Scaling Up: How A Few Companies Make It And Why The Rest Don’t feat. Verne Harnish

Here I want to focus on what, in essence is branding. And the constraint is you never get about owning a word or two in the minds of the market. That's the essence of brand. And if you don't do that, and most of us in this room will never accomplish that. And how do you know if you do? You just Google it. Now I own Growth Guy. Any place you Google it on the planet, I own it. Here's the problem. Brand, nobody cares. When's the last time somebody sat around and said, man, I'm looking for a growth guy, unless that was like Viagra related and that ain't my deal? And so I screwed up. Now I know the two words. And we went out like Tim Ferriss. Tim had the stupidest title for his first book that thank goodness the publisher pushed back. So Tim, being the analytic nerd that he is, who I got to meet here at this event, one of my heroes went out and did a whole bunch of Google testing. And what two words does Tim own? Four hour. And that guy has taken that to the bank. And so what two words do you own? And I guarantee you, if you're not narrow enough focused, then you're nothing to anybody. And that's what's killing you.

Okay, I am super, super excited to have this next session is really going to tie a lot of how do you do things? Who's the right who? How do you think about your thinking? How do you get things done? And I'm not going to do a big formal introduction because you already heard him speak yesterday. And this is Mr. Verne Harnish. And Vern is the founder of EO, the author of Scaling up, and a guy who has worked with more businesses and helped launch more entrepreneurs than most people on the planet. And for those of you that are watching this on our Genius Network group, you're going to be handed out or you probably have on your table a copy of this. If not, it's being handed out right now. Grab one. There should be a pile on your table. It says Growth Tools. And if you go to scalingup.com scalingup.com you can scroll to the bottom and you can see a picture of this and you can click on it and download it. So those of you that are watching this, that are members on Facebook Live, just go ahead and scroll and you can go through this tool that Vern is going to walk everyone through. So with no further ado, give it up for the amazing, brilliant man, good friend, Mr. Vern Harnish. Thank you.

That is good. Thank You. And did you mention the Bill Gates, Martha Stewart thing? No, I'm just not. No, I did not. Stacy, where are you? That was spectacular. It's so great. She's been really here for 23 years in Phoenix supporting this organization as we've scaled this thing around the globe. Also want to give you guys a little background. I don't actually have any clients anymore. We've got all these coaching partners working with the companies out there. So I'm spending more time investing in companies. Like my major one is Barcelona Housing Systems. We are literally fixing the affordable housing problem on the planet. Sam Zell's our partner, all in Latin America, the multi billionaire out of Chicago, and just take it around the world from there. We are working the healthcare side. So I'm chairman of the Reardon Clinic. We are the Mayo Clinic of Alternative Health. We've got, in fact, the former president of Mayo Clinics Labs, Keith Laughman. Keith's on our board with me and he's running our lab side and the like. So we're really saving a lot of lives. We're excited about it. We were so excited that finally, after 41 years of our work, the Reardon protocol behind IV vitamin C time came out big. Even if folks are doing radiation and chemo, we double the effectiveness. You don't actually need it. The FDA won't let us get there that far, but we're doing some amazing work in that space. And then super excited. This is. Frank Gehry designed our building down in Panama, but I'm co founder and chair of what's called Geoversity. And. And it's a place where we're bringing executives down to the jungle of Panama. Because the reality is nature has solved all of our problems. And what we've got to do is tune in as leaders into what nature can teach us, from organizational structure to product design. And so it's been spectacular. We're partnered with Smithsonian. James Cameron is partnered with us along with Ubisoft. And we are putting together a new jungle game, which we're really excited about. My son Cole is actually right now interning on that particular project. So got a lot of other stuff going on besides helping companies scale up out there. And so that's what we're up to. You all start as a lean startup, and then what we want to do is get you over the hump. And there literally is a gap. Geoffrey Moore described it in Silicon Valley, what got you here will not get you there. And that is one of the largest constraints. And that's going to be my theory really this morning is let's take a look at what are the things that are constraining us from for being able to scale up. And there are the results and our real goal and I want to state it simply to help you achieve software margins. I don't know a business that we have worked with that you can't get the kind of gross margin and net that you would expect if you were a software company. And so I don't want to talk about Apple, but I want to talk about Apple tree. So John, come on up here. John's my partner. One of the reasons why we are in Wilmington, Delaware. And here's a guy that rolled up what I consider the sweatshops of the information age, call centers. And in an industry that has 200% turnover employees, he took it to 18%. In an industry that has 4% profitability, he actually took it to 22%. And he bought these companies for three times their earnings, put in this magic that we talk about, plus his own. And he turned around and sold the whole thing to a $2 billion company for 14 times earnings. So just do the multiplication and it was a 25x on every dollar invested and it was all debt. John didn't put a single dollar of his own money in it. And he earned the ultimate, what I consider entrepreneurial award, a tail number. And so he gets to fly into these events privately, which is very, very nice though he does commercial. This is a long flight think. But what we want to talk a little bit about is that this ultimate constraint first is between our own ears. And John and I do these CEO boot camps down in Marathon, Florida. And one of the guys we've had a chance to really become friends with is Michael Singer. And we want to recommend a couple books. I want John to share his quick story. I recommend you read Michael Singer's second book first. It is one of the great entrepreneurial journeys called the Surrender Experiment. How many of you have read it out there already? Not enough of you. He goes on to build a multimillion dollar construction company and a multi billion dollar software company. So it's a great just bio on how you scale. Then you read his first book second called the Untethered Soul. How many of you have read that? You've heard folks talk about it. So John, real quick share what happened? You were at this meeting.

