Founder's Story - How You Can Effectively and Immensely Scale Up Your Brand | Ep. 59 with Scaling Up Founder, Verne Harnish

Episode Date: November 27, 2021

Verne Harnish is a world-leading expert, speaker, author, and entrepreneur in the field of business growth. He has spent more than 30 years educating entrepreneurial teams. He founded the world-renowned Entrepreneurs' Organization (EO) and chaired for 15 years EO's premiere CEO program, the "Birthing of Giants", held at MIT. Verne is also the Founder and CEO of Scaling Up, a global executive education and coaching company with over 180 partners on six continents.   Known as the "Growth Guy" syndicated columnist, Verne is also a regular columnist for Fortune magazine. He's the author of Scaling Up, Mastering the Rockefeller Habits and, along with the editors of Fortune, authored The Greatest Business Decisions of All Time, for which Jim Collins wrote the foreword.   To know more about Scaling Up, you can visit: https://scalingup.com/verne-harnish/   For more info on guests and future episodes visit KateHancock.com  Our Sponsors:* Check out PrizePicks and use my code FOUNDERS for a great deal: www.prizepicks.com* Check out Rosetta Stone and use my code TODAY for a great deal: www.rosettastone.comAdvertising Inquiries: https://redcircle.com/brandsPrivacy & Opt-Out: https://redcircle.com/privacy

Welcome to Inspired by Her, the podcast that will give you the inspiration, motivation, and tips for success from some of the top executives, CEOs, and influencers from around the globe. With your host, serial entrepreneur, and named one of the most influential Filipina in the world, Kate Hancock. Vern, I've heard you talk about scaling, but I want to know, what was the city or town you grew up in like? You know, it was Littleton, Colorado, born and raised in Denver. And look, it was like the Austin of Colorado or the Annapolis where I am right now. It was kind of the high-tech spot because Martin Marriott was there. And so we were programmed, get this, I was programming computers back in, let's see, I was middle school, which would have been 71, 72. And so that was the old IBM punch cards. But we were quite progressive back then. And what moment from your childhood are you most proud of? Um, oh, that's crazy question. Um,

I, I think dressing up like Beethoven in fourth grade and playing Moonlight Sonata, it was a little embarrassing at the moment, but they had me perform in front of the whole elementary school. And I got to tell you, I actually loved it. So it was fun. Wow. Wow. I can't wait to hear you play the piano very soon. But Vern, what was your journey like to get where you are? You know, it was actually kind of a riches to rags story.

My dad was a rocket scientist, and he and three guys left and started a rocket ship of a company. And it's interesting, Noam Wasserman at Harvard found that, you know, intact teams that leave and launch a company go further faster. And so these were all his buddies. They launched this company that grew quickly. And we had all the toys, Kate. It was so much fun. They owned the mountain property, the boats, the snowmobiles, and all of that back then. And then the 73 recession took him down. And you didn't declare bankruptcy back then. It was actually one of their customers got shut down by the SEC and they owed him about a half a million bucks, which was a lot

of cashflow back then. And we lost it all. And we ended up moving on my 15th birthday from Colorado, from literally programming computers to Kinsley, Kansas, literally 35 miles this side of Dodge. And I walk in to my first math class and they've got a slide rule up on the chalkboard. And I thought, oh, this is going to be a little bit different. And we had to start over. And dad and I became janitors at the local nursing home. And I cleaned about 100 rooms and 100 rooms, 50 bathrooms, old men are such bad aim. And every night after school, and I thought, all right, that's the last

hourly job I'm ever going to have. And dad and I started a little business. And it's, I haven't worked for anyone since. So that was kind of the beginning of the journey. And I ended up launching EO, and my heart's in it still today, to make sure that this never happens to any other entrepreneur. Dad never really recovered, and he started drinking, kind of messed him up, messed the family up. And so hopefully we can help. If just one entrepreneur avoid that and made a difference. Thank you for sharing that, Vern.

You know, I get a chance to hear that story. 2020, when you were in Orange County, that story of your friend. And that's I have to say thank you for creating EO because because of EO that really helped me grow tremendously as a person and as an entrepreneur. And without EO, we won't be here in this community. So I have to say thank you so much for creating that organization. You bet. And what's cool is there are 16,000 entrepreneurs that are not alone. And I still remember, I think you were there when I shared that story,

but later I had this chance to host Steve Jobs' first public speech after being fired from Apple. And as we saw, October 5th was the 10th anniversary of his untimely passing, so just a couple of weeks ago. And it was quite an emotional day for me, as I recalled. I hosted him. We had about 1,200 young entrepreneurs in the audience. Had Michael Dell sitting there with Steve and Mark Cuban. And Neil Balter had done California Closets. And Kevin Harrington, you know, went on to be one of the early Shark Tank judges with Mark. Anyway, Steve gave this unbelievable presentation about how he founded his baby and then had it ripped from his arms.

