The Learning Leader Show With Ryan Hawk - 309: Verne Harnish - Scaling Up: How To Grow Yourself & Your Business

Starting point is 00:00:00 You need to actually hire a team of weirdos. You need to find somebody who actually gets energy out of that, which makes everyone else in the organization tired. And that's why you want chess pieces, not a bunch of checkers. Welcome to the Learning Leader Show. I am Ryan Hawk. Thank you so much for being here. It is Mindful Monday. Tax Learners to 44222 in order to join tens of thousands of learning.

Starting point is 00:00:35 learning leaders from all over the world, text learners to 4422.2. Also have some cool updates coming for those who would like to be a part of my book launch team. Text learners to 44222. Now on to tonight's featured leader, the great Vern Harnish, the founder of the world-renowned Entrepreneurs Organization. EO has over 14,000 members worldwide. He's also the founder and CEO of Gazelles, a global executive education and coaching company with over 200 partners on six continents.

Starting point is 00:01:07 He spent the past three decades helping companies scale up. And he wrote a best-selling book titled Scaling Up, how a few companies make it and why the rest don't. A few of the topics we got into. The four decisions a leader must address in order to grow their business. Then the three barriers that impede scaling up and how to address them, then why marketing is the most important part of your business, and more importantly, how to do it better.

Starting point is 00:01:43 Ladies and gentlemen, this one's so good with Vern Harnish. All right, Vern Harnish, so good to have you here on the Learning Leader Show. Welcome. Glad to be here, Ryan. I'm curious to get us going. Over the past four and a half years, 300 plus leaders have been fortunate enough to talk to. I'm fascinated by those who have found a way to sustain. excellence over an extended period of time. And you have certainly, I sense, have figured that out, and you've surrounded yourself with others who have as well. I'm curious from your perspective,

Starting point is 00:02:20 Vern, what have you found to be the commonalities among leaders who sustain excellence? Well, you know, it's interesting. One of the stats that we point out is it normally takes about 25 years for the traditional company to take off. You know, Apple started in 76. And yeah, you know, they did well, but they didn't really scale until 2001 when Steve came back and that was the year they launched the iPod. And their real 10x occurred after that 25th anniversary. Same with Starbucks. You know, it started in 1971. They didn't have 100 stores until their 20th anniversary.

Starting point is 00:02:59 They had not even gone international until their 25th. And their real 10x occurred after that 25th anniversary. Side note, though, one of the things that, how? Howard Schultz talked about is on the 25th anniversary, 1996, he did something that really he had contributed to him scaling, and that is he got his first coach. You know, it's crazy. You know, every other athlete on the planet wouldn't think to go a nanosecond without a coach, but I'm amazed in the business world.

Starting point is 00:03:29 And, you know, tomorrow, I know I don't want to date this podcast, but April 16th, Eric Schmidt, who had been CEO of Google and on the board has his new book coming out on Bill Campbell called I think the trillion dollar coach is the name of the title and you know Steve Jobs always had a coach and Bill Campbell was his coach right up to the very end as well as he coached Eric Schmidt so first I think you've got to persevere and then it's useful

Starting point is 00:03:58 to get some help along the way why do you think it's not more common for leaders in all-size businesses to employ somebody who is willing to provide that regular basis of feedback on their work? You know, I just think it's habit. And it hasn't been talked about a lot. I think there was a, there might have been a stereotype that if you needed a coach, that you might have problems.

Starting point is 00:04:31 But, you know, my first book mastering in the Rockefeller Habits, I pointed out that John D. Rockefeller and Andrew Carding again, all of those shared the same coach, Ivy Lee. So Ivy Lee was to Bill Campbell, you know, 100 years ago. Yeah. How about for someone like you? You know, you've written a lot of work that has spread almost in a viral way. Your name is popped up as a guest to be on my show from fans and listeners for years. That's part of why I'm excited to talk to you now.

Starting point is 00:05:02 as well as everything else you've been involved with with with with eo entrepreneurs organization that you are the founder you've done and accomplished a lot at a still relative young age who or how do you have people in your life to coach you as you've achieved so much so many levels of success do you have an inner board of advisors or what's the process to make sure you continue to grow and prove as you're working to help others at the same time. Well, I, you know, I was always, a lot of people talk about, but I was a Napoleon Hill fan. My dad, who had a successful company, exposed me first of the think and grow rich material back when I was, I think, 13, 14.

Starting point is 00:05:50 And I always loved that idea of a mastermind. So I've had mentors, Bill Woods was my first mentor when I was 16 outside my dad. And so make a very long story short, when I decided to launch the precursor to what is today EO, the Entrepreneurs Organization worldwide, I was getting my MBA at Wichita State University, go shockers. And I had read that Steve Jobs had a coach in marketing Regis McKenna, the famous Regis McHenna of Silicon Valley fame, who was coaching Steve and Intel and Genet Tech and all the rest. So I just Cole called him. I, you know, you've got to have a great elevator pitch. And long story short, Regis took me on, Ryan, as what he tells me today is his only free client he ever had in the history of the firm. He said, all right, I'm going to teach you what I've been teaching Steve Jobs, who would scale by that time to almost two billion.

Starting point is 00:06:48 And he sent me out this four inch thick manual. I wish I still had it today. And he said, you've got to do two things. And I said, all right. I said, first, you've got to set up a marketing meeting separate from sales. And I've had a 10 o'clock a.m. Eastern time Monday, sales, marketing meeting ever since. And then he asked me a question that later on Bill Gates said was the best question he had ever been asked. And that is he had signed a young guy to me, Rich Moran, who today, you know, is a well-known figure in Silicon Valley.

Starting point is 00:07:23 I took out a piece of a yellow notepad and he said, what are the top 20, five influencers that you need to bolt on and get involved with. At the time, I wanted to scale the largest global student entrepreneurship organization in the world called ACE. And I remember the first five, Ryan, I listed. And look, I was young, dumb, and broke as the latest song goes. And they had said, the bigger the names, the faster you'll scale. So in 1983, I wrote down President Ronald Reagan.

