The 7 Levels of Scale: Dialing In Your Operating System

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But if you don't have a documented operating system in place, it's just anybody. What should we do? Well, Bob thinks we should do this. And, you know, Jan went to this webinar and she thinks that we should try this thing over here. That would be cool. And it just becomes, And I know, man, we've dealt with this. It's not like we're above this, right where it's, it's. Everybody's got their respective pet projects. And because nobody agrees what is. Because we don't have that common language pet. Because we don't have documented algorithms in many cases. Cause we don't even agree on what the desired output is. There's no way to decide. Like, well, this is obviously what we should do. So, yeah, you've got to build. You gotta have the operating system in place. And then a component of the operating system is, guess what? Updating and improving, you know, optimizing, upgrading your operating system. And as that happens, it just, it has a way of working itself. You're listening to Business Lunch with Roland Fraser. This is your seat at the table.

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Hey, everybody. Roland Frazier and Ryan Deiss here with.

The Business Lunch podcast.

And today we are going further down the path. Farther, Farther. I think down the path. I mean, it's further and farther because.

We'Re going further into the. Yeah, we're going both Deeper in terms of understanding and further in terms of distance. So it's both further and farther.

We're going for farther into this whole concept of the seven level of scale.

That we talked about the last time.

We got together and last time we ran through them. We're going to review that for you and then we're going to go into level three this time. So level one being the old, get 10 sales from non affiliated, not your mother, not your father, not your best friend tin of people. And then level two, Ryan, level two.

Is to build the growth flywheel. Yeah. So once you have got those first 10 sales and not just got 10 sales, but you've actually started, serve them effectively.

So not just.

So if you said like, Yeah, I sold 10 people, yeah, I sold 10 people and they all hated it, or I sold 10 people and then I took the money. Not necessarily a recipe for a scalable business. We're talking about seven levels of scale getting 10 sales. But so level one, sell and serve 10 unaffiliated customers. Yeah. Level level two, which we talked about in the earlier episode, is to build that growth flywheel. So basically take the learnings from those first 10 and look to say like, how do we, how do we perpetuate this? How do we automate this? How do we take these, you know, 10 random things and make it to where this becomes predictable and repeatable.

So I have a question about that, but let's go through the quick review. So then level three is you get an operating system for your business put in place so that you have a, an ability to scale so that you've got something that the wheels won't fall off as things start to grow. And then level four, good thing.

Level four is my favorite. Your favorite? I think double your take home. I mean the idea that kind of once you have perpetuated your sales, once you've got your operating system in place, now it's time to, you know, to increase both your take home pay, but also to really start looking at the overall profitability of the company. Right. How do we increase our bankable profits for our own? If you do that kind of before some of these other things, and this is important, the sequence matters, you get this out of order and you're gonna find that doesn't work. A lot of times people want to play business and build operating systems and stuff like that before they sold anything.

They want to, getting the logo and all that stuff. But you haven't done anything.

Yeah, yeah. Well, what do you think of my logo? I don't know. Have you sold anything? No, not yet. But I don't think anything about your logo and neither do your customers because you don't have them. So yeah, doubling your take home pay, thinking about that. Hopefully you're profitable throughout. You're not going backwards. But once you've got that operating system installed, level four, it really is time to get in there and to really think about increasing your take on.

Which brings us to level five, which is build a bear, right?

Build a bear. Yeah. Build a board. It's close. Yeah. Build your board. Yeah, exactly. And this is the time where. And again I see this a lot of times as well, people are saying like, I've got to get. I want to build a board of advisors. I want to go. And it's like, have you sold anything? Have you. It's like, no, I know.

Advise you about maybe how to sell something.

Any decent advisor is going to tell you to go and do that. Now there's a good chance that, that you already have at this point some peers and mentors and things like that. So really at level five, that's when it's time to formalize that. Right. That's when it's time to really begin to formalize this. Not necessarily around a board of directors. It doesn't mean that you have to go in and saw a board of directors and have people telling you what to do, but you maybe should at this point have a more formalized, at least board of advice.

