OVERVIEW

• Of the 28 million firms in the US, only 0.4% every reach $10mm in revenue and only 17,000 companies ever reach $50mm.
• 4 keys to scaling: the right people, a truly differentiated strategy, flawless execution, plenty of cash
• 3 barriers to scaling: lack of leadership to delegate and predict, lack of infrastructure to handle complexities, lack of marketing to attract customers and talent
• People: establish a handful of rules, repeat yourself a lot, act consistently with those rules, define core values
• Strategy: offer something that matters to customers, offer something different from competitors
• Execution: set a handful of priorities, gather data daily and review weekly, set a meeting rhythm to keep everyone in the loop
• Long-term: pick a BHAG aligned with core values and purpose, set up routines and habits to eventually achieve the BHAG
• #1 functional barrier to scaling up is the lack of an effective marketing department to attract customers, talent, and capital.

PEOPLE

• Leadership is prediction, delegation, and repetition.
• Leader’s main thing is to keep the main thing the main thing.
• One Page Personal Plan (OPPP) is for leaders to reflect on their personal goals.
• Functional Accountability Chart (FACe) clarifies the people who are accountable for scaling the business.
• Process Accountability Chart (PACe) lists the processes, and people accountable, that keep the business running.
• Divide big teams into smaller teams. No team should be so big that it can’t be fed with two pizzas.
• There must be one and only one person accountable for a team or task. Accountability here doesn’t mean responsibility or authority; it means accountable for tracking performance.
• It takes time to hire and absorb an outside senior leader into the company. Never do this more often than once every six to nine months, unless absolutely required to keep up with growth.
• Select leaders who: don’t need to be regularly managed, and regularly wow the team with their insights and output.
• Be aware that the strength of the CEO often becomes the weakness of the organization. A strong marketing CEO often leads to a company with a weak marketing team.
• The CEO’s KPI should not be profit because that’s a lagging indicator. A better KPI is how many of the people (in the FACe) are hitting their KPI’s.
• Good executives introduce themselves by stating their title. Great executives introduce themselves by stating what they are accountable for in their company.
• Matrix organizations (vs hierarchical organizations) are tricky and require expertise to run.
• The first company in any industry to fully embrace Lean methodology will often dominate.
• One of the most important KPIs for processes is cycle time (time to complete or deliver something.)
• Before searching for talent, create a job scorecard instead of a job description.
• Teams need to be well-rounded, but people can be specialists or unique.
• Hire based on alignment with the core values that underpin your culture.
• Don’t just place a job post, create a guerilla marketing campaign to find talent.
• Aim to make it onto a Best Places to Work local list.
• Use the interview method from Who by Geoff Smart and Tomgrading by Brad Smart.
• A Topgrading interview should last three to four hours and is a vigorous affair.
• Be creative when testing for cultural fit.
• The best way to select people is to have them work for you for several weeks before you hire them.
• People join companies. They leave managers. You need a system to develop middle managers.
• Hire fewer people, but pay them more.
• Give recognition, and show appreciation.
• Set clear expectations, and give employees a clear line of sight. KPIs, Priorities, Critical Number.
• Don’t demotivate; dehassle, instead.
• Help people play to their strengths.
• Don’t copy somebody else’s compensation system. Design one aligned with your core values.
• The deepest principle of human nature is the craving to be appreciated.
• It’s impossible to do great work if you don’t feel that somebody cares and appreciates what you do.
• It’s okay to structure compensation differently based on the person.
• Nothing is more frustrating for A Players than having to work with B and C Players. Only hire A Players.
• Think of your team as your direct supports, not your direct reports.
• Ask your employees what tasks they find draining and then eliminate/automate/delegate.
• Scaling up requires both visionary leaders and great managers.
• Set up an internal learning academy to encourage reading and growth.
• Investment in people is the single biggest predictor of a company’s competitiveness.
• Invest in a thoughtful onboarding process for new employees. Too often, it’s more waterboarding than onboarding.
• Zappos gives new employees a four-week orientation to reinforce the company culture.
• Get rid of the term “manager” and replace it with “coach.”
• All employees should have a weekly or month one-on-one coaching session. KPIs, Priorities, Critical Numbers, Core Values.
• People get bored eventually and stop growing, so make sure they get exposure to different experiences.
• Managing people is difficult because people are complex. It’s easy to get caught up in the fight for results and forget about the complex human beings needed to produce them.
• Name the department something like Talent or People Development, but definitely not Human Resources.