Yeah. So since nobody's complimented Joe this week, I figured I better get up and say something nice about him. So it may have even been a year ago today. But it was in that timeframe. It was actually the first 100k meeting. And I signed up to be in 100k. And I said this last night at the dinner. I'm probably the least likely person in the room that belongs in 100k. I'm not a marketer. We don't have an email list. In fact, I think I spent four or five meetings trying to figure out how to build an email list. And I'm still not there, but. And I wasn't even really sure why I was in the room. But the second day we come in and Dean and Joe are great about kind of giving stuff out and resources and that kind of stuff. And there's a book in front of us called the Untethered Soul. So the backstory for me is as long as I could remember, literally back to my childhood time, certainly my teenage years, I battled depression and I battled it very quietly. In fact, my family didn't even really know. And it manifested itself in some really interesting ways with me. I was, you know, every time I tell someone that, you know, from my past that I had this lifelong battle with depression, they always laugh because I was the life of the party. I was always happy. I was kind of, you know, outgoing and all those things. And that was really just a manifestation or kind of my, I guess, protective mechanism for the depression. And the way that I describe or kind of explain depression, what it was like for me, it was like wearing a blanket all the time, morning, noon, night. And sometimes you'd forget you had it, but you were always sort of aware it was there. Sometimes it was really, really heavy. And I battled depression from mild to medium to severe, at times suicidal, and didn't tell anyone about it, didn't talk about it, didn't see a therapist. And I think a lot of us as entrepreneurs, we are unbelievably predisposed to this. I won't go through all the statistics, but by self selecting into this lifestyle of entrepreneurship, a lot of us are like being the life of the party and being outgoing. It's sort of our way of kind of protecting ourselves from our depression. And the statistics say right now in this room, probably over half of the people have had some battle in their life with depression. But more importantly, there's probably two or three people in the room right now. Look around, there's about 250 people. It's probably two or three people in the room right now that are contemplating or in the last couple weeks have contemplated suicide. It's become an epidemic, obviously. So you know, part of my depression was I lost the ability to read. I sold my company in 2012. I was a prolific learner. I was a student of earns and I'd read 30 or 40 books a year. And over time it just got more and more difficult to focus. And I sold the company and I literally lost my ability to read. So it was kind of ironic, this book's on the table and I looked at it, I thought, yeah, another book, whatever. So I tuck it in my briefcase. And because Phoenix is a long way, I happen to. I fly commercially like once or twice a year, but happened to be on a commercial flight. So somewhere over, I don't know, Oklahoma or something, I see my briefcase and I just pull the book out, which is ironic because I lost the ability to read. And I open it up and I read the first page and second page, and I look up and I'm like 40 pages in. And I'm kind of surprised that that's happening. And then I get to this section on why we get depressed and kind of what's going on. And he talks a lot about energy. And you get energy, kind of all your negative past experiences, all those things manifest physically in your body as energy. And we have a predisposition to kind of push those things down and try and forget about them and, you know, just sort of let them, you know, linger, but not. Not deal with them. So he talks about this idea of we've pushed all this negative energy down and if we could just figure out how to relax. If you're into, you know, the chakras, it would be your heart chakra. Call it whatever you want. All the different traditions have a different name, but right here in your kind of center, your heart center, where we've pushed all that negative down. If you could just relax and re experience that negative, but just let it go, we have an unlimited capacity for positive energy to kind of flow in from the bottom is how he describes it. So here I AM Sitting in first class, I'm on page 65 of the book, which is its own miracle to start with, and I literally just imagine, okay, what if I did relax here and kind of let everything go? So I do it. I sort of, you know, I'm totally in the moment, I relax. All of a sudden all this stuff just starts coming out of me and all this incredible, like tingly, sort of incredible energy starts flowing into me and I literally don't realize it, but like, crying to where the tears are like dripping off my face. And then I'm like, my God, these people must think I'm a complete lunatic, right? I'm looking around, first class, people are looking at me. Finally, I actually took my sunglasses and put them on. But for about the next two hours, I just had this amazing sort of energetic kind of thing. And what happened in that moment was the blanket came off. Now, that was about a year ago, probably almost. It could be today. Today could be the one year anniversary, but the blanket came off and it hasn't been back since. So I know there's people in this room that are fighting this privately and publicly and personally and not talking about it. It's now my mission to talk about it every chance I get. The fact that mental health and the way our society's going with mental health, that it's, you know, it's like addiction. It's a badge of honor now to talk about this as opposed to, you know, being ashamed about it. So cannot recommend these two books enough, Vern. Thank you, Joe. Obviously, everyone says, why in the world did you pay 100k? I would have paid $100 million that day for that one moment. So thank you.