Yeah. And there's two things that I'm glad you mentioned that because it is important not for people not to be confused. So board of directors is really about governance. The board of directors is the group of people who were elected by the shareholders of, or the stakeholders or owners of the company to have a vision for the company and then be sure that the vision is being carried out in a responsible way and they elect the officers of the company like the C Suite and that sort of thing. So that's, that's a board of directors thing. We're not so focused on that. We, you, you generally by law have to have a board of directors, even if it's just you, but in several types of entities. But what we're talking about is the ability to have a group of people that you can look to to help you shape the strategic vision of the company that can advise both the board and some of the key people in the company so that they can see things that they might not otherwise see.

Right.

So that you get some additional perspective in particular and that maybe you can draw on both their expertise for guidance, but also their networks and connections.

Yeah, we'll talk more about this when we get to the episode where we dive deep. Because as we're doing is diving deep. Take an episode to dive deep into one of these, each one of these. But you know, big distinction there is, I see the board of directors, I mean, they're fiduciary, bound to do what's right for the company. Whereas, you know, if you're going to build a board of advisors around you, the entrepreneur, the CEO, the founder, they should have you in mind as well. And it doesn't mean they don't think about the company, but they should be saying, hey, how are you doing? Because as, as entrepreneurs, as founders, CEOs, you know, we need some support. Like we need help and we need sometimes people to call us on our BS and sometimes people to say, hey, it's going to be, it's going to be okay. You got this.

Then we get to level six, which is an acquisition.

Yeah, Level six complete. An acquisition, an expansion acquisition. At this point now, you know, Roland, this is your, this is, this is your bag, this is your game. But when we were building this list and realizing like, what does it mean again to build a scale able company? This is the seven levels of scale. Like how do we make sure that we're actually able to scale all companies, even if they got the gross flywheel in place, even if they've got a great operating system, their profits are phenomenal, they've got great advisors around them. Eventually all companies are going to reach the limits of their own ability to kind of scale within their organic kind of creation. So they need to go outside, they need to acquire, they need to acquire projects, properties. They need brands, media, other businesses if you really want to scale quickly beyond just kind of normal growth. So this is moving beyond the linear and towards the geometric. You got to develop those acquisition abilities. Exactly.

And then once you've done all that, you hit what we like to call level seven entrepreneurship. So you've got all that stuff together. And then here's the fun part, you kind of get to start all over again. Because this is an iterative process, right?

Yeah. At level seven, I mean, you've kind of hit your number. That's what we say. Level 7 is all about hitting, hitting your number. This is when, this is when kind of you're achieving, you know, and hopefully living your level set. And this is where you're building wealth. Maybe you're able to be generous with that. Maybe you're going and starting new things. But the point is, you know, you've hit your number. And what most entrepreneurs at this point. Exactly. You know, to your point, Roland, they say that's great, I'm going to reset the goal. I'm going to move, you know, move the target out again, which is totally great. It's completely fine, appropriate, as long as you celebrate the success that you had there. Right. That's important. Very often as entrepreneurs we move the goal posts too much and we never pause to celebrate. So you hit level seven, celebrate it. You're always a level seven entrepreneur at that point. But you're kind of deciding, you know what? I'm start back at level one and do it all over again. Or maybe not. Maybe you say, I'm going to reset it, I'm going to stay at level seven within this company. The point is at level seven you have what I believe all entrepreneurs crave, where they realize they're not optional. Exactly.

And so this time today we're diving into level three. But before we do, I'd like to kind of get a point of clarity. So Ryan, we've got the thing at level one about selling, making 10 non affiliated sales and then we go into the growth flywheel. But where does product market fit fit in between those two before and one? Because 10 is not really a lot to figure out. Do I have product market fit? And we do want people to make those sales and serve them so they've actually got something going. But should you build a growth flywheel before you have product market fit or how does that fit into that?