Starting point is 00:07:56 And I wrote down Steve Jobs, I wrote down Michael Dell, I wrote down Inc magazine, Inventure Magazine, and it's crazy and 20 others. And 36 months later, they were all actively involved and we were global in three years. I got President Reagan to be the first president of the United States ever to utter the term entrepreneur and later got invited to the White House. I ended up hosting the first public speech of Steve Jobs after being fired from Apple in 19 1886 of the Bonaventure Hotel, where I had him sitting with the young Michael Dell and Mark Cuban and all of the young entrepreneurs of that time and that era. And I got ink and venture magazine to both be major supporters of our global movement.

Starting point is 00:08:43 Bernie Goldhurst, rest of soul, became a dear friend of mine, the owner of Inc magazine. And Arthur Lipper, who owned Venture Magazine at the time is still a dear friend today from the San Diego area. I just saw them a few months ago and I was out there keynoting a major conference. And so that's the key is to reach out to the top influencers, brands, if you would, in whatever market space that you want to dominate and enroll them early on. And it's because I've had that unbelievable support going back to 1983 that I think really help sustain my scaling and our movement scaling. Wow. I think that advice is more common now than it was when you were doing it. So the follow-up to that, the natural follow-up, Vern, is, okay, I'm willing to hustle and like you. But what could I say? Because people like you and the names of the people you just mentioned, the president of our country or a Steve Jobs-like person. So maybe somebody like Elon, Lusker, Mark Zuckerberg, or Cheryl Sandberg, people like that, what advice would you give to say, not only that you should reach out to them, but what should you say?

Starting point is 00:10:05 What do you think you said to them that compelled them to respond and want to support you? Yeah, so you really do have to have a great elevator pitch. Nobody wants to support anything that's small. So I remember in our one-hour call every week, we would figure out, all right, how are we going to get to that person? and we had read in Venture magazine and Arthur Lipper was going to be speaking in Dallas. And I want to take you back. I mean, I was a nobody in 1983. And I read he was speaking in Dallas.

Starting point is 00:10:36 I hopped in my 81 Pontiac, drove six hours south, attended the speech, made sure I said up front and nodded my head a lot. And then I gave him. What you have to do is you have to do two things. You have to give before you ask. And at a minimum, I gave him my attention. and came up afterwards and thanked him. And then, look, you've got 15 nanoseconds. You know, say, hey, Mr. Lipper, I'm looking, I am launching the world's largest

Starting point is 00:11:04 student entrepreneurship organization. And I can tell from what you've said that this aligns with where you want the world to go. And if something like that, and then I asked him a question, you know, hey, Mr. Lipper, if you were me, what would be the top 10 things you would do to me? this happen. And then I listened. And most importantly, then I, back then, we didn't have email or anything. I had to type up a letter and email it to him. But I immediately mailed him and said, look, of the 23 things you suggested, I've already acted on two of them. And then I followed up a

Starting point is 00:11:42 month later and gave him a further update. And, you know, all a great mentor wants is a, is a great student that actually does something what they suggest. Now, what you do today, I needed to get to Greg Brennamet. You know, Greg helped turn around Continental Airlines, PWC, Burger King, 48 other companies, raises billions on a regular basis, a real celebrity in our space. And so you start by putting their name in Google Alerts, and you get to know who their assistant is.

Starting point is 00:12:17 And you can attempt to get warm introductions, but I find nothing's better than first. giving him your attention. And I happened to get Google alerted that he had won some obscure award in Kansas, which is where I hung out and reached out to him. And obviously laid out what I was up to. And I got his attention. And today we're friends. And he's actually agreed to chair our Scale Up Masters program in Houston as a result. So the other way you get to them is through their charity. People are different when they're in their charity mode. And so I got to know John Whitehead.

Starting point is 00:12:55 You know, John was co-chair of Goldman Sachs, went on to be in the Reagan administration early on. He was the one who helped to redevelop downtown New York City after 9-11. And I got to know him through the Nifty board that I was involved with. And that was helpful. So through their charities by giving before asking, and you need to have a compelling elevator pitch. And then it led you to document your thoughts. And in this case, in the form of books. And particularly one of them, mastering the Rockefeller habits, I found compelling and interesting because you study what others have done well.

Starting point is 00:13:38 That's led to immense success, sustained excellence, as we've talked about. And then sharing how others can do it. what led you to initially write a book about the Rockefeller habits? Well, I had, so I knew that YPO, kind of the model for YEO, had had a successful program ongoing at Harvard. I actually went to go see Howard Stevenson, who was chairing that for YPO, and he said, hey, he didn't really want to do another one. So I went next door to MIT, and through relationships I had built earlier, got them crazily to bolt their name on to YEO back when we only had like 156 members. It helped that I knew Bernie Goldhurst, Inc.

Starting point is 00:14:23 And Bernie was a graduate from MIT, so I pieced all that together and managed to both the Ink Magazine brand and the MIT brand onto YEO. And it was there for that first executive program, we originally named the Burthing of Giants, launch of 91, is develop, I began developing the curriculum for scale-ups. We called them because that. back then, which was a technical term, David Birch at MIT at coin for these mid-market fast-growth

Starting point is 00:14:52 companies. But there was all kinds of information about startups. I have an MBA, which is supposedly teach you out or run an elephant, as David Birch called the large companies. But there wasn't anything, Ryan, at all for what do you do between startup and elephant, we called gazelles, which I named my company after. And so it was the curriculum that I built and then refined over the 15 years that I ran that program. They still let the old man come back and teach there today. And that then was the Genesis for the book in 2002. And again, I wanted to bolt a brand on to what it is that we were doing. And a good friend of mine, John Anderson's wife turned me on to the book Titan, which was the, I think, the seminal biography of John D. Rockefeller. And I was just blown away by his discipline.

Starting point is 00:15:46 And the things that he had naturally decided to do that were critical to scaling standard oil were exactly the things that I had discovered were necessary in order to scale up. And so it made sense to bolt that brand on to the name of the book, Mastering the Rockefeller Habits. After all, he is the wealthiest guy on the planet historically next to Putin, which is a joke, but probably not a joke. And, you know, it has served well. We've later called it scaling up. So scaling up is now, I feel like ubiquitous. It's out there, especially for the people looking to build their business. And scaling up is organized around the four decisions a leader must address.