STRATEGY

• To scale, a company needs a clear and differentiated strategy, supported by a strong core culture that can deliver on the brand promise.
• Deep strategy work takes time. Senior leadership needs to work on it a little bit every week, free from day-to-day firefighting.
• In chess, you need to think 5 moves ahead. In business, you only need to think one move ahead of the competition, but consistently.
• Vision Summary Worksheet: Core Values, Purpose, Brand Promise, Short-term and Long-term Strategic Priorities
• SWT Worksheet: Strengths, Weaknesses, Trends
• One Page Strategic Plan Worksheet: People and Process
• Core Values are the rules that define the company’s culture and personality.
• Purpose answer the question, “Why?” Why does what we do matter to customers or the world?
• Mission == Purpose
• Values == Values
• Vision (not a fant) = Values + Purpose + BHAG
• Take time to understand your core competencies (and core weaknesses.)
• Collect stories from employees that embody your core values and purpose.
• Emphasize your core values and purpose during recruiting, interviewing, and onboarding.
• Live your core values every day and repeat yourself often.
• This “soft stuff” really does matter in the long-run.
• Create a 3-5 member strategy council that meets once a discuss strategy.
• 7 Strata of Strategy: Words You Own, Sandbox and Brand Promises, Brand Promise Guarantee, One-Phrase Strategy, Differentiating Activities, X-Factor, Profit per X and BHAG
• Words You Own: your brand needs to be associated with one or two words
• Sandbox and Brand Promises: Who/Where are your customers? What are you selling them? What are your three brand promises? How do you measure your ability to deliver on the brand promise?
• Brand Promise Guarantee: What guarantee do you offer that you will deliver on the brand promise?
• One-Phrase Strategy: What’s the key lever that drives profitability and guides product design? Eg. IKEA’s flat pack furniture, Apple’s closed architecture. Great brands don’t try to please everybody.
• Differentiating Activities: What are the 3-5 activities that your company does differently from the competition.
• X-Factor: What’s the single most important competitive advantage you have over the competitors?
• One Page Strategic Plan Worksheet is a summary of core values, purpose, BHAG, SWT, KPIs, Critical Number, Priorities.
• Ask employees what activities should the company Start/Stop/Keep?

EXECUTION

• Execution is: Priorities, Data, and Meeting Rhythm
• Execution is about implementing the Rockefeller Habits Checklist
• 1. The executive team is healthy and aligned.
• 2. Everyone is aligned with the #1 thing that needs to be accomplished this quarter to move the company forward.
• 3. Communication rhythm is established and information moves through the organization accurately and quickly.
• 4. Every facet of the organization has a person assigned with accountability for ensuring goals are met.
• 5. Ongoing employee input is collected to identify obstacles and opportunities.
• 6. Reporting and analysis of customer feedback data is as frequent and accurate as financial data.
• 7. Core Values and Purpose are alive in the organization.
• 8. Employees can articulate the following key components of the company’s strategy accurately: BHAG, core customers, 3 brand promises, elevator pitch.
• 9. All employees can answer quantitatively whether they had a good day or week.
• 10. The company’s plans and performance are visible to everyone.
• The leader’s main thing is to keep the main thing the main thing.
• He who chases two rabbits catches neither.
• Require all leaders and managers to read The Five Dysfunctions of a Team every year.
• Always work to identify the current bottleneck. Scaling up is all about eliminating constraints.
• Netflix turned data into a secret weapon.
• Wal-mart executives are famous for spending most of the week immersed in the market.
• Balance quantitative and qualitative data collection efforts.
• Talk to employees regularly. Start/Stop/Keep conversations. Ask about how to increase revenue, lower costs, or make things easier/better for customers or employees.
• Hold middle management responsible for responding to and implementing employee feedback.
• All executives and middle managers should talk to one customer each week.
• Discuss employee and customer insights during the executive team’s weekly huddle.
• NPS is the preferred way to measure customer satisfaction.
• Everyone should have a KPI and a handful of key priorities.
• All executives and middle managers should have a coach or peer coach.
• Top performing companies have well-run daily, weekly, monthly, quarterly, and annual meetings.
• The monthly meeting is a key routine for developing middle managers into mini-CEOs, freeing up executives’ time.
• Consider walk-and-talks to improve thinking.
• When everyone is meeting daily in a daily huddle, things get communicated quickly and accurately.
• Daily: 5-15 min huddle to update everyone.
• Weekly: 60-90 min discussion to review progress on quarterly priorities, discuss market intelligence.
• Monthly: half or full day to cover one or two big issues and transfer DNA to middle managers.
• Quarterly and Annually: one to three day meeting to update Growth Tools and set next quarterly or annual theme.