Yeah, I believe you should. I mean, so I think at 10 you have enough to know at 10. Again, the assumption here is that it worked. So if you sell and serve 10 and it was totally unprofitable, nobody really liked it. It was painful. You got a lot of customers that you don't actually want. Well then what you proved through selling and serving 10, you might decide like this is not the business that I want to be in. This is not the business I want to grow. And so it's possible to sell and serve 10, but to have that confirm that you don't have product market fit. Right. So the assumption is that you sold and served 10 and you're happy that you did it and they're happy that you did it at that point I would say yeah, you've got the early stages of product market fit. Now what you need to do is to say, okay, can we actually go to market with this in a meaningful way? Can we build a growth flywheel. Once you've built a growth flywheel, then that's when you've truly confirmed, okay, we have product market fit. So the challenge is that people want to. They want to build their funnels, they want to really think about their go to market strategy. They want to all of these things that as marketers and entrepreneurs we want to do. They put ahead of just the down and dirty nitty gritty of, let's go out there and see if anybody will buy this. And when they do, if they're happy and then we're happy. And so that's kind of that first step. Then it's okay, can we do this? Can we scale this, grow it in a way that is, you know, that in a way that's profitable, where the economics make sense. That's what level two told you.

Okay.

Okay.

So with that, I know that the operating system is something a lot of people are really interested in. Tell us what your take is on that.

So. And again, it gets back to sequence. So a lot of times people want to think about building a team or. I know, Roland, we've dealt with this with like board members or people saying, I think I need to hire a coo. And it's like, you have the most inconsistent sale. Like a COO is not going to come in and fix broken sales. I think that's so important. Right. You need an operating system when sales are coming in so quickly, when the business is growing to a point that it feels like the wheels are about to fall off. Right. The machine is going, but it's held together by duct tape and duct.

And a sales director is not going to fit that.

Right.

Or a COO who fixes sales. As we found out, one of our business partners had an event recently, right. In Las Vegas and was talking about one of the first acquisitions that we did together, which was this water filter company where we. The first thing that you guys asked them was, can you handle more sales? And they were like, oh, yeah, we got capacity and we've got all this stuff. And then within, I think the first campaign, the whole thing fell apart because they couldn't handle the business.

Yeah. And that's when you need an operating system, you know, and at the time, right at the time, like, we've since have developed those skills and frameworks around that. We're going to talk about those, you know, talk about a lot of that now. At the time, we were primarily marketers, and this is well over. This is a decade ago. And so when we walked into A company. We were all about level two. We were all about getting the growth flywheel spinning. And again, if you're wondering, like what is the growth flywheel? What is that? I would direct you back to the previous episode where we talked about it, but once you've done that, if you then don't say, okay, let's get our operational capacity, sort of, let's get an operating system in place, then what you're going to find is you can grow businesses into non existence. You can implode businesses. And we've done that in the past. It's why we've had to develop this kind of level skill. But I see entrepreneurs make two grave errors. The first is they, you know, want to play business and so they want to build an operating system before they really have sold anything. That's not going to do any good at all. Best case scenario, you slow your company down through bureaucracy. Best case scenario, what's more likely is you waste a lot of time doing something that you don't. Right. You waste a lot of time building in efficiencies when there's nothing happening. The second big mistake that I see a lot of entrepreneurs make is they don't figure out the operational side of things. They're the hard drivers that, you know, they're the sales and marketing focused entrepreneurs, or maybe they're still product focused, but they're like, let's go, let's get this thing in as many people's hands as possible. And they never shift from what we refer to as a U operating system to a scalable operating system. And, and a U operating system is just, you are the operating system. And I've, I.

There's a few people that are good friends of ours right now that are going through that and it's actually breaking them. I mean, it's, it's causing family challenges and relationship challenges and even challenges within the business because there are opportunities that are coming in faster than they can handle them, which is, you know, you'd say it's a great problem to have. And I guess it's better than none at all coming in. But, but you're kind of experiencing some brand damage as a result of it because you're not able to serve the people who are coming in at the scale that they're coming in, which means that you're dropping balls and things, you know, things are kind of falling apart. So this is where the OS comes in. So, Ryan, what are the components of the scalable operating system?