Starting point is 00:16:35 And I want to focus on three of the four of them for this particular conversation, if you're cool with it, Vern. And that's the first three. Primarily the first three because of my show is called The Learning Leader Show. It's about focusing on those people who are, leading, serving others, the ones that have made that conscious choice to lead. And so the four are just all now some people, strategy, execution, and cash. We're going to focus on the first three. And let's just start in order for that when it comes to scaling up.

Starting point is 00:17:03 So people, it's really about attracting and keeping the right people as part of your team, and certainly when leadership is involved. Can you, we'll go in order here. Can you explain when an organization, wants to scale up first and foremost about the importance of its leaders and its people. Well, first I want to give a shout out to Jim Collins because it was really Jim's model, Ryan, in his book, Good to Great, where he said, hey, if you want to go from good to great, you've got to do three things. You've got to have disciplined people, engaged in disciplined

Starting point is 00:17:39 thought through disciplined action. And that really modeled upon our people strategy and execution. And then because the first law of entrepreneurial gravity gross sucks cash, we then just added cash to the particular model. So really a nod to Jim Collins. He was the one who I think really discovered the underlying framework there that we've borrowed. And he's remained a good friend. And we credit him a lot, obviously, in our work that we do. But anyway, he was right. You know, your first decision is you've got to get the right butt in the right seat.

Starting point is 00:18:16 seats. He just didn't give us a list of seats. So we created one. We call it our face tool, our function accountability chart. And, you know, if you get that team right, your life is easy. If you don't get that team right, your life is not as easy. And so it's about getting those right butts in the right seats. And we then teach the leaders how to choose those people. And we really have four criteria. By the way, it's the opposite of a job description. That's why we're not big fans, and we hope nobody waste their time putting those pieces of paper together. Job descriptions? Yeah, job descriptions.

Starting point is 00:18:54 Because they really just list skills, which we think is the least important criteria that you're going to use to choose who you're going to partner with. And so the four in order is first will. You have to hire based on, you know, hiring people who've got will. Will to learn, will to succeed, will to persevere, will to de-reveal. will to deal with failures. Now, there's a lot of that that's going to happen in the scale-up environment. And you can't train that. I think you've got to find people that already have it. And we utilize the top grading methodology that I discovered way back when I did a thesis at my MBA on employee selection. The second then is that they fit your values. And it was great. Just last

Starting point is 00:19:39 week, Ryan, I had a chance to catch up with Scott Foucaw at Lassian. You know, Scott. He and his team attended my first workshop in Sydney, Australia at Alassian. In 2005, I think they only had like 50 employees at the time. Today he's got 3,500 employees. The company's market cap is $27 billion. And Scott and Mike still owns 75% of the company. So they're the new multi-billionaires in Australia. And so I had a chance to see Scott last week, and he came in and spoke at an event I was running

Starting point is 00:20:14 in Vegas. And he shared that back when he had 50 employees, he used the gym. We taught him the Jim Collins Mars Mission Discovery exercise. And he figured out the core values for Atlassian. And he said those have not changed from 50 to 3,500 employees. And they've been a key criteria that they've used to hire. Back to my insight last Friday, I pointed to the video. You can go to Atlassian's core values, landing page and you're going to see a really cool video that they've produced about their core values and you'll see how they've listed them as phrases using the language that's common inside of Atlassian and they use those then to attract and select so we think the second criteria is values the third is results you know at the end of the day this person might

Starting point is 00:21:08 demonstrate the skill to call on high-level executives in the telecom industry, but if what you need is to generate a half a million or five million in revenue from that salesperson, and they've never done anything close to that up to this point, why do you think they're going to start doing it now? And then last is skill. And it's so fungible with everything changing so much if you don't have the will to continue to update your skill. And I can guarantee you if you've got the will, you match the values, and you've been getting results in the field you're being hired on, you can guarantee the skill is there.

Starting point is 00:21:43 So those are the four criteria that we get down to detail around helping startups, make sure they're hiring the right people as they scale. So that people piece is critical. People, I was fortunate enough to have Jim on the show. I know he doesn't do many interviews, but it was great. He's going to stop me in my tracks, Vernon, said, you're talking a lot about the what and the why. And those are fine.

Starting point is 00:22:08 What you really need to first think about is the who. The who is everything. The who will make the difference in everything else. And it really showed me, it helped me be more intentional, even in my personal life with friendships and relationships and who I decided to partner with in business and work with, that that was, if you get that right, you are so far ahead of where you would be. if you're just average at the who well and that's why that opening question that regis mckenness team asked me back in 1983 you know take a piece of paper out and you say it may be common but boy it sure

Starting point is 00:22:52 isn't in the audiences that i address over the years i don't see too many people physically saying all right i need to get something done let me take a piece of paper out and be as intentional to figure out who those key, whose are and get them bolted on to whatever activity is that you need to achieve. Second is strategy creating a truly differentiated strategy in your space if you want to scale up. Can you define, because I think sometimes this can get, people can confuse strategy or people are, I talked to Robert Green about this. They're more tacticians than they are strategists. And so they don't fully know how to formulate a strategy or put together a strategic plan. For someone who wants to scale up, what does it mean when it comes to strategy?

Starting point is 00:23:44 Yeah. And that was a huge difference between Ryan the first book, Mastering the Rockefeller Habits and scaling up. Mastering Rockefeller Habits was really about execution planning. It didn't have a lot of depth around this strategy piece of strategic planning. So the first thing we had to do is really break that apart and realize, The strategic planning is really two separate activities that require two separate teams. There's their strategic thinking piece.

Starting point is 00:24:13 And then there's the execution planning piece. A lot of folks are good at putting the execution plan together. But if you don't get the underlying strategy right, you're really going to waste the next three to five years of execution in the marketplace. And so if we come back to that, we created this kind of, I call it unified theory of strategy. And look, we borrowed heavily from Harvard. I think Harvard's got the top strategy thinkers in the world from Michael Porter to Clayton Christensen to my favorite Francis Fry in her book, Uncommon Service. But I want to come back and I want to anchor it with one idea or really two.