Hey, I hope you're enjoying this video. And I want to let you know that I have a new book that's come out and if you'd like to get it absolutely free, there's a link below in the description, or you can wait till the end of this video, or you can simply go to Joe's free book and you can get a copy there.

So that's the first constraint you've got to address, is right between our ears. Now, I want to put a question out to you and I consider the best strategy question ever created was by a guy named Clayton Christensen at Harvard. And that is what is the job your product or service really does? And if you've not seen Clayton Christensen's Job of a Milkshake video, how many have seen the Job of a Milkshake video? All right, I want you to go to YouTube, I want you to look up Clayton, just put Clayton, Job of a Milkshake. And I want you to watch that four minute video because that's ultimately what you've got to figure out if you're going to be able to communicate any kind of value, is what's the job that we ultimately are doing for our customer through our product or service? So I want to give you guys a generic question. What's the number one job of all of our companies? At the end of the day? Just shout it out. What's the number one Job, create value. Maybe we only get one word. What? Profitable? Maybe. Serve. Maybe. By the way, maybe means no, I'm just trying to be nice here. Let me just cut to the chase. And it's something we learn from nature. Now, I don't know if this is right, but I find it's useful. All right? And that's what we try to do, is find ideas that are useful, that are practical. What determines the route of that river. It is seeking. Always what? That's right. Easy. I just want to suggest, if you will, obsess on one word moving forward, and that is look, think about what Amazon's done. And we know this for a fact, that every week Jeff Bezos with Jeff Wilkie, who's a good friend of mine and the other team, they obsess about one idea. How do we make it this week even easier for folks to get stuff quicker? And ultimately what your product or service is geared to do is to make someone else's life easier, not harder. So just take for a moment what's not easy in doing business with you. Is it easy to find you the website? Is it easy if you have an app? I don't care how killer it is, if it's not easy to use, the thing's going to die on the vine. Ultimately, does your product and service, is it easy and make their lives easy? So I want you to go back with that question with your team and begin to obsess on it. Here's a dear friend of mine, Hank, just moved to Barcelona because he can. And for 20 years he's had one business. They own 70% market share in the United States in this very narrow niche, and that is if you're going to drive your car as a US citizen down to Mexico, you need Mexican or auto insurance, and you can't state it any better than that. The easiest way to buy enter info, buy print policy. He makes more money than any human should legally make, and he does it with seven employees and a dog. And that's his entire team. Now, there's a lot of talk about leadership. There must be thousands of books every year. Let me suggest, you know, we know, and I'll come back to that. We know that in a word, if you'll just focus on one thing, the number one job then of the leader of the company is to what, figure out how to make it easy for your employees. And that's what John did at those call centers. He obsessed on one thing. How do I make the job of that call center rep even easier from the Quality chair that they sat in to the technology they used to the apps that he developed, if you will, just obsess on that. Two questions. What do I do to make it easier for my people? And what do I do to make it easier for my customers? And you will pound on that for the rest of your life. You'll continue to move in the direction that nature would be seeking in order to build and scale the business. And that's what Ikea did when I mentioned it yesterday, which is they said, look, to make it even easier for the elderly to take advantage of our flat pack furniture, we're going to make this purchase of TaskRabbit. Now in order to scale, you got some decisions to make, people, strategy, execution and cash. So we created some tools and I want to look, this is normally a two and a half day course, but we've got about two and a half minutes it feels like. And so I just want to give you kind of four practical ideas. What I consider the number one question you must ask about people. What really is branding? How do you decide what to focus on? And what's the universal truth about making a ton of money? Not that that's the only reason, but hey, I'm interested in that as well. And you've got these growth tools, as Joe had mentioned, I am a tool builder, mechanical engineer by training and I think it's through tools that we change people's think and I want you to think about them. Like Sudoku puzzles or crossword puzzles. Anyone a crossword puzzle fan in here? How do you do crossword puzzles? You start with what the easiest first, right? If you're a person who says, look, I'm not going to go to box two till I figure out box one, you are going to be absolutely stuck. And that's the same way with our tools, you pick around on these boxes and over time the full picture will come into view. So I just want you to kind of relax with the process. So let's open them up. And each one of our areas is anchored with the question people, would you enthusiastically rehire everyone in your company knowing what you know about them today? And you've been seeing that question asked in various forms and fashions over the last two days by Clayt and others that have spoken about it. By the way, if you're here with your team, they don't want to make eye contact with you right now. Right? They don't want to get this screwy look. But by the way, that's all relationships. Your bank, John finally had to sever a relationship that's been long lasting with the bank. He's had partners, investors and even certain companies and customers that you've done business with. Now turn to the first tool. We're not going to have time to take a look at it, but we do think you can't separate personal from professional. So we've got a one page personal plan that allows you to kind of lay it out long term, medium and short term men in the U.S. i want to share one really sad statistic. You report that your best friend is your spouse and that does not match what spouses report. We are absolutely lonely and I recommend at least you write down the names of the six men who would carry your casket. You need at least that. And as you start to think through the list, I'm like, I think they may be busy, probably out of town, not in shape, and so begin to pay attention. Particularly men building out your faith, family, friends, fitness and finance. And those are really the organizing fashions. What I want to do is turn to the page and look at our both what we call face and pace tools. And Jim Collins said, look, you got to get the right butts and the right seats. He just didn't give us a list of seats. And