Scaling Up: How a Few Companies Make It…and Why the Rest Don’t

Verne Harnish aka “The Growth Guy” needs little introduction in ALTO’s circles. He joined us in 2011 for our London seminar, which left attendees invigorated with new ideas. (For a “blast from the past” moment of nostalgia, check out the old video clip.)

Proving that not all sequels are bad, Verne’s second appearance for ALTO in Madrid left us all with the templates and tools to enact change thanks to his inspiring talk and free copies of his book, Scaling Up: How a Few Companies Make It…and Why the Rest Don’t.

Verne’s book includes many of the examples and tips he shared in Madrid as well as a shopping list of even more books to read… a lot more. And the list is as much varied as it is long. For all of Verne’s sharp business acumen and bold parting advice (spoiler: see the end of this article), his first message to the crowd was one of a more spiritual nature. Suggesting we all take a lesson from self-proclaimed hippie and bestselling author Michael Singer, sometimes we need to stop obsessing over what we want and simply “go with the flow”.

Given the 24/7 pressures and demands of running a company, and the often overly ambitious nature of entrepreneurs, it may come as no surprise that a recent study found that 30% of entrepreneurs experience depression. To combat this, Verne’s reading list kicked off with two books that can teach you how to open up and accept whatever life throws at you and to stop self-doubt and negative self-talk.

Book recommendations:

  • The Surrender Experiment: My Journey into Life’s Perfection and The Untethered Soul  by Michael A. Singer.

The Pricing Debate

Quickly shifting gears, Verne launched in the four barriers to scaling up:

  1. Ego
  2. Leadership development
  3. Scalability infrastructure
  4. Marketing effectiveness

Of these, the last “is the one that make or break you,” according to Verne. “Marketing strategy is strategy,” he declared, highlighting our move from the 4Ps (Product, Price, Place, Promotion) to the 4 Es (Experience, Exchange, Every place, Evangelism).

Coming back to the classic Ps, Verne opined that price is the most crucial area to focus on and he encouraged attendees to embrace demand-based pricing and follow the examples of the travel and leisure industries. He implored, “Human beings are not rational, and you’re trying to set a price based on rationale!”

To illustrate the power of pricing, Verne shared an example we can all relate only too well to: a restaurant wine list. Oftentimes, wines are listed from least to most expensive; however, this can create anxiety as we watch the price climb higher and higher. By reversing the order, we feel more inclined to choose a wine towards the middle or the top two-thirds, rather than sticking to the least expensive items. Simply showing the most expensive prices first can add up to 17% more revenue to your bottom line.

Another bullish pricing technique Verne recommended was to take your top ten best-selling products and raise the price by 10% each week. One of his clients did this until he reached an 80% increase in price, without suffering any loss of sales!

Book recommendations:

  • Great by Choice: Uncertainty, Chaos, and Luck – Why Some Thrive Despite Them All  by Jim Collins and Morten T. Hansen.
    • Reveals that successful companies hold three times more cash assets than their industry average.
  • Confessions of a Pricing Man: How Pricing Affects Everything  by Hermann Simon.
    • Features a case study on the London 2012 Summer Olympics, which generated more revenue than the previous three Olympics combined. This success was largely due to a “Pay Your Age” scheme which was psychologically seen as a fair pricing model and drew in visitors in droves.

Article recommendation:

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Company Values and Corporate Culture

Another star Verne cites is Danaher Corporation, currently number 229 on Forbes Global 2000 list and whose stock has outperformed the S&P 500 Index by more than 2000% over the past 20 years (according to their website). Danaher attributes their growth to:

  • hundreds of acquisitions since the early 1980s,
  • the Japanese concept of kaizen  (meaning continuous improvement),
  • living its core values by being “process-oriented and customer-centric”.

To illustrate the importance of company values, Verne also talked about Appletree Answers, an answering service and call centre provider. By focusing on their core values and a strong company culture, they were able to reduce employee turnover from an abysmal annual industry average of 200% to below 20%. This in turn drove profits up from a 4% industry average to 21%. Over a period of nine years, Appletree acquired 24 companies, and one thing that stayed strong throughout was their core values, which they demonstrated daily and instilled in each employee from Day One.

When it comes to hiring new staff, Verne has three rules:

  1. Don’t hire someone unless they fit your culture.
  2. Look for people who don’t need to be managed.
  3. Hire people who “wow” you – don’t settle.

Article recommendation:

  • Building your Company’s Vision  by James C. Collins and Jerry I. Porras.
    • A classic piece from 1996 that will help you shape your values, core purpose, and vision.
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A Few Top Tips

Next up was Verne’s top tip when it comes to pleasing customers: make it easy. He claims that 56% of all retail searches online go through Amazon because the company makes buying so easy.

He also stresses the importance of keeping things simple, such as stating your strategy in one short phrase. For example, Dominoes’ strategy is “We sell pizza” and they added a brand promise to that: “…in 30 minutes or less, or it’s free.”

Book recommendation:

  • Scrum: The Art of Doing Twice the Work in Half the Time  by Jeff Sutherland.
    • Citing the need for us to “clean out our closets” at work and find efficiencies in our processes.

Verne is also a fan of delegating and outsourcing, explaining, “As CEO, your job is to make no decisions. Your job is to get the right people to make the right decisions.”

He encouraged attendees to create a list of the top 25 most influential people that can help build your company. By employing this tactic, he believes that CEO’s should be able to run their companies one day a week. That’s certainly a goal we can all admire!

Book recommendation:

  • Never Eat Alone by Keith Ferrazzi.
    • Encourages readers to find and nurture meaningful connections with the right people.

Be tough, be brave, and read a lot of books!

Verne rounded off his talk with some bold advice: “You need to dare. You need to piss off 90% of the market.” Sounds crazy, doesn’t it? But Verne used examples such as Ikea and Ryan Air which intentionally offend the competition as their ultimate blocking mechanism. This “anti-brand promise” is a daring strategy that can protect your market share because others won’t be brave enough to copy your techniques.

He supports the advice doled out in another book Uncommon Service, explaining, “Entrepreneurs are pleasers… it’s that pleasing mentality that will kill your business because customers always want more for less. They will want you to bankruptcy.”

He suggests you create a list of the top 10 things your customers want, pick two or three of them and do those extraordinarily well, and forget the rest. As the old saying goes, you can’t be everything to everyone.

Book recommendation:

  • Uncommon Service: How to Win by Putting Customers at the Core of Your Business  by Frances Frei and Anne Morriss.

For more information, get cracking on that reading list and see gazelles.com and scalingup.com.

 

2017-09-25T21:44:55+00:00
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