Starting point is 00:24:49 The first is you said it's got to be different. And everyone says that. But if you hire the same people as your competition, if you price the same way as your competition, If you deliver the service the same way the competition does, you can't claim you're different. And that's the big thing that we really push with the audiences that we work with. You've got to do everything different. And that's why Michael Porter's foundational article titled, What is Strategy? We think is a must read on an annual basis.

Starting point is 00:25:26 And it's at the how level, the activity level, as he called it, where real differentiation occurs. The second is we think strategies rooted in a very simple idea, and that is what's the word or two you own in the minds of the marketplace? And most companies don't get around to achieving that. You know, it's easy when I bought my first car after the birth of my oldest son, Cameron, we wanted the safest automobile, and that was clearly at the time of Volvo. Volvo, no.

Starting point is 00:25:58 Nobody owned automobile, but Volvo owned. in enough minds the idea that they were the safest. You know, today if I want to do search, it's Google. And if you want to cripple your competition, you steal their word, which is what Google did from Yahoo. And Yahoo never recovered because nobody could figure out, as Clayton Christensen said, the job I needed to hire Yahoo to do. I know what job I need Google to do, which is, you know, I haven't questioned and I need to search for an answer. And they can simply do that. And so strategy at some level really boils down.

Starting point is 00:26:37 And it's our first decision of the seven you need to make to nail kind of a competition-crushing, you know, industry-dominating strategy, which is what is this word or two you want to own? And you've chosen to own the phrase scaling or scaling up? You got it. In fact, I had actually made a mistake. You and I were talking about Tim Ferriss, by the way, before we got on this. And I'm a big Tim Ferriss fan. And he did it. He managed to coin for our.

Starting point is 00:27:09 You know, Stephen Covey, seven habits. Tom Peters, the word excellence. And everything he's done has been around that. So I thought I was the growth guy. And I own it. You know, any place you search on the web for the growth guy. But nobody cares. I mean, you got to pick a word or two that matter.

Starting point is 00:27:27 And, you know, I kid, when's the growth guy? last time somebody was looking for a growth guy unless it was Viagra related. You know, that's, that's not my deal. So we had to go back to drawing board and realize that the term scaling up and scale up. So I own scalingup.com and scaleups.com. And we're getting about, you know, dominating, you know, that space globally. Third part is execution. So driving flawless execution as part of this.

Starting point is 00:27:59 the four decisions a leader must address to scale up an organization? Yeah, precisely, because you can sit around and dream up a lot of stuff, but until you act, you know, it's all just hot air. And everyone will tell you that the real failure happens at the execution phase. And it becomes particularly difficult, Ryan, as you add people. Because as you rhythmically grow the team, you geometrically increase, mainly. the communication challenges. You know, anyone who's in a serious relationship knows what I'm talking about. And that's just with one other person. You start adding 10 or 100 or, you know, 3,500 like Scott has and Mike at Atlassian.

Starting point is 00:28:43 And that's why the thing we became real, you know, well known for, if it was the one page strategic plan under the strategy piece, it's our communication rhythm. This meeting rhythm of day, week, month, quarter, year, particularly the daily huddle. And it is, it's critical. There's, isn't a company in Silicon Valley that would think to scale a nanosecond without, you know, the typical scrum or agile daily huddle. Can you, let's, let's expand on this a bit because I think this is a topic that is, I'm asked about a lot. Most meetings are terrible.

Starting point is 00:29:16 They're not run well without a distinct plan and actions and goals. Can you describe a little bit more? So let's, let's take it to, Vern, actually. there is a mid-level manager listening right now who works at a big business, and they've gone to a lot of really bad meetings. And they want to change this. They want to be the reason that their company actually has great meetings. And for that person who has their regular Monday morning meeting with their team, because that's what their boss did. And they go to other meetings because they have to. But they want to be the change that actually impacts the rest of their organization. What are some ideas that you would give to that very person to change the course of meetings within their company and they can start it with them?

Starting point is 00:30:03 Well, first, if you want to move faster, you need to pulse faster. And so you're talking about the standard weekly meeting. The problem with the weekly meeting is it gets clogged up with a whole bunch of tactical questions and issues that if you can clear those daily, they're not going to clog up the weekly. So that the weekly can be much more focused on priorities and kind of the two or three big decisions that need to be made, a la setting up what is going to be the sprint for the next week or two if we're using kind of the agile or scrum methodology. So that's number one. Number two, you know, we were designed, you know, we've been around on the planet for 200,000 years. 100,000 years ago, we developed the spoken word.

Starting point is 00:30:46 We've only had the written word for 5,000 and we've only had Excel spreadsheets and PowerPoints. for about 30 years. So I really look at a meeting and I measured in terms of the amount of talk time of everyone in the meeting. Instead, if it's people sitting around listening to folks drone on through Excel or PowerPoint presentations, you know, shoot me now. It's one of the reasons why Jeff Bezos said Amazon gives everybody, you know, 15 minutes at the front of a meeting to read a review whatever it is that they're going to discuss. Because he's assumed they didn't take the time to look over the contract or the press release. They use cleverly these press releases as a way to drive projects at Amazon.

Starting point is 00:31:34 So it gives everyone a chance to kind of read it up front. And then what you want to see at a great meeting is heated debate and conversation. And then that ties really to the last two items, which is, and it's what Google discovered and drove effective teams. And they studied it for two years in a thing called Project Aristotle. And they came out with only two factors to determine the effectiveness of a team.

Starting point is 00:32:02 And one of those was, seems so simple, equal talk type. And what's neat about, for instance, Zoom, is you can have a Zoom meeting. And at the end of it, you can tell, they'll give you stats on how much time each person talked. And what typically happens at meetings, You got eight people.

Starting point is 00:32:23 There will be the same two or three that dominate every conversation, every meeting. And who gets left out, generally speaking, the women and the introverts. And lots of research around particularly the importance of getting the introverts to contribute. And so in EO and YPO, we run these things called forums. You know, you've got eight type A, you know, CEO, entrepreneur, president types. And if we didn't have a timekeeper, and a lot of people don't realize that that's the foundational principle of these forum meetings, you have timekeeper. And the meeting is structured so that everybody gets roughly equal talk time. And so our daily huddle is structured so that everybody in that 15 minutes gets equal talk time.