so we've got a tool we're just going to look at. I want you to fill out here very rapidly. We call the function accountability chart. Every one of these functions has got to exist even in a startup. And what I want you to do is I want you to go down that list. We've given you a couple of blanks. The Reard Medical center has got a chief medical officer that's not on the list. Every industry will have something specific. So I've given you a couple of blanks here, but I want you to put a name next to every one of these functions. By the way, if you're a startup, whose name is next to every one of them. Me, me, me, me, me, me, me, me, me. And all scaling of business is figuring out how do I delegate this to somebody. And somebody asked, how do you know if you got the right person? We have three tests. Number one, they fit our values. Number two, they don't need Managed. If these people need Managed, you got the wrong person. They wow you if they're not wowing you. So I remember I launched Gazelle 1997. The first thing I wanted to do is give up bookkeeping. And my neighbor across the street, Claudia Smallwood, who had been doing books for her husband, a very, very successful entrepreneur. I First of all, knew would get and understand an entrepreneur and the values that we would share. Number two, I did not have to manage at all. I would just send stuff over there in boxes and information. And she would often wow me. Vern, I know you're busy. I remember those early days when Bill was launching his company. But let me show you something interesting here. I'm seeing in the numbers. Wow. All right, so go down through the list real quick. And by the way, if you say who's doing marketing? You're like all of us, then that's no one. So be honest. If nobody's doing these things, go real quick. Put the initials. If it's you, fine. Who's had a company, who's driving marketing, who's driving R and D? Who's driving sales, who's driving operations. You want to separate treasury and controllers. Somebody counting the money going out versus counting the money going in or you'll end up with embezzlement. The sad stories I've heard over the decades. I'm sure Dan has as well of that. Who's handling your it by the way, these can all be outsourced. There's no problem there if you're outsourcing that. Our HR has been to TriNet. We've been with a PEO from the very beginning, professional employee organization. It's handled it with a company for us out of Hyderabad, India, in talent development and customer advocacy. Just blast down through there. Now, at the bottom, we asked three, four questions. Number one, did you put more than one name? And that happens if you've got partners, family members, you brought somebody on to drive sales, but you haven't really let go of it. And the rule of accountability can only be one person. So if you put more than one name, I want you to circle that box. Second, did somebody's name show up a lot more than anyone else's? It's probably yours. I had head of company marketing and R and D and I became the constraint within our own organization, our own company, and the person whose name's showing up a lot is either going to die young or one of the balls that they're juggling is going to get dropped. Number three, circle those where you have no name. And then last, hey, I've got a person doing that for us, but I'm telling you, they don't pass Verne's tests. Circle that. Now, you may have a lot of stuff circled. And the reality is this, unless you're venture backed, growing 100% a year, you can mix people around inside an organization. But you can only bring one outsider in about every six to nine months because it takes that long for you to inculcate them, get them paying for themselves and get this thing working inside the organization. So at every six to nine months you're going to start to fill a hole there within the organization. For me. We brought in finally a chief marketing officer and revenue jumped 60%. Wish I'd made that decision sooner. Now I'm bringing in ahead of the company. I only like R and D and that's one of the things you need to get very clear as an entrepreneur. Randy Amen. One of my early students built a company called ABL Cables. His card. Founder and head of customer service advocacy. He then brought in folks who filled in all the other boxes. Didn't change ownership and when he sold the company to a $2 billion firm. Today he is on the exec team of a $10 billion division. This $40 billion company. What do you think he does for that firm? Head of customer service. He has continued to follow his passion. So don't get stuck in thinking you have to be the head of the company. By the way, you're never too big. When Michael Dell took back Dell in 2007, even though there were 22 reports to Kevin Rollins, there was nobody driving marketing and nobody driving customer advocacy. And those were the first two decisions Michael made. Brought in Mark Jarvis from Oracle. Only one outsider shifted some boxes inside and took his dear friend Dick Hunter and brought him over to head up the customer service side. Revenue jumped 20 billion in the next 24 months. So that's how it happens. You're never too small or big. It's plugging the next who hole. Now if you look at what we consider the three barriers to scaling first, it's your own development. That's why this is absolutely critical. You're here. It's why I'm here, to learn. I've got notes, I've got things. I'm going back to change our company on Monday. Scalable infrastructure. But the function that's most critical is marketing. And so I want to share a second idea under people. So in 1983 I'm launching ACE association of Collegiate Entrepreneurs. It morphs into Yeo. And I figure if Regis McKenna is good enough coaching Steve Jobs at the time as he helps him go to 2 billion by his 29th birthday, he's good enough for me. He's helping intel and Genentech and all that. So I cold call Regis now. You better have, like Naveen said, a hell of an elevator pitch, which I did. And he took us on as I was his only free client. He tells me in the history of his firm, you know, you don't get anywhere if you don't ask. He says, all right, I'm gonna put you through exactly what I put Steve. So he sends me out the big booklet and he said the first thing you have to do is have an hour marketing meeting. I mean it sounds so friggin basic but how many of you actually have an hour? Same time, same bat channel? Ours is 10am every Monday for 30 some years. You have a marketing meeting separate from sales, even if it's with yourself. All right, first thing you do is I want you to go back next week and I want you to set a specific time when you are going to think about marketing. You may be doing marketing all week, but you need a marketing meeting in order to make some decisions. And the first decision Bill Gates considered the best question he had ever been asked. And it was the thing that anchored Regis work based on his book Relationship Marketing that was this. You take a piece of paper out, you've heard it and you make a list of the top 25 influencers, people, partners. You heard it shared