Yeah, I'll go into, I want to Pause on what you said, because I think that's really important. I don't want to skip over that. Because what you said, I think is the most important thing. Because there's two. If you don't do this, there's two possible scenarios. We kind of talked about it. The first is system overload. Right. And that's the best possible scenario, is your systems get overwhelmed, you don't serve your customers, you have brand damage. That's the best scenario. If you don't do this, the worst possible scenario is we see founder burnout and. Yeah, I mean, I've seen this cost people their health. I mean, literally have, like, nervous breakdowns. I've seen it cost people marriages. I mean, it nearly cost me mine. I've told the story, like, walking in after, you know, many, many, you know, too late, working night, just trying to keep up with the growth that we were having, and walking in and to my bedroom and at, you know, past midnight and light was still on, and my wonderful, amazing wife sitting up in bed saying, hey, we need to talk. Like, you know, this is not. You know, this is. This is not. This is not okay. Like, we can't keep going on like this. And so it is. Yes, you're right. It is a good problem to have. It's it in. It's better than not making any sales. Except this is the. This is the piece right here that can truly destroy you. Right. If you never make sales, it's frustrating and it's just broke. It's disheartening. Right. But you're not.

Yeah.

And you can keep going. Right. It's not complicated. You know what you need to do? I need you to go sell some stuff. But to have built something that is actually working and to have it destroy you is one of just the worst things in the world. And I know, I've been there. We. We've been there, and we've seen too many entrepreneurs there. So how do you not get there? Yeah, I mean, that was kind of the question that we really sought to answer when we launched scalable to begin with. And it started was from just looking at what is an operating system, Right. To try to figure out, like, what goes into an operating system. Because I was Googling, I was like, what the heck? We're talking about a business operating system. What is that? Nobody really seemed to agree. So I went back to the source, right? Kind of a first principles type thing. Like, what is an operating system? So I Googled it, and Google said, an operating. I'll read it. An operating System is a set of algorithms and a common language that enables different components to communicate with one another in the support of the desired outputs of a machine, right? So it's a set of algorithms, it's a common language, meaning everything is showing up on, you know, the user interface, right? And you know, that allows all these different components. If you think about a computer, right, the mouse has to communicate with the cpu, which has to communicate with printers, which has to all these things in the support of the desired outputs. So it's those three things, the algorithms, the common language, and the desired outputs. And you know, we looked at that, it was like, oh, set of algorithms. Well, that's your processes and SOPs, you know, the common language, that's communication alignment, it's meeting rhythm. And of course, desired outputs, your goals and objectives. So those three things, right, your set of algorithms, common language, desired outputs, that's what really formed kind of the foundational framework of what does it mean to have an operating system? And it seems simple, but if you ask most growing businesses, and I say growing, not scaling, because until you have this in place, you're not going to be scaling, you're not going to be scalable. The business owner generally knows what the desired outputs are. They, they have a general idea, but they haven't really been, you know, fully fleshed out. Like, because in the beginning the desired output was don't die, right? Don't run out of business, which is enough in the early days. But it's at some point, it's not enough. So we need to reset and come up with, you know, desired outputs with goals and objectives that are scalable, that get shared throughout the organization. Common language, you know, the meeting rhythm. When companies are small, you can literally talk about that stuff over the same table. But we saw as we scaled from 10 people to 25 people to 50 people, that that didn't work anymore. We needed to install more formalized meeting rhythms. And then same with the set of algorithms, the process and SOPs in general. Like, I know how to do stuff, so I do it, I teach somebody else how to do it, it's good enough, and then that's usually where it stops. Nothing actually gets documented. So these are the three things that go into building any company operating system.

And the way that they're assembled for scalable is through a little bit of a software suite that we've created. So do you want to share a minute about that and kind of how it works and helps?

