We had a look at the book “Scaling Up” by Verne Harnish and found some very interesting concepts and pointers here that can not only support startups but even SMEs alike. Looking for tips on how to manage growth better? You came to the right place. Read on for some points of review and the summary of “Scaling Up.”
So you want to upscale your business? It’s one of the most common goals of companies, I can’t blame you. Especially startups are defined by their ‘yet to be planned and executed’ scaling phase and pursue to exit their state as startup and become a scaleup, a stable business with a sustainable and viable business model as well as the options for upscaling. But just to pull you back to reality, neglecting the trends, upscaling is not a goal – it’s a potential necessity to achieve your goals. So first, think about this: Why do you want to upscale your business?
Growth does not equal success
The collective perception of scaling up a business seems to validate the success of a company. From my point of view, however, the size of an organization does not provide a score on its efficiency or profitableness. For instance, if your goal is not to employ and pay as many people as possible without increasing profits, you need to focus on your actual organizational goals and utilize as least resources as possible to reach the same.
The 4D framework for scaling up
In his book “Scaling Up,” Verne Harnish explains his 4D framework to give business owners and business developers a guideline on how to upscale their business. It consists of the following four major columns, which carry the methodology. Let me try to give you a quick overview of the segments.
First D: Drivers
The executives and managers of a company need to walk the talk and drive the development of staff just as much as they need to improve the profitability of the organization. If you don’t account for learning and striving towards better cooperation, scaling the organization up will introduce more trouble than benefit.
Second D: Demands
You need to find the right balance between the demands of the stakeholders (or clients, users) and the requirements that are to be taken into account in order to build your product/deliver your service. When streamlining your processes, make sure you cut only unnecessary fat and not cut the qualitative edge that is your advantage over your competitors.
Third D: Discipline
Create a battle plan on how you think you can achieve your goals. Segregate the steps towards the overall goal into achievable quarterly goals and make sure everyone in the company is aware of the quarterly goals – that is the number one priority and should be permanently omnipresent. That means people can work towards these goals rather than just work. This allows everybody to work towards the organizational strategy. Reemphasizing the quarterly goals in meetings and other communication should further aid in achieving the goals.
Fourth D: Decisions
When you seek to scale up, you should track all your issues and opportunities based on a regular risk management exercise. You need to prioritize the biggest issues to be solved first and jump on all kinds of quick wins (little effort tasks with major benefits).
Actions for your managers
As per the first D above, you need to change what your mid-management does. They need to actually give up the (micro-) management and empower people. The manager remains accountable for his or her team but makes each team member responsible for something they will then own from now on. Knowledge on the what and how-to needs to be transferred by training and a proper knowledge management system. You are in a good state when the managers can take four weeks off for a vacation with no doubt that everything will continue to run smoothly in their absence.
Goal setting
Setting up KPIs (Key Performance Indicators) is a way of measuring performance for your managers; achieving all green KPI numbers in the monthly report is good but does not equal goals. Harnish says you need one primary external facing brand promise, a BHAG (Big Hairy Audacious Goal), and an OPSP (One-Page Strategic Plan) that you should always keep up to date.
Brand promise
Your brand promise is the single attribute that best defines your company. Think about your unique value proposition and think about what makes you special amongst the competition. You should focus on that and make it your brand promise in alignment with your marketing strategy. This is what the world should know you for and how they will think about you.
BHAG
The BHAG or Big Hairy Audacious Goal is your primary long-term goal. This is what you seek to achieve in a time frame of about 20 to 25 years time. The BHAG should be broken down into steps that can be achieved in smaller frequencies, such as 3 to 5 years per step.
OPSP
Your One-Page Strategic Plan will help you to visualize and communicate the company’s goals to an internal or external audience. The OPSP is very handy to have but needs to be kept up to date at all times. You also need to make sure that every step and task in the OPSP has a responsible person assigned to. You need to make sure you have a priority one item clearly outlined that receives a major focus, and you need to mark down the metrics in which these goals can be measured. After all, you can’t manage what you can’t measure. But don’t only be grim about the OPSP; make sure the benefits of achieving goals are clear, and the reward for achieving the same is stated as well. Gamification can also be an excellent tool to improve culture to complete tasks on all levels of the organization.
To sum up your goal-setting strategy, you should make sure that you have a vision and it is segmented into achievable steps in a plan. This will help you with strategic decision-making and support you in dealing with prospects, suppliers, and maybe even with HR matters.
Finance for scaling up
Before you even think about upscaling your business, you need to know that every growth step will munch up your funds big time before a new stable level is reached. In order to prepare for an upcoming attempt to scale your business up, you need to make sure to increase your financial reserves. Take a look at the Cash Conversion Cycle (CCC), and you will be able to figure out how long you take until an investment comes back as turnover (ROI). In general, the smaller the time span of your CCC, the better.
To shorten your CCC, you should initially segregate the total into four components of sales, delivery, billing/payment, and production/inventory. After you do that, you need to work to improve these silos one by one. You should not tackle more than one at a time. In each of these silos, you might find opportunities to improve the cycle time by reducing typical issues (a Six Sigma culture can help with that) or by improving the overall business model.
Communication for scaling up
If you want to help your cause, you should allow your staff to know about your vision and strategy. Even if your strategy is agile and prone to dynamic change, your teams will understand that and will still appreciate the insight. The value-add for the business is that each piece in the clockwork of your business knows the direction it should move to on its own. Nevertheless, you should frequently communicate the strategy, the goals, and also the steps associated with the same. Don’t expect anybody to read your mind if you are not communicating these things frequently.
Further Reading
Summary of the book “Scaling Up”
Based on Verne Harnish’s bestseller, I have tried to reflect on the lessons we learned from him in a compact way. If you have a good idea now of what you should do now – that’s great. Nevertheless, I still suggest you to dive down into the subject of upscaling more. This is one of the most critical activities a company could transition through, and countless organizations have failed this step and don’t exist anymore because of that failure. If you have feedback or want to share some more tips on upscaling a business, please drop your thoughts into the comments section below. Many thanks for reading.
YouTube: Verne Harnish – Scaling Up | Leadership Collab
Photo credit: Sebastiaan ter Burg / Nan Palmero / Brian Ujiie / Raymond Clarke