And, you know, really all the lessons that he had learned. This was way before then he got into Pixar and really turned things around. And then surprisingly, Kate, he stayed that evening for the after party. But I go up to it and he's standing in the corner. And I looked right then to my friend, Greg Stem, and I remembered my other mentor, Joe Mancuso, saying it's okay to be independent, but no reason to be alone. And I said, that's the night that an organization for Steve needed to be found. And I passed the hat, raised some money. It took about a year to kind of get it together, but we launched then the following year in 1987. So, you know, if there's any, I think,

redeeming grace there with EO is none of us are alone. And I think that's important. Thank you for sharing that. That is such a story. And you have no idea how many entrepreneurs' lives you've touched. And, you know, just amazing. And were you expecting EO to grow as what it is now, Fern? Absolutely, you know, for sure. And by the way, so many people along the way, you know, have caused it to happen and still today. So I just got the party started and gave it some momentum and made a couple of good decisions.

But the reason I figured it would be and that was the goal is I had been hanging with a lot of YPOers, Young Presidents Organization members. And it was already a significant organization. And so the vision for EO was pretty simple. Let's be YPO for purely entrepreneurs. And the goal was to be as big. And I think we've got an opportunity to be larger. I think they're more, I think for good reason,

an elite organization. And I encourage every EO member that can become a member of YPO to do it because of the contacts and the network and the like. But we've got, I think, a broader mission. And so I'd love to see the organization get to a million members pretty easy. That is so wonderful. And Vern, can you name a person who's had a tremendous impact on you as a leader? You know, it has to be, you know, I've been lucky to have mentors all along the way, including one today, you know, that I'm on the phone with every single day. But it was the one who taught me most of what we teach, Kate, is a mentor I had back in college named Dr. Fran Giubara, rest his soul, he's passed. And he was involved in launching about 75 companies,

including he was one of the early guys that helped Bill Lear launch Learjet. And I learned so much from him. Wow, thank you. And Vern, did you create the concept of forum? Can you tell us why a forum is so important to every entrepreneur? Yeah, no, I didn't at all. That was something that YPO created. And there's a lot of, it's crazy, there's a lot of urban legends around what started EO and YPO and forum. And one of those is that I heard the other day again, when I was in Dallas for the EO chapter that somebody asked me, didn't EO start because somebody committed suicide? I got, not only is that an urban, not an urban legend in EO, but it's an urban legend in YPO and it's an urban legend. Supposedly they said Forum started in YPO because somebody had committed suicide. It's a serious topic, by the way. Our mental health challenges among entrepreneurs, we have one of the highest percentages of depression as a cohort.

But Forum was started by YPO. And so when we launched YEO, it just made sense for us to adopt that unbelievable part of what's now both organizations. Wow. Thank you so much. And Forum is one of my favorite. And I don't know if I would survive the crash of my Amazon store back in 2018 without Forum, Vern. So thank you for curating that and helping that get going. And Vern, tell us about your Scaling Up book

and how did you went from being gazelle to scaling up? What's the story behind it? Yeah, by the way, back on the forum thing, I thought what was interesting in the pandemic, which I thought was important, is as you know, Kate, forum meets once a month and it's in person for multiple hours. Obviously when the pandemic hit, the in-person went away. And what I loved

is, and I don't know if yours did or not, but the forums pivoted to meeting every week for like an hour. And that kind of more frequent support by seven others, the stories, I'm sure you heard them like I did, was so important to help all of us through kind of the craziness with our businesses. And so I was so glad that that was there in place for so many entrepreneurs. But back on the Gazelle and Scala, I was just talking, I was over at a fundraiser for the mayor here in Annapolis. The election's coming up next Tuesday. And we got talking about the original name was Gazelles. I thought it was clever. It was the technical term that David Birch at MIT had given to growth companies. He said there were three companies, elephants, the large companies, mice, the small business, and then

these gazelles, they really drive the economy. So I thought, Kate, it was going to be a clever name. I called it that. But you know, the problem was nobody could spell it. It's like, you know, how many Zs, how many Ls? Is there an S? I dreaded when somebody asked me for my email address. And then later on, this term scale-ups and scaling up became popular. And one of the things we teach is the essence of brand is owning a word or two in the mind of a market and really answering that late Clay Christensen at Harvard's question, what's the job you're there to do? What's the job of your product or service? And clearly, our job is to help companies scale up, to help scale ups scale up. And so it just made sense for us to make that

