The #1 Job of All Organizations is THIS Feat. Verne Harnish

Even Steve Jobs understood that this thing won't scale big. And he created what today is the largest market cap company by realizing that what we can do is create a closed ecosystem. And if what you do is so distasteful, your competition won't copy you. It's the ultimate blocking strategy. Even my own team in Barcelona figured out if we can control the ball 76% of the time, and they figured it out over a decade ago, we'll be the most winningest team on the planet. And so the question I leave with you is where is the constraint in you, your business, your business model, and ultimately the industry? And if you figure it out and get control, you win and you win big.

On December 7, 1903, Orville Wright was the sole passenger in the first powered airplane flight and he flew it at 6.8 miles per hour. Some of you might have flown to this event on an Airbus A380 that holds 853 people and travels 634 miles per hour. Now Elon Musk, CEO of SpaceX, is working on a city to city rocket that will travel from Los Angeles to Toronto in 24 minutes. That's what we call scaling up, making things faster, better and much more effective. When it comes to scaling up a business. Verne Harnish has done more for scale ups and the young sun heroes of our global economy than any other human being on the planet. This year is the 30th anniversary of the Entrepreneurs Organization, or E.O. as it is commonly called the Vern founded and is scaled to over 12,000 members worldwide. It's also the 25th anniversary of the executive CEO program held at MIT called the birthing of Giants, which Verne also founded. Plus it's the 20th anniversary of his amazing company called Gazelles. With over 230 partners around the globe. Verne also chairs Fortune magazine's annual Scale Up Summit and is their venture columnist. Verne is the best selling author and in demand speaker, father of four and a card carrying member of the International Brotherhood of Magicians. Get set for some magic. Vern is an amazing dude. Give it up for my dear friend Verne Harnish. That's awesome.

Thank you, thank you. Got it. Yes, I know what you're thinking. Joe and I. Where are you? I'm surprised you didn't mention this. You know, we're kind of an intimate group that there's something little known about me and given the dirty blonde hair and the glasses that I have, that I am actually the secret love child of Bill Gates and Martha Stewart. And if you don't believe me, there it is right there. So, and being a mama's boy, and you know, many of us entrepreneurs in this room, we are just one decision from going to jail. In fact, you know, Joe, Dan, where are you? You guys were sitting there talking about the definition of an entrepreneur and you guys really didn't get it right. It's actually a French term that means pay no taxes. So that's what we've always been as entrepreneurs. But here's why we're here to talk about, you know, it's an interesting thing. There are Many, many startups, 11,000 startups every hour in the world. In fact, that means right now hundreds of thousands of people are moving into their parents basements as we speak. And that was a JP line. I knew it wouldn't work. And seriously, 76% of those companies actually have no more than just the entrepreneur as their employee, which means many of those are even overstaffed. Just let it roll, let it roll. Yet really the challenge is we have too few scale ups. And Joe was right. 92% of the job growth in the innovation since the Great Recession was driven by companies like you in this room. 10 million to a billion. You really are the unsung heroes of the ones that are doing most of the heavy lifting in the economy. And so this idea of scaling up is critical. And so our moonshot working with John and several of the others in here is we want to go into 150 cities around the globe and we're going to install scale up ecosystems to kind of go along with these already robust startup ecosystems that exist. And that's our way of impacting tens of thousands of what we think are the companies that can do these moonshots to save the planet. And we know it works. There, by the way, is one of our latest success stories. He's a unicorn down in Australia. They went public 23 months ago at 4.2 billion. And I checked just this morning, 11.74 billion just less than two years later. And so they're doing well. The latest, I think upcoming unicorn is Paul Wedgwood with splash damage. And I had a chance to kind of hitch a ride with him and I was happy to see there in the back was a copy of the book. And so I want you to put into your mind, Ferrari equals scale up. All right, and you've got them both. But what is it that gets in the way? And that's this one idea that I want to share this morning. And it comes out of the second book, this history book of greatest ideas. It always reminds me of my favorite quote. The greatest lesson of history is we fail to learn from history. And so I want to go in there and I want to look at this story about Robert Taylor. So I want to take you back to 1980, and Robert introduces soft soap. Now, a lot of you are too young in this room to know that there was a time when we actually had these things called bars of soap and we didn't know whose genitals they had touched last. I mean, I just. I want you to. I want you to think about that and realize that we have solved this problem. And so he launches, and he goes to $39 million in his first year. That's back when that was a lot of money. And he's now faced with year two, and he's got a lot of constraints. And if you were to shout out what's going to be in his way of year two, just shout it out. What's going to get in his way? Yeah, cash, obviously, growth sucks. Cash system, supply, employment, distribution, taxes. Yet he realized, and he got wind that Colgate Palmolive was going to rip him off yet again. And so he stepped back. And this is the decision you must discern why you're here and for your company. And that is, where is the constraint? Now, a lot of people say we got to go out and fix problems, but I don't know. I've never found that really useful as a concept. It's hard for me to get my head around that and my arms around it. But if you can think about what is constraining you and your industry and your company and you can get control of that, then you can begin to scale enormously.

