The Scaling Up
How to achieve accelerated business growth according to Verne Harnish.
About scaling up
Scaling up is about the growth of organizations that have survived the startup phase and are ready to take the next step: scaling up. In the Netherlands, few startups reach this point. According to a study by Erasmus Centre for Entrepeneurship, the number of start-ups that continue to grow has stagnated in recent years. The scale-up phase is a stumbling block for many companies, because the organization and its processes are becoming increasingly complex in this phase.
How do you prepare your company to achieve exponential growth? For many entrepreneurs, this is still a difficult question. Verne Harnish's Scaling Up method provides insight into this and explains which four aspects are essential to take into account when an organization wants to scale up considerably.
People make an organization. It is therefore important to find and retain the right people. This means that within an organization, attention must be paid to recruitment marketing, in order to find applicants that fit the company’s corporate values & culture. It is also important to regularly evaluate whether each department has enough capacity to carry out the required tasks.
Attracting the right talent can be a challenge for small businesses. One of the reasons for this is that CEO’s tend to hire people who resemble them and often prioritize this over skills. This can become fatal for the growth of such an organization. Also, CEO’s can prevent company growth because they cannot relinquish tasks themselves and do not delegate enough, which is often necessary in a growing company that wants to successfully go through the scaling-up phase. Of course, external factors can also play a role, such as a shortage on the labor market.
Defining a strong, realistic and distinctive strategy sounds like a logical precondition for a having a successful business, but for many organizations it turns out to be difficult to put into practice. It is important to ask yourself if the strategy is easy to explain. Can you summarize the strategy in one concise sentence? Other things to look out for are:
- Have at least 3 brand promises and offering a guarantee for these promises.
- Think about what associations your brand should evoke. What words belong to your organization?
- What are the Unique Selling Points (USPs) of your organization?
Execution (rockefeller habits)
Of course, defining a strong strategy is not enough; implementation is the real challenge. On the basis of the rockefeller habits, Harnish explains how to bring the strategy to life. These tips are mainly about regularity, efficiency, communication and promoting the core values of the organization in all business activities.
- The management team functions properly. The decision-makers are not influenced by friendships with each other (in a growth company), or political issues (in large organizations).
- Everyone is working towards one 3-month top priority.
- Meetings are held on a regular basis.
- It is clear which person is in charge of which tasks and processes.
- Feedback from staff members is requested and discussed by the management on an ongoing basis.
- There is also weekly contact with customers to receive feedback and information about the market and competitors.
- The core values and mission live within the organization; everyone knows the "why" of the company.
- The employees are aware of the company strategy; they have their elevator pitch ready and know what the mission and vision of the company are.
- Employees know from quantitative data whether they have had a good or a bad day or week; priorities and KPIs are set.
- Plans and performance of the company are visible to all employees.
It is therefore essential for a company to have a certain routine and to carry out as few ad hoc business activities as possible. This is in line with one of the three major growth obstacles mentioned in the book, namely: scalability of infrastructure. This obstacle relates to the scaling up of all processes, as this is easier if processes are regularly executed and recorded.
In order to be able to grow, and to be able to carry out the above mentioned habits properly, your organization needs to have enough cash available. This is not so much about the turnover or profit of the company, but the final amount that is immediately available in your "cash". The CFO of the company must therefore have insight into the cash flow of the company.
In addition to the above aspects, 3 growth barriers are identified that threaten to block the way to scaling up:
Lack of scalability of infrastructure
Not being able to scale up the current processes because the technology, software, capacity and skills of employees are not sufficient to cope with growth. Not using the right software, not bringing in enough talent to attract and serve a growing number of customers, prevents a company from growing.
Not having insight into the market, not having effective marketing and lack of data and measurability. Scale-ups often help themselves by focusing on optimizing their internal marketing: are the marketing results measurable? Is the marketing funnel predictable? By using a data-driven marketing approach, you can create an effective and future-proof marketing department.
This is about the lack of good leaders skilled in prediction, delegation and repetition.
In his book, Verne makes it clear that an organization should take one step at a time and not be distracted by too many different things at once. So look within your organization where most priority lies. Is there a lack of cash? Then start with this problem, and the rest will follow. Is the company stuck because the current processes are not suitable to scale up? Then start working on this first.