earlier with Stacy. Now the issue is if you're Naveen, you can put out your elevator pitch and they come to you. Honestly, the rest of us in this room are not Naveen. And even Steve Jobs when he wanted to launch itunes, took a piece of paper out every time, made a list of the top 25 key players in the music industry. And he did no A1 and not A1 would return his phone call. The only guy he knew was Don Henley, the drummer for the Eagles. And so that's how you get started. You invite over whoever you know. He did his walk and talk and at the end of it he goes, all right, Don, know anybody on this list? Yeah, I know that guy. Get me to him. And you network your way around till you get to it. Now actually, how do you do it? I wanted to get to Herman Simon. Herman is the Drucker of Europe. He wrote the book Hidden champions of the 21st century. He runs the largest pricing consultancy in the world. This guy is God in our world. In Europe, you get to know their assistant very well. You then take their name and you put it and their company name in Google alerts. All the people you want to try to get to, you put in Google alerts and then Google alerts you. Ah, Herman just got chosen to keynote Peter Drucker's hundredth anniversary celebration in Austria and you use as an excuse to send a thoughtful note through their assistant to them. Now it feels like stalking. But it's okay. I did the same thing with Greg Brennaman and anyone else I've needed to when I made that first list I'll never forget. Look, he said, the bigger the name, the faster you scale. So I'm young and dumb and an engineer, so not a lot of fun. And I'm 23 and I take a piece of paper out student at Wichita State University and I write down President Ronald Reagan. I wanted to be the first president to utter the word entrepreneur, which he did later on. And I got invited in then to advise both Dan Quayle and President Bush on their entrepreneurial policy. I put down Steve Jobs. I put down Michael Dell. I put down I didn't know who owned it, but I got to have Inc Magazine and Venture magazine behind what we're doing. And then all we did was spend an hour every week figuring out how to get to that person on the list. And what was an idea in 1983 had gone global in 36 months. I led the first official delegation of young entrepreneurs to mainland China. I hosted the first public speech of Steve Jobs Post being fired from Apple at the Bonaventure hotel with almost 1200 of the top entrepreneurs, including I've got sitting next to Steve, Michael Dell, Mark Cuban, who still is a good friend. Michael just had me coach his son. They still remain acquaintances, if not good friends. And President Ronald Reagan had agreed to fly in and give the opening address. He got diverted by a war and so he asked his friend Mayor Bradley, one of the most respected leaders at the time, to do it instead and read a telegram from the president from our stage with Inc Magazine doing a six page story on us that led to Wall Street Journal and everyone else, and Arthur Lipper, still a dear friend of mine, today giving us full page ads for everything that we were doing to move forward. It was a miracle. Make the list and work it. So right now, start the list. What are the top five people? Relationships. Partnerships that if you could get them behind what it is that you're doing, you're going to scale fast. Start the list. We knew we needed to get Sam Zell behind this. Barcelona Housing Systems. The guy invented the real estate industry in this country and we orchestrated it and made it happen. And we didn't know Sam from Adam, by the way. It's harder now that you're not young and cute. All right? It seemed to be easier back then. I never was cute, but I was young back then. And the beautiful part is being in the genius network, you're about one or two degrees of freedom, not six from any human being you need to get to on the planet, and that's key. I'm gonna. I'll tell it right now. My wife. You'll see in a moment. She's launched an olive oil business. My daughter's got a body care business. And I asked Joe last night to introduce us to Randy Zuckerberg because she cares about that, and we've already. The communication happened last night for Randy, and my wife couldn't be more stoked. My daughter knows that there are five people, four bloggers, YouTubers, and Vice President Biden's daughter, that if she gets those five behind her. 14. She's 14. Her natural body, but her business, the rest takes care of itself. I was just at University of Delaware. I put it out to the universe. And the introduction's gonna be happening here shortly between Joe Biden's daughter and my daughter. That's how it works. All right, you got the list? Then I want you to buy this book. You don't even have to read it. I just want you to set it on your desk. I think the number one KPI campaign performance indicator of everybody in this room is how many people every week. And I want you to track it. Do you break bread with. Do you have a breakfast, a coffee, a lunch, an afternoon break, a second lunch, a third lunch? I don't know there's anything more important as an entrepreneur than for you to take your time to go out and meet the people that are going to help you scale your business. Everything else you can optimize automate in the things that Ari teaches you. And he's been our advisor to our company as well. And so never eat alone. And I hope that was the case at this event. Never eat alone. All right, strategy here. We anchor it with. Can you state it simply? It doesn't mean it's simple or simplistic or everyone would nail it and have a unicorn overnight. These two words made this guy $4 billion. Deliver pizza. Who are we talking about? Domino's. Domino's and Tom Monahan gave it all away to the Catholic Church. But 4 billion. Now let's add to it. We deliver pizza in 30 minutes or less. We're going to call that the brand. So the two words I own Deliver pizza. I'm going to deliver it in 30, 30 minutes or less. The brand promise or it is free. There's the brand. Promise? Guarantee. Not unlike the 997 offer I signed up for. Because if I don't use it, I get my money back. I'm just confirming that in front of Joe. Alright, Just so that we get this all straight. Now a lot of folks say yeah, you can do that selling bad pizza to college students, but serious companies can't do this. Well, Larry Ellison has always done it. He knows his core customer. He owned the back cover of Fortune magazine that I write for all these years. And his message was always been simple. I want to burn into your mind the exadata server. And he knows where his core customers hang out. He is not. He doesn't do all digital marketing. He's right there in international airports where he knows his customers are hanging out. And he has a very simple message. It is 5x. This is an ad he runs on the front cover of Wall Street Journal. The other place where he knows his people hang out his customers. We're not four, we're not six, we're five times faster or you win $10 million. Now why would Larry do this? Because it works. Now who hated this? IBM. What do you think Larry said to IBM?