Yeah. So, I mean, there needs to be one place where everybody goes to look at this. So, yeah, we built a tool to do that for us internally. We're now making that available to everybody in the scalable operating system accelerator. But the basic thing that we have folks do is, number one, step one is to document your set of algorithms, right? And so we will first have people kind of visualize how does your company create value? So what is your growth engine? And we'll say, okay, once you've, you know, once you've acquired a customer, then how do you serve them? That's what we refer to as a. As a fulfillment engine. So once you have these things documented, you can say, okay, in this entire process where we acquire a customer and then we serve a customer, in any business, you know, if you got multiple products, multiple product lines, you might have a half a dozen of these, right? What we call value engines. And within those value engines, there's going to be a stage or two, maybe three or four that really matter. Those are the ones that you document. This is so important because when people, especially entrepreneurs that get stuck in creating process documentation because they feel like they need to document everything, right? And I remember. I don't know if you remember this, Roland. This was years ago. So, I mean, I think it was in the earliest days. You may not have actually joined up as a partner at this point. I think actually you weren't, because I remember the timing was. And who was here. And it was definitely, you know, we were friends, we knew each other, but it was. Let's just say it was when a certain somebody was always talking about charts and things like that. But, yeah, so we decided, you know, Perry and I decided, like, we knew that we were broken in this area and we needed to fix it. So we said, okay, we're just going to basically shut down the company for a month. We're not going to build anything new, right? We're not going to build any new products, we're not going to build any new funnels, you know, marketing campaigns, nothing. Everybody just do the bare minimum you need to do to maintain. And in your spare time, we want everybody to document everything that they do. And we shut down the entire company for a month and created this, like, big fat, like, process manual. And I remember, like, printing it out and looking at it and flipping through and being like, oh, this is great. This is great, dude. Nobody ever opened that thing. It got put up on like, a bookshelf and literally nobody ever opened it was the biggest freaking waste of time. And the reason is because I found it. I was flipping through, I Actually took it. It's sitting in a mat. Because I was like, here you go. And it's stupid. Like the stuff that we documented, like, we documented stuff on how to request paid time off. And look, I'm not saying there's anything wrong with vacation time and people taking time off. I want people to take time off. But that wasn't the first thing that we needed to document.

It is good to have, but not.

Maybe it is, but it's not where you start, right? Yeah. So start with the customer. Move backwards. First, visualize how do we create value, how do we acquire customers and serve customers. Going all the way back to level one. Right? Sell and serve 10. Okay, so sell and serve 10. Then you build your growth flywheel. Then you go, okay, we generally know how we do this. Now let's document that. Okay, within this broader flow, what are the handful of steps that we really need to get right? Document only those. We call those your business playbooks and those business playbooks. And in most companies, there's maybe going to be a dozen that are actually meaningful.

What are a couple titles? Just document, you know, an idea of the things that.

So one of our business playbooks is on how to. How to document a product, how to build a product positioning document. So anytime before we're going to roll out a new Sprint or workshop at Digital Marketer Scalable, one of the stages within kind of our fulfillment engine is to, you know, we're going to run a. We're going to, we're going to do this webinar, we're going to do this course. Well, before that gets created, we've got to build what we refer to as a product positioning document. And this simply makes, it just simply ensures that the thing we're about to do, people actually want. It seems really simple, but we produced a lot of workshops that we thought were cool, but that nobody registered for. Even when people had it for free, they didn't show up. And so we realized we need to figure out the positioning ahead of time, and we needed to engage both the product team and the marketing team. And so we added this stage in there of build the product positioning document because it's what gets everybody on the same page. Literally means that marketing can start creating copy and campaigns while it's being created. So it added some efficiencies. So that's an example of a, you know, that's an example of what we call a power stage. Another example of a power stage, you know, could be. If you think about, let's say that you have an E commerce company and you want, you know, you're doing shipping and fulfillment. So your fulfillment engine could be, okay, somebody bought something, we're going to go over to the shelf, we're going to pick it off the shelf, we're going to put it in a box, we're going to send it out. Well, maybe you realize, like, we should write a handwritten note because that's going to drive like a thank you note or something like that, because that's going to drive more. So you might create a process around, you know, how do we write that note? Who's supposed to write it? What are they supposed to say? Because you realize that that one little element not only does it dramatically, you know, reduce returns, but it also gets you eight times as many reviews on Amazon, which drives your score up. Right? That would be another example of a power stage. When you go through, if you visualize and document again that value engine, the steps will just call out, like, this is a biggie. And there's others where you're like, we couldn't screw that up if we tried. Like, that's. Just do it. I don't know what to tell you. Like, permission to play, show up, respirate. It's going to be fine. And so once you identify those, you realize that, wow, at this company, there's really only a handful of things that we need to do amazingly well, but God dang it, we better get those things right. So step one is you document your entire process value flow. Then you identify the power stages and build checklists, step by step, checklists, playbooks around those. Then kind of the third step, and we're still in the, you know, we're still documenting the set of algorithms. But the third component is you assign accountability. Okay, if this one is particularly important, who is uniquely responsible? Because if everybody's responsible, nobody's responsible. And so we build, we have what we call a high output team canvas, where we go through and we say, okay, this stage in the value engine, who does that? This one, who does that one? And we literally go to a spreadsheet that, again, is in this tool that we've created, where it's very easy to say we don't have job, we have job descriptions. But it's more important for us that we have what we call critical accountability bullets. So this person, these are the things that they're absolutely accountable for that are critical. How do we know they're critical? Because they're aligned to one of the value engines. So that's kind of the first Layer, then the, then we'll use that to build company scorecards and establish what's the meeting rhythm. Right, so we got scorecards. Let's make sure we're all looking at the same thing. We've got team based scorecards, company wide scorecards, meeting rhythm, where we know when are we going to meet as teams leadership, when are we doing all hands, you know how you do your meeting, you should figure out your meeting schedule once you know what scorecards, otherwise you're just doing meetings about nothing. Right. If your meetings seem worthless, it's because you haven't done some of these other steps that we're talking about. But the meetings plus the scorecards, that's what defines the common language. And then your desired outputs, those are your company goals and things. We can talk more about that as well.