Starting point is 00:33:15 And then the last component is, and I spent a dozen years studying it. I wanted to understand why people would start the daily huddle or start doing weekly meetings, and then they would stop. And I found out it boiled down to one thing, generalities versus specifics. If in meetings, you're saying, hey, what's up? And you're getting a whole bunch of generalities, again, end the meeting now. And so the specificity of what is shared is critical. So those are some of the components that we detail around how do you run an effective meeting rhythm within the organization.

Starting point is 00:33:55 What's a daily huddle sound like? What's it look like for the person who's never done one before? And they're thinking, well, wait a second, Vern, I do the weekly meeting. I prepare. I get ready. I'm trying to do a good job. What do you mean by this daily huddle? Can you expand on that and how someone could potentially?

Starting point is 00:34:11 finish this episode and implement this immediately to change the course of their group, the team that they're leading. Well, obviously, and I'd encourage them to read the meeting chapter within my book scaling up to get the real details. But it's first, if you've got eight people, it's going to average a minute per person. So five to 15 people, it's going to be only a five to 15 minute meeting. We're talking about a bathroom break here, a restroom break. and out of an eight or 10 or 12 hour work day, everyone has got that space.

Starting point is 00:34:44 And then it has three agenda items. And you want to go around the group of eight each time. So they're going to get three chances to talk equally, roughly 20 seconds apiece. And so I'm being very precise about it. And the first round is what's up? What's up over the next 24 hours specifically? You know, I'm working on a contract for Bill over at, Acme for 2.3 million. And that way, everyone could say, wait a second, ah, it's Acme, it's

Starting point is 00:35:14 2.3 million. When did it change from 2.5 to 2.3? I thought we were dealing with Erica there instead of Bill. By sharing those specifics, we can avoid the minor train racks. And I don't have to read 12 dozen emails to be staticed because I'm hearing it real time. So first, what's up? Mainly your number one priority. So the leader of the team, that mid-manager, you're mentioning in that company. It's like getting the headlines of what's happening. Just like Warren Buffett reads the headlines of 50 major magazines, you know, newspapers every morning to know where he's going to invest. This way, you know where you're going to invest your next time. The second round, 20 minutes, 20 seconds apiece is what are the updated daily metrics that are driving the business?

Starting point is 00:36:00 And it can be simple things like number of open positions. Right now, the number one challenge of all the leaders who are serving globally is attracting and keeping talent. So you ought to be sharing that stat every day. And if I'm hearing that I've got 10 open positions today and I hear that same number tomorrow, Wednesday, Thursday, Friday, the squeaky wheel is going to get grease. And by hearing it every day, I'm more likely to act now than if I hear the number once a week or I hear it just once a month. So I want to hear data that really drives the business. And then the third agenda item, again, everyone goes around 20 seconds apiece, is where are you stuck? Where are you constrained?

Starting point is 00:36:44 It's the essence of the book, the goal, the theory of constraints. What is in your way over the next 12 hours that is keeping you from being effective? And by getting those verbalized, the most important person it helps is the person who verbalized it. We know from the brain research that if I can verbalize what's got me anxious, I'm more likely to be able to deal with it logically than get, you know, having an amygdala hijack, as they say. And so three to 10 items. What's up? You know, any daily metrics and where are we stuck? And man, in eight minutes, I have shared.

Starting point is 00:37:25 The rule is every minute you're in the daily huddle should save you 10 minutes. So an eight-minute daily huddle ought to save you 80 minutes of having to read other emails and status. And if nothing else, trying to track other people down. And you do this on person and on Zoom? If your team's distributed not all in the same office? Yeah, we really recommend that if you're going to have some people that are regularly on the road or not in the office, for everybody to log in to Zoom. Gotcha.

Starting point is 00:37:55 Or whatever is your platform. That way, there's kind of a quality. There's nothing worse than everyone standing around one of those conference phones. Yeah. And you want parity. I got you. Makes sense. Okay.

Starting point is 00:38:09 Really good. Now, there's three barriers you've written about to scaling up. And so I'm going to introduce them at a high level, and then I'd love for you to dive in, just like you did there with the four decisions of leader must address. Is that cool? Yeah. That's cool. So first one is leadership, so an inability to staff grow enough leaders throughout the organization.

Starting point is 00:38:27 So that's the first. So I'm just going to introduce it and then we'll hit each one. Okay. Then the next one's scalable infrastructure. So system structures, they handle complexities. And then marketing, the ability to attract new customers, talent, advisors, key relationships. So let's start with leadership. I've talked to leaders who run businesses of all shapes and sizes. And this is absolutely one of them, especially one where the primary leader of the business has a lot of relationships.

Starting point is 00:38:52 It's still very active in doing the work. And they see, I don't know how I could. how I could scale back my, I guess, customer time or client involvement, even though I need to be working on the business instead of in the business. What advice do you give to that person? Because this is one of the barriers to scaling up that so many people deal with. You know, you stated it beautifully, Ryan. And I'm going to borrow what I think is probably the best titled book ever. And that's Marshall Goldsmiths. What got you here won't get you there. And one of the guys who grew up underneath Regis McKenna is the famous Jeffrey Moore, a dear friend of mine in Silicon Valley,

Starting point is 00:39:31 who wrote Crossing the Chasm. And he was absolutely right. When you go from the startup phase to what we're calling the agile scale up phase, you want to scale and remain agile, there really is a gap. It's not a smooth curve. And literally, what got you here, which is in the beginning, you needed a lot of ego, you needed to say yes to every opportunity or person you wanted to hire that came along. and you had to have a lot of answers. In fact, you answered your email. When you cross that chasm, you've got to let all of that go. The early clients you were able to garner, if you use them as references, they'll actually

Starting point is 00:40:09 turn off the clients that you need as in order to scale. You've got to begin to say no 20 times more than you said yes. You now have got to let your ego go where you need a lot of it in the very beginning. and where you had a lot of answers. If you still think you have the answers, that's what's going to crush you. Your jobs really get the right question and then find the right people that can get to you that answer. So almost everything that you did instinctually in the startup phase will crush you in the scale up phase. And so number one's awareness.