painful decision. But I think a lot of companies need to and have, which was to change the name. And we decided to get all aligned around this idea of scaling up. And that then was the name of the book, changed the company name and all of our services as well. Thank you for sharing that. One of the reasons why I joined EO is because Sarah Blakely bragged about it, how it helps her scale her business. Were you there when she was just starting up? No, I wasn't in Atlanta, but I love her stories. Yeah, I mean, I'm kind of the oldest member, so I've been around, but I've only met Sarah a couple of times. I've got to know Jesse a little bit, but I got to tell you this recent interview that John Rulon did of Sarah at our global leadership conference. Kate, did you tune into that at all? Yes. Yes. Oh, that was, that was spectacular. And there were a couple of

stories that I thought might be fun to share with the entire audience. You know, one of them was, she was talking about how she has just got the business started. She joins EO, joins a forum with, as she described it, eight dudes. And she said, first of all, it was a great kind of crucible to learn about dudes because she ended up marrying like the dude of dudes, Jesse Itzler. And she said, they kept telling her, you know, Sarah, you've got to go to war and you got to push hard and you've got to, you know, take that hill. And, you know, the masculine has a tendency to use like all these kind of, and even the business world, this kind of militaristic language.

And she described, if you remember, like literally going home after one of her forum meetings and just bursting down crying. And she's like, look, this isn't the way I want to scale. This isn't the way I want to grow a business. And she goes back and she explains that she, and it's one of those things we've seen with the feminine where they really just want to let love flow. This isn't a man or woman thing.

It's a masculine feminine. You know, just let the love flow. She said, I want to trust the universe. She literally used that term, if you remember. And they're like poo-pooing her the whole bit but then they start watching as her company is just scaling and she described later on after she'd had you know you know it was obvious the success that she was achieving she said one by one the guys came to her and said like secretly Sarah, can you tell me a little bit more about this universe stuff?

And I just burst out laughing. Oh, my God, I can't help laughing. Right? I mean, but there was something to it. I actually get this message from the universe. You can sign up for it. And it comes in every day. And I absolutely get a kick out of it.

So that was one of my favorite stories. The second one, which really is something we've been talking quite a bit about and scaling up, which is, you know, what's the key to really winning every war and every market? And it's Intel. It's firsthand Intel. Whoever has the best Intel wins. And I remember John asking Sarah, so so Sarah, how did you do it? And as you guys saw, she just sold BlackRock this week for a billion two or billion two valuation. And I love that

she gave all of her employees $10,000 and two free first class tickets anywhere they want to go in the world. I thought that was just a class act. Anyway, John asked Sarah, Sarah, how'd you do it? And she said, look, because I did because I was never in the office. I spent a lot of my time out in the stores. And nobody knew, you know, I think maybe the employees did, but none of the customers knew she was the founder or CEO just said Sarah on her name badge. But she said that's where she picked up all of the hints and ideas and clues about the innovations to the products and additional product lines that she should pivot to. And so anyway, two of my favorite Sarah Blakely stories from that interview. Thank you for sharing that, Brent. Brent, I know you've transformed a lot of companies. Can you give us one of your favorite ones, like a massive transformation from what to nine figures? Clearly, Scott Farquhar, who was kind enough to endorse the back of my book, I remember Scott and his team.

They had just started Atlassian in 2003, and I did my first two-day workshop in Sydney in 2005, just 24 months later. And Scott and his team were there. At the time, they had about 50 employees. And I remember taught them to use the Mars mission exercise to discern their five core values, which are still their core values today. And what's been neat is to watch Scott and Mike scale that to, I just checked yesterday, you know, I own a chunk of their stock, $107 billion in market cap. And I think what's even impressive is they still own over 70% of the company between the two of them. They didn't give it all away like a lot of the tech companies do.

And what's neat is they've really represented the shift in the global economy as it has in Australia by them buying, purchasing the two most expensive homes in Sydney from the two mining magnets of Australia. Again, I think representing how the economy has shifted from natural resources, which created John D. Rockefeller's wealth, to tech, which has created Atlassian's wealth. And I think what's cool is they've also won like every best place to work award that you can achieve on the planet. But I think even more important is early on, before I even met them in 2005, they had made what they called the 1% pledge, which is they didn't,

I don't think, imagined that they would be at a hundred billion in market cap, maybe so. It's been a couple of years since I saw Scott in Vegas just before the pandemic when I hosted an event with him. But he said, look, we're going to pledge 1% of our profit, 1% of our product, 1% of our people's time, and 1% of our value, 1% of our product, 1% of our people's time, and 1% of our value, 1% of the company, we're going to donate and focus it all around educating children. Well, today, 1% is a billion dollars just of equity. And now they're part of the 1% Club. And I think 5,000 companies are members of it worldwide.