CASH

• Understand your company’s cash conversion cycle.
• Three ways to improve cash flow: shorten cycle times, eliminate mistakes, change the business model.
• The #2 weakness of growth companies is accounting.
• At 15% pre-tax profit, a business is in great shape.
• Gross margin is the most powerful indicator of a successful company.
• Four Forces of Cash Flow: plan for taxes, manage debt, save two months of operating expenses in cash, pay dividends
• Your return on net operating assets is a measure of your strategy.
• Four drivers of returns: profitability, working capital management, noncurrent asset management, cash flow
• Seven financial levers: price, volume, COGS, operating expenses, accounts receivable, inventory, accounts payable

READING LIST

• Anti-fragile by Nassim Nicholas Taleb
• E-Myth Revisited by Michael E. Gerber
• Lean Startup by Eric Ries
• Willful Blindness by Margaret Hefferman
• Multipliers by Liz Wiseman
• Great by Choice by Jim Collins
• Five Dysfunctions of a Team by Patrick M. Lencioni
• Turn the Ship Around by L. David Marquet
• Relationship Marketing by Regis McKenna
• Confessions of a Pricing Man by Hermann Simon
• Buyer Personas by Adele Revella
• The Billionaire Who Wasn’t by Conor O’Clery
• The Business of Happiness by Ted Leonsis
• The Soul of Money by Lynne Twist
• Key Performance Indicators by Bernard Marr
• KPILibrary.com
• The Great Game of Business by Jack Stack
• How the Might Fall by Jim Collins
• The Checklist Manifesto by Atul Gawande
• Who by Geoff Smart
• First, Break All the Rules by Marcus Buckingham
• Change to Strange by Daniel Cable
• Topgrading by Brad Smart
• Drive by Daniel Pink
• Peak by Chip Conley
• Now, Discover Your Strengths by Donald O. Clifton
• Trombone Player Wanted by Marcus Buckingham
• Good Company by Laurie Bassi
• Uncommon Service by Frances Frei
• The New Rules of Marketing and PR by David Meerman Scott
• Outliers by Malcolm Gladwell
• The Happiness Advantage by Shawn Achor
• The Weekly Coaching Conversation by Brian Souza
• Leadership and the One Minute Manager by Ken Blanchard
• Help Them Grow or Watch Them Go by Beverly Kaye
• Hidden Champions by Hermann Simon
• Exponential Organizations by Salim Ismail
• Building Your Company’s Vision by Jim Collins and Jerry Porras
• Massively Transformative Purpose by Peter Diamandis
• Core Competence of a Corporation by Gary Hamel and CK Prahalad
• Epic Content Marketing by Joe Pulizzi
• The Inside Advantage by Robert Bloom
• How Companies Win by Rick Kash
• Turning Goals Into Results by Jim Collins
• What is Strategy by Michael Porter
• The 7 Habits of Highly Effective People by Stephen Covey
• The Balanced Scorecard by Robert Kaplan and David Norton
• Big Data by Viktor Mayer-Schonberger
• Unexpected Companies Produce Some of the Best CEOs (Danaher Business Systems)
• The Ultimate Question by Fred Reichheld
• Competing on Internet Time by Michael Cusumano
• How Fast Can Your Company Afford to Grow by Neil Churchill
• Intellectual Capital by Thomas Stewart