Starting point is 00:40:48 And then number two, you know, the constraints right between your ears. and it's why I highlighted Bill Gates. And I think it's impressive that Microsoft, here, 44 years later, is the number one or number two market cap company in the world right next to Apple, you know, beating the young kids, you know, the Amazon's and the Facebooks and the alphabets in the marketplace. And it was Bill Gates realizing that nothing interesting can come out of that operating system called your brain that you don't put in first.

Starting point is 00:41:20 And so his routine of these think weeks, his record being 112 books, manuscripts, PhD thesis, white papers that he would absorb over a seven-day period is really what allowed him and Microsoft to remain relevant. And that's the key word, is what are you doing to remain relevant? That really comes back to this idea that leaders are readers. And so for that person listening who's in that space who is doing a lot of the work, who struggles to let go because they've done such a fantastic job of building something, which you know this is common. Yeah. And they're saying, well, wait a second. I can't back off Vern because that's a significant portion of revenue for our business here. What do you talk?

Starting point is 00:42:07 Like, how could I do that? And to them, I'm sensing you're saying, well, now your job is develop other people within your organization and maybe attract. some that could do the future of that work. Am I hearing you right? Partially, but I think here's where I pivot to Marcus Buckingham. Okay. You know, Marcus... Just had him on the show, yeah.

Starting point is 00:42:30 Yeah, and to me, Marcus created one of the two most important ideas around leadership. And he probably shared this. And first, he really understood the difference between strengths and weaknesses. And a strength is not that you're good at it, but that, as you do it, it gives you strength, that gives you energy. A weakness, even if you're great at it, is anything that drains your energy. So I think one of the things we have to let go up is this idea of time management. Yeah, it's important, but time's limited. We're really in the energy management business. And so for me, it's like the lean initiatives. It's not about doing

Starting point is 00:43:11 the important, the stuff that adds value faster. It's getting rid of the waste. And so let me just give you a concrete example. One of my favorite students, entrepreneurs over the years, was Randy Aman. Randy built a company called ABL Cables out of Baltimore. And I love the title of his card, Ryan. He was founder and head of customer service. And what he realized is that was the only piece. Like Steve Jobs really only chaired the marketing function at Apple, even though he was ICEO,

Starting point is 00:43:42 Tim Cook ran everything else in that company. That's why it was pretty easy for the organization to pivot to Tim as CEO upon Steve's unfortunate passing. And so Randy was clear, hey, I'm founder, but the only thing I like doing on our function accountability charts, the customer service piece. And he brought in a CEO and a CFO and a CFO and a CFO and VP sales marketing. He then scaled the company, sold it for a gazillion dollars. And he's one of the rare entrepreneurs that stayed on. And today he is one of the senior executives of a $10 billion division of a $40 billion global conglomerate. You can, you know, Google Randy Aeman and Snyder Electric.

Starting point is 00:44:28 And you'll see his title is EV of customer experience, you know, the customer service site. So I'm not asking for a leader to give up everything. but it's to really get in touch with what part of the enterprise gives you energy and to really begin to clear the calendar and do more of that and then get everything else off the plate. And obviously Marcus Buckingham's second biggest idea is that good, you know, good leaders play checkers, great leaders play chess. And so this tendency to hire people like us is the problem. You need to actually hire a team of weirdos.

Starting point is 00:45:13 You need to find somebody who actually gets energy out of that, which makes everyone else in the organization tired. And that's why you want chess pieces, not a bunch of checkers. And so those are the two big ideas that have helped at least me and the leaders that we coach scale. Wow. Very good. Second is scalable infrastructure. So this is the systems and structures to handle complexities and communication decisions that come with the natural thing that happens, which is growth. What, what, this is one of the barriers.

Starting point is 00:45:49 So how to, how to handle this as somebody who's looking to scale right now. Well, it, you know, it starts with things as simple as when you move from one floor of a building to you've scaled enough, you need to take the second floor. Yep. You have to realize no communication. occurs between those two floors. If you don't consciously, for instance, close off the restrooms on one floor, make sure everybody goes to the same floor so they bump into each other. You increase and maintain the collisions, you know, within the organization. And then you compensate by putting the break room on the other floor. So for instance, Ryan, I got to tell you, I have never visited

Starting point is 00:46:33 a better designed office space than Bloomberg's headquarters in New York City. And one of the design elements, I've never seen in any other building, is that everybody who enters the building has to go to the venerable sixth floor, which is where all the free snacks and drinks and meeting spaces are. And so everyone's colliding there. Now, more importantly, if you're on the three snacks. 22nd floor and you want to go to the 20th floor, you can't go directly. You have to go through the sixth floor. All elevators lead through the sixth floor. And that causes these collisions

Starting point is 00:47:15 that I think are important in what Michael Bloomberg, a great entrepreneur, has created. Now, the bigger topic, and by the way, where people physically sit is such an important decision that entrepreneurs make, I think, too lackadaisically, or all leaders make too lackadaisically. You really want to be conscious of who is physically near the right people in order to drive the business from a process standpoint. We could get into that later. But the hot topic is around organizational structure. And, you know, the fundamental there, detailed in one of my favorite books, reinventing organizations. So really the best books called Outrageous Empowerment by Ron Love it. And you should have Ron on your podcast. I can make an introduction. But he scaled,

Starting point is 00:48:06 he scaled a 1,500 person security private security guard company across Canada and North America. And of those 1500 security guards, there were eight what you would call managers, leaders, including Ron himself, in the entire organization. In essence, our old organization, our old structure mirrored our human skeletal system, head, shoulders, arms, fingers, and toes. And that was really great for organizing muscle, for organizing might, which is what we need to do last century. The thing is, we're not doing that this century. We're organizing not backs but brains, not muscle but mind.