No.

If you can prove otherwise, I'll write you a check for $10 million. Put up or shut up. And the rest is history. Larry has had this kind of simple message from the very beginning of his company. What's the word or two you own? What's the promise we make? Very measurable. And then what are you going to do if you don't deliver on it? So you take the fear out of them possibly doing a sales job on you. And we have what's called the 770 rule. And I hope you've experienced that over the last couple of days. You Absolutely. And I've advised several of you, I've talked to several of you privately. The biggest mistake entrepreneurs make is they think everyone's their customer. You absolutely want no more than about 7% of any market you're in.

When.

When Apple hit its highest market cap the first time, two months prior to Steve Jobs untimely death, their entire global market share was only 7%. Yet that 7% represented 50% of all the profitability of the entire industry. Today, let's speed forward. They're over twice the market cap, yet their market share is only a whopping 15%. Yet it represents 89% of the entire profitability of the industry. Would you rather have market share, share or profit? Yeah. Now the niche you choose, you want to own 70% of so Mexican auto insurance for US drivers. The percent of the total insurance industry that my buddy Hank owns is such a small fraction, it wouldn't fit in this room. All the zeros until you got the number. Yet he owns 70% of that niche and he owns two words. I need Mexican auto insurance. I remember when Julie gave birth to our oldest son, Cameron. She absolutely wanted the safest car. What do we buy back then, boa There was no question you can't own auto, but you could own safest automobile. And so we have this seven strata. If you'll take a look at it. It's one of the first blue sheets. All of our stuff's color coded. And I went through the one phrase strategy in my 10 minute here. I want to focus on what in essence is branding. And the constraint is you never get about owning a word or two in the minds of the market. That's the essence of brand. And if you don't do that, and most of us in this room will never accomplish that. And how do you know if you do, you just Google it. Now I own growth Guy any place you Google it on the planet. I own it. Here's the problem. Nobody cares. When's the last time somebody sat around and said, man, I'm looking for a growth guy? Unless that was like Viagra related and that ain't my deal. And so I screwed up. Now I know the two words and we went out like Tim Ferriss. Tim had the stupidest title for his first book, the. Thank goodness the publisher pushed back. So Tim, being the analytic nerd that he is, who I got to meet here at this event, one of my heroes went out and did a whole bunch of Google testing. In what two words does Tim own? Four hour. And that guy has taken that to the bank. And so what two words do you own? And I guarantee you, if you're not narrow enough focused, then you're nothing to anybody. And that's what's killing you. And what does brand give you? Unbelievable pricing power. I'm in Australia. I love this. We're number one in the number two business. Do I need to translate? If I do, we poop. We pump poop. And if you don't need poop, pump, then they don't care that you know who they are. But that's what we mean by brand. I'm passing through the Turkish airspace and I read this article about Ali. Now this is a guy whose passion was carving wood and he got a job doing it for a furniture company. But then he began to focus and he Wanted to carve wooden doors, but not just any wooden doors. Wooden doors for churches, but not just any churches for Christian churches. And today this lone artisan owns that mind space. By the way, when you do, I mean literally worlds seek out world churches, seek out this lone artisan in this small province of southern Turkey because he owns 70% of this space. By the way, when you own this kind of branding, what happens to your marketing costs? They plummet. What happens to your pricing power as a result? What happens to your profitability and margins? Software like which is where you want to be. I want to see you at three. I want you to be at a million to get an EO and then get to 3 million and net a million. If you're not netting a million on 3 million, you're screwing up someplace within the business. That's the kind of margins at a minimum you should have. And so we've got a tool. Keep flipping. You're going to see what we call our one page vision summary. And in essence, if you can't state at this point simply these components, what are your handful of values? You heard, you got to hire against those values. You got to decide when you wake up in the morning what you're going to work on first based on those values. You've heard that over the last couple of days. You need to know what they are. And they're discovered. They're not defined. What is our purpose bigger than just making money? And then what are. And look, Robert Cialdini, who I, you know, dear friend, we got to hang out together at the 100k event. His research is clear. You want to convince somebody to buy your product or service, you give them three reasons. Three crushes, two or four, or a list of 10 Southwest Airlines from day one, low fare. There's one. You lead with lots of flights. Four in the morning, four in the evening, point to point and lots of fun. They've called it the three LFS or the three Fs. And it's powered that company for 4, 46 years. And so what are the three promises? And then ultimately, where are we taking this thing? The big hairy audacious goal. And if you know those four components, you have got a more aligned vision than most than 99% of the companies out there. Then you figure out, all right, what do we have to do this quarter, this year, in the next three to five years? And then you sit down with everybody in the company, say, all right, what can you do in the next 90 days to help us get there? And that Way everybody has a very, very clear roadmap on a page. So my wife launched this olive oil business. She's fed up