- Weekly input from employees re: obstacles & opportunities
- Ask questions which will
- Increase revenue
- Reduce costs
- Make something easier / better for the customers or employees
- Close the Loop
- Middle-management team responsible
- Track the number of days it takes to implement the ideas
- List all suggestions w/ update on progress
- Have a Start / Stop / Keep conversation with 1 employee weekly
- Habit #6 – Gather Customer Input
- 4 Questions w/ at least 1 user weekly (talk directly with those benefiting from your product & services
- How are you doing?
- Get them to talk about themselves
- What are their pain points? What are their priorities for the coming year?
- Find out what the person’s bonus is tied to
- Show how your products can help them achieve their targets
- What’s going on in your industry / neighborhood?
- What are the newest changes or technologies?
- What are they thinking / feeling / talking about?
- What do you hear about our competitors?
- Probably most important
- How are we doing?
- Ask about their reactions to your offerings
- How are you doing?
- Connect on an even level – your CFO should talk to their CFO
- Discuss at weekly meeting
- 20% of their leadership team’s meeting discussing feedback from customers
- Involve all Employees
- Require them to call in daily to a voice mailbox and leave a 3-minute update
- Close the Loop
- Middle-management team
- Reports to sr. leader accountable for the customer advocacy function listed on FACe chart
- Middle-management team
- Net Promoter Scores
- 4 Questions w/ at least 1 user weekly (talk directly with those benefiting from your product & services
- Habit #9 – KPIs for Everyone
- Linked directly to column 7 of OPSP
- Each person must report on one or two KPIs weekly
- Alignment
- One Critical Number & 3-5 Rocks
- Getting everyone in the company to accomplish one additional thing that is aligned w/ the company’s focus every 90 days
- All employees or teams need to set a handful of priorities (rocks) that will help them achieve their Critical Number
- Peer Coach
- All execs & middle managers should have peer coach
- Holds them accountable for behavioral changes
- External
- Leads quarterly and annual planning sessions
- Checks in monthly to monitor progress
- Everyone, internally
- Based on your own column 7 of the OPSP
- One-Page Personal Plan
- Choose 5 behaviors or actions you need to start or stop
- Report your progress each day to your peer coach
- Peer Coaching Overview
- All execs & middle managers should have peer coach
- Habit #10 – Scoreboards Everywhere
- Metrics, goals, plans displayed in Situation Room
- Core Values, Purpose, Priorities everywhere
- Accountability Management Systems
- AlignWithGazelles.com
- Meeting Rhythm
- Rockefeller Habit 3
- Give yourself the time to make better / faster decisions
- Chapter 11 of Managing Up
- All executive assistants read
- Meetings equal…
- 10% of workweek for Sr. leadership
- 5-7% for middle managers
- 3% for frontline
- Quarterly & annual meetings = updating the Growth Tools, inc. OPSP
- 3 Advantages to Meeting Regularly
- Peer pressure
- Collective intelligence
- Clear communications
- Habit #3 – Meeting Rhythm
- Daily Huddle – 5 to 15 minutes
- Scrum
- Critical to include specifics
- Start the meeting on time whether everyone is there or not
- Who? Have more people in fewer meetings
- Agenda
- What’s up? (Next 24 hrs)
- 1st 5 minutes
- Detect conflicts, crossed agendas & missed opportunities immediately
- Should relate to key activities, meetings, discussions
- NOT a recitation of someone’s daily calendar
- What are the daily metrics?
- You’re looking for patterns and trends
- Where are you stuck?
- Bring up constraints and concerns that could prevent them from having a great next 24 hours – what’s the rock in their shoe?
- Should share a “stuck” even if nobody can help them
- 2+ days w/out a “stuck” = bigger problem
- Conversations about bottlenecks shouldn’t drift into problem-solving
- What’s up? (Next 24 hrs)
- Weekly Meeting – 60 to 90 minutes
- Review progress on the quarterly priorities
- Discuss market intelligence
- Customers, Employees, Competitors
- Everyone is well-informed via Daily Huddles
- Keep everyone focused on #1 priority & big rocks supporting it
- 1 or 2 important topics = resolve 50 to 100 important things in 1 year
- “Council”
- End with Who’s going to do What, When
- Monthly, quarterly and annual meetings can consume this weekly meeting
- Agenda
- 5 min: good news (personal & professional)
- 10 min: priorities
- Red, Green & Super Green
- 10 min: Customer & employee feedback
- 30-60 min: 1 or 2 topics
- patterns and trends from the daily huddles
- progress on your priorities / theme
- feedback from employees & customers
- opportunities & challenges
- potential partnership
- major event
- Who, What, When
- One-Phrase Close
- everyone sums up w/ a word or phrase of reaction
- End before lunch or happy hour
- Weekly CEO One-Pager
- Status of the #1 priority
- Other significant developments
- Monthly Mgt Meeting – 1/2 to full day
- Sr, middle and frontline managers
- Collectively address one or two big issues
- Transfer DNA from upper to middle management
- Learning, Sharing & Problem Solving
- Quarterly and Annual Planning – 1 to 3-day off site
- Update the Growth Tools
- Establish the next quarterly or annual theme
- STRATEGIC PLANNING – Preparing and Leading the Planning Process
- Daily Huddle – 5 to 15 minutes
- Intro
- Scaling Up Cash
- Intro
- Great companies keep 3-10x more cash than competitors
- MSFT always kept 1 year opex in the bank
- Great companies keep 3-10x more cash than competitors
- Cash – Accelerating Cash Flow
- Cash fuels growth
- Cash Conversion Cycle (CCC)
- How long it takes for a dollar spent to get back in your pocket
- Improve CCC using Cash Acceleration Strategies (CASh)
- Brainstorm ways to improve cash flow at each 90-day planning session
- Dell’s CCC
- Was 63 days
- Focused on 1 cash improvement each 90 days
- 10 years later, CCC was -21
- How Fast Can Your Company Afford to Grow?