Starting point is 00:48:50 But our organizational charts didn't change. And so it's what we call the new Agile-Up Orchart, which looks more like the human brain in its design than our human skeletal system. What does that mean? The reality is nobody in the 21st century wants a manager. In essence, you want everyone to be a leader, not just the top leadership. And that is a significant change. By the way, that middle, that middle management, cost you about 30% of your total compensation. And that's what Ron was able to strip out of his 1,500 person security guard company. And when he sold last year, he sold for 24 times earnings as a privately held company,

Starting point is 00:49:40 which, as you know, is twice what public companies are worth in general. Yeah. So a lot of new stuff that we're teaching around organizational structure. So what does that look like if I actually was envisioning, I've seen org structures. We all have. We've seen who we report to and who they report to and the top and the middle and the bottom and how it sounds like that is out of date. What does it actually look like with an org structure that you put in place or that

Starting point is 00:50:10 Ron put in place prior to him selling that business? Well, it looks exactly like what General McChrystal put in place to finally get on top of the terrace, the team of teams. It's 6,000 special ops individuals well-trained in teams of five. Most people don't realize that special ops teams are four or five, not eight or nine. And then 28 generals and not much in between. And he would then have a daily huddled, not of the generals, which is what he did before, but of all 6,000 special ops, 90 minutes every day, deep.

Starting point is 00:50:50 briefing the 10 missions that they did the night before. And they were able to go from 30 missions a month to 300 missions a month by empowering through training and technology the frontline teams, which are our special ops teams, to go out and get the job done. Now, that's how Spotify is structured. And again, if you look at the book, Reinventing Organizations, Part 2, skip part one. It's a bunch of theoretical mumbo-jumbo, skip the Ford, Ken Wilbur. I don't know what happened when he wrote that. I'm a big fan of Ken's, but it's just really gobbly goop. But go right to part two. And you're going to see from a manufacturer in France to a software company in Seattle to this, this healthcare organization called Bootsar, out of the Netherlands, which today has 14,000 nurses

Starting point is 00:51:45 across China, Germany, the Netherlands, and the United States. One of the hardest positions, by the way, to attract and retain are nurses. But it's 14,000 nurses divided into kind of special op teams with only 50 people that you would call a leader manager at headquarters and 18 coaches. And so this isn't theoretical anymore. And what my final reference is for those that are running large companies listening to this, I'd encourage everyone to go to the November issue 2018 of Harvard Business Review and the title story written by Gary Hamill, the great strategy got out of Chicago and Michelle, his assistant or something like that, called the end of bureaucracy. It doesn't mean you're going to end hierarchy, even as special ops teams, you know, the five sort each other out pretty quick from a hierarchy standpoint. But you've got to get rid of bureaucracy.

Starting point is 00:52:41 And so, and the key lead story is Chinese, you know, largest white goods manufacturing in the world called Hire. They, with 74,000 employees, their great entrepreneurial leader stripped out, Ryan, all 10,000 managers. And by the way, there's, right, by the way, there's usually, I can guess a number of managers. You have the number of employees, you divide by seven because we've always had that seven to one ratio. And so with 74,000 employees, they had.

Starting point is 00:53:11 10,000 middle managers stripped them all out and reorganized the balance of the employees into 4,000 micro enterprises a la team of teams. So from our military to health care to manufacturing, this isn't theoretical. This is the reality of the 21st century. What do you do with those 10,000 managers though? Are they reallocated as player coaches? What's the, I love managers. I love people who want to step up and help other people.

Starting point is 00:53:44 I would assume there's a place for these types of people. Well, you just don't need as many. You can, where you might manage seven, you can coach 40. Gotcha. And, you know, if you, look, if everyone in the company. In your player, you mean, you're still playing. You're still doing the job, I would imagine. Yeah, I think what's interesting is a lot of managers miss the action.

Starting point is 00:54:09 Yeah. Want to get back out in the field. Yeah. So you've got to change some things around compensation and you've got to quit making the only way to get quote promoted is by having more people to manage, which was something 3M figured out decades ago. I first learned when I was leading the strategy sessions to the Post-it node division. You know, I got to know Art Frye who invented the Post-it note and this was 25 years ago.

Starting point is 00:54:36 And they figured out that there needed to be. some alternative promotion strategies beyond your traditional management track. Okay, third one's marketing. I know I went a little bit long, but this is because it's so useful and really good. So it's great. The third barrier to scaling up marketing. Need to be able to attract new customers, talent, advisors, and key relationships. Explain to me this aspect of trying to scale your business yet, not doing it well from a marketing perspective.

Starting point is 00:55:07 Well, this goes back. So my senior, the senior, you know, professor at MIT Sloan School, Dr. Ed Roberts, who always gave me air coverage running our Burthing of Giants program there on the campus. He did the original research, Ryan, around high tech fast growth companies. And he studied a bunch of firms that started out of MIT. And he wanted to understand what was the difference between those that scaled and those things that, and those it scaled more rapidly. And one of the key findings was these techie-run companies that would be formed by a group of techies, those that were smart enough to have at least one person on the team focused on marketing scaled much further faster. That clued me in. I began to look at it at companies in all sectors. And sure enough, my view is the single most important function to scaling is marketing separate from sales. And it's realizing you need marketing not just to attract customers, but talent, attention, investors.

Starting point is 00:56:17 And I think it's one of the reasons why Steve Jobs gravitated towards that. He ran the three-hour marketing meeting every Wednesday afternoon at Apple. And he quick early on, reached out and had one of his first coaches, Regis McKenna, who was a guru in marketing. So that's why we think it's so critical. Side note, what's interesting is the second most important function for scaling is accounting. And that's the one that really catches everyone. Once you say marketing and you explain it, then folks, it's a light bulb that goes off and they get it.

Starting point is 00:56:53 And the first thing I encourage them to do is set up a separate marketing meeting separate from sales. But when you say accounting, that's the one that catches everyone by surprise. but I like to point out the second law of entrepreneurial gravity is buy low sell high and everyone laughs but hey we violated every single day because we don't have granular enough data to know buy customer by location by skew by service line where we're making money and where we're not and I'm going to have dinner tomorrow night with with Tom Meredith who was the guy that the board brought in when Michael Dell, you know, first blew up Dell. And they fired everyone but Michael and he was 26 at the time.