with the crappy oil that the Italians and Greeks dump on the stupid American population. It's all cheap and rancid with no nutritional value, yet it's critical to brain health. And so last September we sat down over lunch, she had a coach. Not sure it was a good idea, but she just penciled out what are the things that she really values. What's this purpose? To transform the olive oil industry through educating the American people. Three promises. First, most stuff, healthy for you, tastes like crap. So she has won. Her products, won five London food shows. It's the only olive oil in the history of the entire London Food show that's gotten what's called a gold dash three that'll be significant in a moment and a very clear, big, hairy, audacious goal. Then you start to narrow in. And she said, in this first year, I got to win the New York City Food Show. She knew it. She knew the one thing. She laser focused on it and the rest is history. She did. She's got her chart as she's tracking up the sales and she's in Barcelona this week going through now their second harvest as she brings in the new stuff. So from startup, it's pretty simple just to kind of get clear about what I've got to do. 90 days one year, next three to five years with a clear vision moving forward. Now, once we've got that, we got to execute. And here the key question is, do you have relentless repeatability? It's getting not from there, but down to this level. And that's what it looks like. Basically, Julie has put a stake in the ground. She's put a flag up there and said, that's the Everest I'm taking. And by the way, why does it need to be at least 10 to 25 years out? So nobody can debate you. This is supposed to be funny, but it's actually accurate. Anything shorter than that and folks can talk you out of it. They can bring stats. But man, we're going to put a man on the moon this decade. I mean, who says we're not going to these 10 to 25 year out goals? The kind of challenge that Dan put to Peter Diamandis is precisely what we're talking about here. A flag in the ground, then you begin to back up to it. But let me suggest this so you can take down the stress. There are no straight lines in nature and there are none in business. And so there's only two points you need to be absolutely clear about, and that is where you're headed and what is the next step. Everything else in between we call a wag wild ass guess. Because, man, the weather can change in a minute, and you've all seen the movies and read the books, and that's the way life is. So it's all about constantly readjusting and just making sure the next step you take doesn't send you off the cliff. And then you begin to make your way in the most crazy circuitous, hopefully following the easiest path. Quit hitting walls, go around them, go over them, find somebody like Stacy did. I don't know how to get to any of those folks. So she lucked out, somebody showed up, she put it out to the universe, and she found the human who got her inside all of those particular deals that she needed to. Simon Lim is a client of ours in Malaysia. He does commercial cleaning. I love the fact that he has kept a chart, actually, of his particular climb of his business with the Asian economic financial crisis, the subprime crisis. I just. I love that that's the journey that you're on, and that's how bumpy and irregular that it'll look. And I'm telling you, you can tear your fingers off. And so I want to tell you a story about my Gene Brown gene. It's not Apple, not Google, not Facebook. He's doing garbage collection in Galway, Ireland. He's got 60 employees. He's in one of the big countries. The economy's collapsed. He's just trying to make payroll. And he scrapes up some bucks, comes down to our workshop, and he said, all right, I know this. Without a vision, as they say in the Bible, the people will perish. And so we put out there. So I don't know how I'm going to do it, but I want a million customers by 2020. This was in 2010. Now, we're talking about a city that's got only 70,000 humans in it. If you got everybody in Dublin, it's only 100,000 households. He's not going to get 100%. He's going to have to move way out beyond Ireland, through Great Britain, through Europe, all into the Middle East. But right now, he's got 60 employees hauling trash in godforsaken Galway, Ireland. But he put it out there, and then you start to climb. And the key is coming back to what I talked about yesterday. It's identifying what is the most important next constraint you need to move. And so as things began to clear, he said, I need, and you need to be Precise, I need $40,000, in this case, euros more per month cash flow. That gave me a half a million for the year so I could get this thing back going again. And so he turned it into a game. Let's hit the big four zero and win. He put up these kind of posters to track. That's the thing sport has that most of our businesses miss is a scoreboard. That's why the first thing Julie put up was that kind of handmade, bigger than life bottle of olive oil, so she could begin to mark it off immediately. And they did it. Then he said, okay, what do I got to do next? My team's not really working well together as one. And he put a theme around it, and it was all about job sharing days. I want sales to go out and work in a trash truck. I want accounting to go out with the salespeople, because coming out of the crisis, they were still mad at each other. And he began tracking it off and let's have 180. I don't know if it was right, but it brought the team back together. And then next quarter, he said, all right, I'm walking by my assistant. She's working on this spreadsheet, and it's like, what are you doing? Well, I'm doing this spreadsheet you asked me to do. I didn't need that for the last two years. She didn't want to just say anything. You know entrepreneurs, you're scary. Even if you're not scary, you're just running around really fast and your team doesn't want to say anything. And so he knew he needed to give his people permission to tell him that the king had no clothes on. So if you see it's wasting