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

Scaling Up - Book summary

Most businesses follow an S-shaped life-cycle. They start small (like mice) and many die. A small percentage successfully scale up rapidly (like gazelles) into companies worth millions and even billions. Some eventually get sold or slow down like elephants. This book by Verne Harnish focuses on a company’s growth stage and shows you the step-by-step process to successfully grow your business by 10 times. In this free Scaling Up summary, you’ll get an overview of the 3 key obstacles to growth, the 4D framework to overcome them and the 4 foundations to scale up your business.

Scaling Up summary_book overview

Scaling Up: An overview

The 3 Key Barriers to Growth

A business of 1 person operates very different from that of 10, 50 versus 500 people. To grow successfully, business leaders must overcome 3 key challenges.

Leadership

Hire and develop other leaders to do 3 things throughout the organization:
• Delegate effectively to the right people and put in place systems for accountability, measurement, feedback and rewards.
• Stay in touch with the customers, marketplace and frontline staff to predict and respond to emerging trends.
• Ensure everyone is moving in the same direction and repeatedly doing what’s needed to achieve the company’s goals.

Scalable infrastructure

Build physical and organizational systems and structures (e.g. phone systems, accounting systems, customer databases etc.) to connect the evolving/emerging parts of the business and smoothen the communication and decision-making processes.

Market dynamics

You face different competitive pressures as you grow. At $1-10 million turnover, a company needs more cash for growth and to tide over expensive mistakes as it refines its niche. Beyond $10 million, it’ll face new competitive threats and customer demands as well as greater internal complexities and costs. At $50 million turnover, it must run like clockwork to consistently attract/retain talent, satisfy customer needs and generate predictable profits.

The 4D Framework

To transform from a small startup to a huge profit engine, you must develop 4 sets of habits and routines:
Drivers: Drive the implementation of 10 Rockefeller Habits within your organization. This can be accelerated with coaching, technology and continuous learning.
Demands: Balance 2 conflicting demands—People vs Processes. Concurrently improve the company’s reputation with 3 groups of people (employees, customers and shareholders) while you improve productivity with 3 processes (Make/Buy, Sell, and Recordkeeping).
Disciplines: Build 3 disciplines that support effective execution: set priorities; gather data and build a meeting rhythm.
Decisions: The bulk of the book focuses on applying the concepts above to 4 key foundations needed for lasting business growth: (i) People, (ii) Strategy, (iii) Execution and (iv) Cash.

Scaling Up summary_4 Questions
The Scaling Up book is like a detailed guidebook that walks you through various tools for each of these 4 foundations. We’ll now give a broad outline of the key concept/components for the 4 foundations of People, Strategy, Execution and Cash. For a detailed overview, check out our full 15-page version of the Signing Up summary.

The 4 Foundations: People, Strategy, Execution, Cash

To grow your business 10x, you must attract and retain the right people internally/externally, develop a differentiated strategy that sets you apart from competitors, execute perfectly through 3 habits, and have enough cash to survive the storms.  Let’s take a quick look at what each component entails.
Scaling Up summary_The 4 Foundations

PEOPLE

To build a strong business, you need great people both internally and externally, from your staff to investors, suppliers and customers. Ask this key question: Are the stakeholders (employees, customers, shareholders) happy and engaged in the business, and would you choose to work with them again?

Your goal is to have the right people in the right roles doing the right things, supported by the right systems. There’s an important difference between these 3 terms:
Accountability means you have the “ability to count”. It must fall on only 1 person who will track the progress and surface relevant issues.
Responsibility means you have the “ability to respond”. It falls on everyone who’s involved in a process or issue.
Authority means you are the party who makes the final decision.

In our full Scaling Up summary version, you’ll learn (i) how leaders can use 3 tools (the One-Page Personal Plan, Function Accountability Chart and Process Accountability Chart) to define clear accountabilities, (ii) how to hire A-Players and (iii) how to manage them.

STRATEGY

Strategy involves both strategic thinking and execution planning. Ask this key question: Can you articulate your company’s strategy simply, and is it bringing sustainable growth in revenue and gross margins?

Our full 15-page Scaling Up summary zooms in on details like (i) how to define your Core (values, purpose and competencies) and bring them to life, (ii) how to use the 7 Strata Worksheet to define a winning strategy (including mindshare, brand promises, guarantee, 1-phrase strategy, differentiating activities, X-Factor, BHAG), (iii) consolidate them on the One-Page Strategic Plan (OPSP) to get everyone on the same page and (iv) prepare for your quarterly/annual Strategic Planning Session.

EXECUTION

When you have a winning strategy that’s well-executed, you should see profitability at ≥3x the industry average and no drama from daily operations. Ask this key question: Are all processes running smoothly and driving superior profitability? Use 2 key tools to support 3 vital habits.

Our full Scaling Up summary takes an in depth look at (i)  2 key tools (the Rockefeller Habits Checklist™ + Who, What, When) and (ii) how to combine them into 3 key habits (priorities, data, meeting rhythm).

CASH

Growth burns cash and business often go bust when they run out of cash. Yet, most leaders focus on profits/losses and neglect cash flow. Ask this key question: Do you have steady (and ideally internal) sources of cash to power your business growth?

In our complete summary, you’ll learn specifically how to (i) accelerate your cash flow, (ii) drive profitability with accounting and (iii) use the 7 key financial levers to generate cash faster internally for growth.

Getting the Most from “Scaling Up

It typically takes 2-3 years for all the tools, techniques and habits to be incorporated in an organization, and another 2-3 years to master them. Don’t try to do everything at once—persevere in taking 1 step at a time to improve 1 area at a time, and you’ll enjoy massive payoffs. If you’d like more specific tips and examples to apply the ideas from Scaling Up, do check out our full book summary bundle for an overview of the various ideas and tips. This includes an infographic, a 15-page text summary and a 29-min audio summary.

Scaling Up summary - book summary bundle

The book also comes with various examples and detailed instructions on how to use the tools and worksheets. You can purchase the book for the full details, or download the resources/materials (including useful worksheets) from the Scaling Up website.

Looking for more resources to scale up your business? Do also check out our summaries for The Four Disciplines of Execution, Profit First, and Traction EOS.

About the Author of Scaling Up

Scaling Up: How a Few Companies Make It…and Why the Rest Don’t is authored by Verne C. Harnishthe founder of the Entrepreneurs’ Organization and the Association of Collegiate Entrepreneurs. He’s also the co-founder and Principal of Gazelles Growth Institute and the founder and CEO of Gazelles, Inc. He chairs a leadership program at the Massachusetts Institute of Technology (MIT) and the MIT/WEO Advanced Business Program for entrepreneurs over 40.

Scaling Up Quotes

“If more than one person is accountable, then no one is accountable.”

“Focus on how your wealth will flow through you in the service of others, rather than hoarding it.”

“The best companies know that one great person can replace three good ones.”

“A vision is a dream with a plan.”

“Cash is the oxygen that fuels growth.”

“What is more important, profit or cash? If you’re a growing business, it’s cash.”

“Pick celebrations and rewards that are mostly for fun.”

“Routine sets you free.”

Click here to download the Scaling Up summary & infographic

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