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So he stepped back and he realized there was the constraint. It was the pump. And it's interesting. Back in 1980, there was only one company, Calmar in California, that made these pumps we're talking about many years before China came on as this kind of unbelievable manufacturing powerhouse. And so he goes out and he visits and he said, all right, what's the biggest sale you guys have ever made? And they said it was like 5 million units. And they goes, and how many of these things do you make a year? And they go 100 million. And he goes, sold. And he negotiated 12 cent price and he bought the entire year supply for $12 million. Now Colgate, Paul Mahler, Proctor and Gamble seized, opened up the marketplace. They're going to jump in and steal it. But guess what? No pumps. And ultimately forced Colgate to, to buy him for a gazillion dollars. Now what do we call this strategy? Blackmail. But that's what you want. You want to understand where is the constraint and get control. And that was not lost on this young man who finally came back, I thought was one of the greatest decisions ever made, that they brought back its founder after 10 years and the company's in trouble and he's launching this new product, the ipod. And he had already been ripped off once by his good friend Bill Gates, who took his operating system and he wasn't going to let it happen again. And he knew this case study, so he went to Bill and that's a whole other story why he convinced him to give him $150 million. And then he took a big chunk of that change and he bought up the worldwide rights to this proprietary Toshiba flash drive. Only one in the world that could deliver his mission, which is very simply stated, the size to fit in your pocket and hold a thousand songs and the rest is history. There was no way that Sony or anyone else could copy him. Now, later on he realized the real constraint to this was the distribution of music. And that he fixed later on the big constraint was nobody could sell with the kind of experience he wanted his devices. And he was forced to launch his own retail stores. The truth of the path of the entrepreneur is always to identify the constraint and get control. Now there's been a lot of talk up here about Elon Musk and he's in the electric car business and the solar business and we heard how important the solar business is going to be. Yeah, look, he's realistic. He's been giving away a lot of his technologies. He's been selling his drive chains to his competition. Why? Because what Elon understands is that where has been the fundamental constraint in both of those industries, and it was mentioned up here earlier, where has been the constraint in the battery side? The reality is if you could get that battery charged from 20 minutes down to five minutes, then you would really unleash the Tesla and everything else that's going moving forward. I thought it was interesting, Tony shared up on stage, Zappos they talked about, he and Dean, this irresistible offer. But let's dig underneath that story. Let me tell you the rest of that story. Tony had sold his previous company over 100 million bucks, was down to their last few dollars. And this business model that they had created, that even included we'll ship it to you and ship it back, was failing miserably. And so they have this fateful lunch. And at the lunch they really asked what I think is question, where's the constraint? And the constraint had to be in their own business model. They were then drop shipping direct, and that was the most inexpensive way to do it yet. The manufacturers were limiting them to the supply they could get and the different various models which their stores had preference on. And his partner Fred said, look, if we could get access to all the inventory, I could triple revenue in the next 12 months. And so what they did is they went north two hours and bought a little retail store in Willows, California, so they could then get access, like all the other retailers, to the full line of product. They realized they needed to fund their own inventory. But when they did, their revenue popped five fold. In the next 12 months, you can have these brilliant, brilliant moonshots and ideas, but what's critical is for you to step back and find the constraint and get control. So we wrote a tool. I'm going to be going over some of these things on Sunday. And one of those is to create what I call the one phrase strategy. If you figure this out, you win huge. Ikea, the constraint, we have to store and ship air. And so they perfect it even. Even though only at 6.8% market share, they'll do 37 billion this year. They figured out how to take the air out of the process. By the way, I love this. Happy birthday, Ikea. There's your cake. F you. Their latest, though, they just bought TaskRabbit. They know where the market's going and that's going to remove a constraint so that elderly can now buy and have assembled their products. Southwest, let's get that hunk of metal in the air. Every decision they made was to do that. Dell, we have a melting block of ice. He took that company to a billion in seven years and lost it all. And the board fired everyone except Michael, brought in Tom Meredith, and Tom figured out that's what we've got to do to make this business model win. Even Steve Jobs understood that this thing won't scale big. And he created what today is the largest market cap company. By realizing that what we can do is create a closed ecosystem and if what you do is so distasteful your competition won't copy you, it's the ultimate blocking strategy. Even my own team in Barcelona figured out if we can control the ball 76% of the time and they figured it out over a decade ago, we'll be the most winningest team on the planet. And so the question I leave with you is where is the constraint you, your business, your business model and ultimately the industry. And if you figure it out and get control, you win and you win big. We'll see you tomorrow.

Thank you.

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