time, energy, money, or space. And it created a new language in the company that still serves them well today. They found another 25% productivity gain in three months, plus a lot more cash savings. They even did one focused around pricing. We're really big on the fact that most entrepreneurs got into business being cheaply priced, and they never let it go. That's one of the things that got you here will not get you there. And they were able to go back and right price everything and increase their average revenue per customer. That quarter, 7%, which is huge in that market, went right to the bottom line and basically tripled the profitability of the industry just by taking a quarter and focus on pricing. They even did a cool, not cool. What's the result? They just Got an email from Gene this weekend. He has partnered over this time with now a $350 million private waste management company called Averta in the Middle East. He runs so much better than they that they basically gave him their entire commercial division. He's now scaled it up and he's already crushed. He literally was. Email him. He sent his latest one page. He said, vern, we already hit the million and it's just 2017 from a company at 60 employees in Galway, Ireland. It's all about 60. Setting the goal and taking one step at a time, understanding what is constraining me next, whether it's between your ears, inside the business, or ultimately what Gene's figured out, and I can't tell you what is the constraint in the industry. And he's got control of it. He's grabbed control of it, and that's allowing him to be the dominant player in this entire region, as I guarantee he takes his company to billion cash. What is your cash conversion cycle? We got a whole chapter set of chapters on that. But I want to finish. So what's my what and my who? What we do is we. We help companies scale. But why? So my dad had a very, very, very successful company. My grandparents were entrepreneurs. He was a rocket engineer with the Titan. He and three buddies left, founded a company called Higher Electronics. This baby went through the roof. And then we lost it all in the 73 recession because a decision the SEC made that shut down one of our major customers and froze their bank accounts. I heard some similar stories in the room. And you don't declare bankruptcy back then. And so we sold everything we had. All of our homes, our toys, our boats, our snowmobiles, our mountain property, everything. We grew up. That was wealth. And in a couple of wheat trucks. On my 15th birthday, we moved out to Kinsey, Kansas, from heaven. Littleton, Colorado. We became maintenance engineers, fancy word for janitor. I cleaned 50 bathrooms and 100 rooms every night after school in my $50 Camaro. I got it that cheap because I had a small problem, had been hit by a train, but I could sit. I could still get there. And it ultimately destroyed my dad. He became an alcoholic, destroyed the family, the marriage. My sisters had to make a tough decision. I couldn't eat. My dad was living with me. I'm taking care of him, but he's driving and drinking. And so they called the police and had him put in jail for a year. He never forgave us for that. And I lost my dad last year. And I said, you know what? I'M going to dedicate my life to not seeing that happen to any other entrepreneur on the planet. Now let's speed forward. I take my company half million million, 2 million, 4 million, 8 million. I'm getting ready to be an inc 500 and boom. 911 hit. I lost a million bucks in about eight weeks. I wasn't really. I was spending money to make money coming up and I was out of business overnight. I thought, oh my God. Like father, like son. And then we happen to have this guy come in to speak to our EO chapter and this idea is that if you really want to make 2,000 pounds of money, which by the way is almost a million bucks, you got to give away 200 first. And you've heard this message over and over and over. And Robert Kurosaki came in and I thought he was a get rich quick guy. But he talked about how his rich dad, whenever he got in trouble would give money away to get things to start. So our church has the largest capital campaign launch in its history. I'd throw a little money in the till. I went back to Julie. We're going to lose our home. I said, hon, let's try something here. What have we got to lose? And we made a commitment to a three year gift to the campaign magnitudes beyond what I thought we could ever first all forward right now let alone. But we did it. You heard Adam Grant's book Give and Take talked about from the stage. It was Lynne Twist that taught me about money. It's like water. You got to keep it flowing or it'll kill you. Like stagnant water. And sure enough. I don't know how it happened. I know how it happened. The World's Fair. Ultimately, I ended up getting 10x back what I had committed to donate that first year. And my only regret was what I didn't invest more. And so four practical ideas to wrap up here. I'm two minutes late. The number one question, make your list and work it. Number two, brand is about owning a couple of words. That's it. Four hour three. Focus your effort on the constraint any other place and you're absolutely wasting your time and effort. And number four, the universal truth. If you want to make a ton of money, you have to give and give right first. If you get the a team together around a very clear vision, then start the climb. Keep making sure that you don't fall off the cliff with each step that you take, then you can keep scaling. And so I want to finish up with just a little final video as we wrap up here. Look, you guys are the economic engines. You are the innovation engines of our local and global economy economies. What you do matters. And so you got to take this serious. You got to take yourself serious. You got to take your health serious. You got to take this job serious. Because leadership is a privilege. It's not a right. And so you've got to get it right. And so, thanks a million. We'll see you@scalingup.com. thank you so much.

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