- The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers’ Cash
- Cash Acceleration Strategies (CASh)
- Opportunities
- Available cash reported daily w/ explanation of why it changed in the last 24 hrs
- Chart against AR and AP weekly
- If you want to be paid sooner, ask
- Get invoices out more quickly
- Send reminders 5 days before deadline
- Get recurring invoices on credit card to automate on-time payments
- Why are your customers paying late?
- Pay your own expenses w/ credit card (float) & get your customers to pay via credit card
- Available cash reported daily w/ explanation of why it changed in the last 24 hrs
- All fall in 3 general categories
- Shorten cycle times
- Lean
- Eliminate wasted time
- Specify a due date instead of “due in 30 days”
- Eliminate mistakes
- #1 reason they are slow to pay
- Change the business model
- Get your customers to fund your business
- Membership fees (Costco)
- Get suppliers to fund business
- Inventory Management (Dell)
- Finding Money You Didn’t Know You Had
- Get your customers to fund your business
- Shorten cycle times
- Improve Profitability
- When you improve profitability, it improves cash
- Recurring charges are the ones that really kill you
- Opportunities
- Accounting – Driving Profitability
- Crabtree’s Simple Numbers, Straight Talk
- Waterfall Graphs
- View the gross margin, profit and cash flow by categories such as individual customer, location, product line, salesperson, etc.
- Trend Analysis
- MapPoint – mapping sales by geographic region to find trends & identify opportunities
- Simple Numbers
- Clear the distortions
- Gross Margin Dollars
- Revenue is vanity when it comes to your P&L
- Revenue minus all non-labor direct costs
- Focus on gross margin dollars than gross margin as a percentage
- Never base sales compensation on revenue
- Gross Margin Dollars
- Set appropriate profit targets
- Define profit as a % of gross margin once gross margin gets below 40% (otherwise, use revenue)
- 5% pretax profit = life support
- 10% = doing well but has untapped potential
- 15% = business is in great shape
- Over 15% = earn it while you can
- User labor efficiency to drive profitability
- Measure of the productivity of each dollar we spend on labor
- 3 segments
- Direct Labor Efficiency
- Employees who spend 50% or more of their time delivering on the product or service
- Accountable for the work you put in front of them
- Measured against gross margin
- Sales
- Grow revenue
- Management
- Manage gross margins, direct labor performance and sales
- Direct Labor Efficiency
- Avoid splitting people across multiple groups
- Do not add payroll taxes & benefits; only count wages and bonuses
- Get to 15% profitability, add labor until you’re down to 10%, get back up to 15%, repeat.
- 10% is the new breakeven
- Understand the 4 Forces of Cash Flow
- Taxes
- Manage Debt
- Core Capital Target
- Have 2 months opex in cash
- After this you can harvest profits for further growth or distribution
- Harvest Profits by Paying Dividends
- Clear the distortions
- Power of One – 7 Key Financial Levers
- Profit vs. Cash
- Growing a business, cash is more important
- A healthy P&L can mask pending cash flow issues
- “Revenue is vanity, profit is sanity and cash flow is king”
- Cash Flow
- Cash flow is the change in cash and debt balances across a given period
- Profit is an opinion & can be manipulated to provide a specific outcome
- Only your cash and debt balances are facts
- 2 Uses of Cash
- Invest growth
- Fund management-influenced waste
- Operational Efficiency and Sales Effectiveness
- P&L efficiency (how much profit is produced from every $1 of revenue) = how efficiently you’re operating & if you’re squeezing the most profit from every dollar of revenue
- Minimum Return on Assets
- Midsize businesses should target a minimum 30% return on net assets
- 4 Drivers (in order to change your business)
- Profitability
- Working Capital Management
- Amount of cash that your business requires to trade
- Consumed by AR and inventory
- Working Capital Days
- Total days worth of working capital
- Noncurrent Asset Management
- Cash Flow / Funding
- Marginal Cash Flow
- Amount of cash retained by the business / compares it to the amount of cash the business produces at the gross margin level
- Power of One & 7 Levers
- Tweak one of these 7 financial levers to improve cash:
- Price
- Volume
- Cost of goods sold / direct costs
- Operating Expenses
- Accounts Receivable
- Inventory / work in progress
- Accounts Payable
- 1% or one-day change is made to each of these levers
- Turn these changes into a formal KPI structure
- cashflowstory.com
- Tweak one of these 7 financial levers to improve cash:
- Profit vs. Cash
- Intro
- Next Steps
- https://www.growthinstitute.com/