And this is way before the business roundtable here 20 years later woke up and said, hey, maybe we need to take care of customers, employees, shareholders, and the community. This 1% pledge had already done that. So very impressive company. Wow. Thank you for sharing that. And Vern, can you tell us a little bit of the story of the Rockefeller Habits? I mean, that's truly amazing.

Yeah, you know, it's interesting. So when I launched YEO, YPO, you know, good artists borrow, great artists steal. YPO had a partnership with Harvard running an executive program. And I felt why EO needed the same. So I actually went next door, went to Harvard, to Howard Stevenson, who was running that program to see if maybe they would partner with EO. And he goes, heck no. He said it in a little bit more colorful language, if anybody knows him at Harvard. So I went next door to MIT and Bernie Goldhurst, who had founded Inc. Magazine, was an MIT grad and had become a friend. And long story short, we ended up partnering with them.

Next year is going to be the 25th – what is it? The 30th anniversary of the first graduating class. And I thought, you know what? We need to create – whoops. Am I still there? We need to create the tools because there was a lot of information, Kate, as you know, on how to start up. Today, there's an incubator on every corner. I was just over at a new incubator. One of my students, Jerry South, has launched here in Annapolis to kind of celebrate and meeting the mayor. So a lot of stuff on the, you know, incubating. And I've got

an MBA that's supposed to teach out around a big company, but there wasn't the parenting manual of what it took to kind of grow up a company. And so that was really the essence of this executive program. I launched a partnership with MIT and Inc that we called the Birthing of Giants. There's a copycat today that's not us at all. They claim our history, but that's not the same organization. And I took the next decade to move about a thousand entrepreneurs, pretty significant entrepreneurs through that program, testing what would really work, what was helpful, and getting their feedback every single year. And a decade later then, codified it in a book that I branded Mastering the Rockefeller Habits after reading the biography Titan about John D. Rockefeller's background.

And so that's where that all came out of. Vern, I have to ask this question. How do you handle someone's copying your work? How does it feel like and how did you get over that? Well, you know, as long as they would take it all, you know, and steal it all. But when they kind of bastardize it, then that's what gets frustrating. But, you know, in some sense, you know, we've all stood on the shoulders of giants. And that's what competition is about.

And it generally makes you stronger, you know, as long as you don't violate any people's trademarks or patents. But then it's challenging because you've got to have the money to defend it. And so I think, really, you just have to stay ahead of the marketplace. Thank you for sharing that. And, Vern, before I'm going to hand it to Dan for questions, how do you want to be remembered? That we left no entrepreneur behind. Wow, that is so powerful. Vern, I really love your passion about helping, and thank you for that. You're welcome. By the way, I want to mention a book that I just had a chance to interview Jim McKelvey last week.

Jim's the co-founder with Jack Dorsey of Square, which really revolutionized payment for the folks at the bottom of the pyramid, small retailers right on the corner street or whatever that needed to be able to access the credit card industry. And he wrote a spectacular book called The Innovation Stack. And I would really encourage everybody to take a look at it. And I think it addresses that question, Kate, you just asked, which is, what do you do when people copy you? And I think what's interesting in the book is when Jim describes the day they find out Amazon has decided to copy their idea and compete with them. And they ultimately, and you've got to read the book to see the decisions they made, how they handled it. But, I mean, this is generally a death sentence when Amazons decide they're going to move into your space.

The amazing thing is a year later, Amazon gave up. And, in fact, everyone who had signed up for their competing service, they shipped them out a square. And that is amazing. And so I think that's the book to look at. And the other reason to read it, and Jim was the first to really bring this to my attention. There is a difference between just being a business owner and being an entrepreneur. And today, EO, maybe you dialed into it, Kate, but we hosted Muhammad Yunus, you know, who did Grameen Bank and all of those other things. And it was clear to me that he's a true entrepreneur. And that is somebody that is really pioneering something new.

So I think the copycats are just business owners, but the entrepreneurs are the ones that are out front solving new problems, serving new groups of people. And I think that's the difference. But you've got to continue to stack those innovations if you're going to maintain those leads. Thank you so much, Brent. We hope you enjoyed the show. Don't forget to rate, review and subscribe. And visit katehancock.com so you don't miss out on the next episode.