Starting point is 00:57:41 And they brought in Tom Meredith, I think 15 years his senior. And Tom was his first legitimate CFO. And the first thing Tom did was calculate for Michael, hey, I want you to, you know, let's not slow growth, but let's grow where we're profitable. And he gathered the data for Michael and he's, you know, Michael got it immediately. When you see some of the unprofitable stupid stuff that creeps into the business as it scales, it's pretty easy to figure out what to get rid of. But most don't have that kind of visibility because they're not getting granular enough information from their accounting. So we've encouraged just to add one person to accounting.

Starting point is 00:58:23 And I've seen that double profitability and. cash flow in 12 months. Vern, I think you've referenced more people and their work than anybody I've ever talked to. I mean, where does this encyclopedic brain come from? How have you developed? Is it reading relationships, all of the above? I mean, it's really remarkable to hear how many, in a less than an hour conversation, the variety of people and their work that you've mentioned that has had an impact on you.

Starting point is 00:58:53 Well, you know, they always say it takes a village to raise a child. I think it takes a village of gurus to scale a company. And none of us have all the answers. And so we've really focused on Ryan picking, choose a curating, if you would, the best. There's 13,000 business books written every year. My job is to curate and figure out what are the handfuls that are actually useful. And I've been lucky starting with that MIT program. I've got to host most of these.

Starting point is 00:59:26 We run these scale-up summits. Our next one's in Atlanta here in May. And it's a chance for me to spotlight a dozen of who we think are the up-and-coming thought leaders. I hosted Seth Godin, Pat Lanchone, and Jim Collins at our first growth summit in 2005. You know, we caught them early. And so we like to pride ourselves that we're able to expose our world, our coaching partners, and our clients to the thinkers who are going to be hot a decade from now. And that way you can outlearn your competition. And that's the only really competitive advantage.

Starting point is 01:00:02 I reference back to Microsoft. And I think Bill Gates has spoken recently to this, that his CEO, he brought in, made just one fundamental change. And that is changing Microsoft from a know-it-all culture to a learn-at-all culture. And that's what they credit for them tripling their market cap over the last five-year. years like Apple has. One funny question. If you got a second, Vern. There's someone earlier in their career right now, and they're listening, their mind's

Starting point is 01:00:36 kind of blown, and they're sitting across from you in your office right now. And they're saying, Vern, I want to build a remarkable career, one that I'm proud of. I want to impact the world in a good way. I love studying about leadership because I want to lead other people. And I want to live a good life. What is the last piece of advice that you would share with them to help accomplish those goals? Yeah, we're going to end where we started. Perfect.

Starting point is 01:01:05 A piece of paper out. And, you know, make a list of who you need to hang around with. Your success. I mean, it's so old the advice, but your success is the sum total of the people you hang out with. So I'll tell one final story. I had read, you know, back my dad exposed me, the Carnegie. and all of those folks. And Andrew Carnegie was poor. And he knew, though, it was important to live in a great neighborhood. So you met the right people. And so when I went to Wichita State

Starting point is 01:01:34 University, I didn't have any money. My dad's company had since blown up, which is a whole another story. And so I got a job. And I had heard that the CEO, Don Simpson, lived in the neighborhood in Wichita. And I don't know, I'm, I'm a few weeks in, and I bump into him in the hallway, and I asked if I could live with him. And he's like, what? I said, well, you got this great place. I told him how Andrew Carnegie said, because I was living in some dorm, you know, at the university. And he said, well, let me go ask my wife, Jerry. And he comes back the next day, And he said, all right. And Don ended up being a, he was a, his son was a member of YPO.

Starting point is 01:02:21 Don knew everybody in Wichita, you know, the Carney brothers who founded Pizza Hut to Tom Devlin Renicenter to Willard Garvey, that one of the Forbes 400 families. And me being in living in the right neighborhood and hanging with the right guy, Don Simpson, the CEO of the company. I met all of those people. And they became great supporters and mentors of mine. in Wichita. And so, you know, identify who the players are and figure out a way to, you know, ingratiate yourself

Starting point is 01:02:56 into the world. And you can't help, I think, but have it rub off. That's great advice. Sometimes just the give can be just giving of your attention and showing you care and sending a kind email to say, your work has impacted me in this way, this way, and this way. And, I mean, I'm sure you receive those all the time. I receive those. I'm fortunate.

Starting point is 01:03:16 And it means a lot. It's the fuel, man. Like, it is fuel to keep hustling and keep working is when you hear directly from people whose lives you've impacted. So that's a way to give before you make any ask. And I think that's a way to get into those people's lives that you want to. Vern, this is awesome. I know we went a little long.

Starting point is 01:03:36 I really appreciate it, man. And I certainly want to continue our dialogue as we both progress. Where would you send my listeners to learn more about you online? Just remember the name of the book, Scaling Up.com. So go to scalingup.com, and we've got all of our tools are for free and 10 different languages, free chapters, all kinds of things there to help you out. Love it. All right. All right, Vern.

Starting point is 01:03:59 Thanks so much, man. Look forward to talking again soon. You got it. Thanks, Ryan. All right. Wow, what an interesting conversation with Vern. Initially, we blocked off 30 minutes for this one based on both of our calendars. however we happen to go over about double that.

Starting point is 01:04:15 I found him to be so compelling, certainly well read. You can tell he has built relationships what feels like every leadership mind in the world. He named a lot of them, which I found to be pretty interesting as far as giving credit to others and using bits and pieces from everyone in his life

Starting point is 01:04:37 to then make up his own strategies and philosophies. on leading and scaling. Fascinating stuff. I hope you enjoyed it as much as I did. If so, I would love it if you would spread the message. Tell a friend or two, perhaps one that has never listened to the Learning Leaders Show. This is a good one to start. Vern Harness is really compelling when it comes to how to grow a business.

Starting point is 01:05:02 Thank you once again for continuing to give me the opportunity to do what I love on a daily basis. I will forever be grateful. Thank you so much. Talk with you. Next week. Can't wait.

The Learning Leader Show With Ryan Hawk - 309: Verne Harnish - Scaling Up: How To Grow Yourself & Your Business

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