So does an operating system help you prioritize what to do? Because I know a lot of people get a little overwhelmed with all of the ideas and the possibilities and potential actions they can take, the products to pursue, the things to launch, etc. Is that something that's dealt within the system as well?

Yeah. So as a part of that meeting rhythm, you know, we do the 90 day quarterly sprint plans, and it's at the 90 day quarterly sprint plans where we reevaluate. Okay, what are our goals? Which is that's your desired outputs. So these are our goals. Then you look at your scorecards. How are we progressing towards those goals? Well, not very well. Okay, well then what must we do to progress closer to those goals? Well, let's look at our value engine set of algorithms. What's working and what isn't, what do we need to optimize? And, and that then informs the activities that you're gonna take in that next quarter to move towards those goals. So the act of doing strategic planning, that is kind of taken care of in that meeting rhythm category. But if you don't have a documented operating system in place, it's just anybody. What should we do? Well, Bob thinks we should do this. And you know, Jan went to this webinar and she thinks that we should try this thing over here. That would be cool. And it just becomes, and I know, man, we've dealt with this. It's not like we're above this. It's everybody's got their respective pet projects. And because nobody agrees what is because we don't have that common language, because we don't have documented algorithms, in many cases, because we don't even agree on what the desired output is, there's no way to decide, like, well, this is obviously what we should do. So yeah, you've got to build, you got to have the operating system in place. And then a component of the operating system is, guess what, updating and improving, you know, optimizing, upgrading your operating system. And as that happens, it just, it has a way of working itself out.

We just finished our, one of our company's quarterly strategic meetings and we have set all of that stuff up. So for people that are listening and thinking about putting an operating system into play, do they do that and then hope everything goes all right for the quarter and then check in next quarter and if it didn't go right, try again and figure out what to do or how does, how do they keep track of that and be sure that things are going the way they anticipated they would when they had that meeting?

Yeah. So if you're at level, if you're at level three, so when you get to level three, that means you've got, you know, your growth flywheel spinning, sales are coming in and you're saying, I need, I need to build an operating system. So when you first build an operating system, and this is obviously what we help people do at the scalable company, what we help businesses do, there is a process. You're generally going to spend, you know, eight to 12 weeks just going through the process of building your operating system. And in that process, you're going to set goals. In that process, you're going to document those kind of critical power stages. You're going to build your company scorecards. But while you're building, you're also tracking and you're measuring for the first time ever, you're seeing like, how do these different components actually.

And that's all through the scorecards.

Yeah, that's all through the scorecards. And so all that happens while you're building it. And then the way that you install your operating system is you host your first quarterly Sprint plan. We, well, we do it. It's a two day process. So day one is a clarity day. And during your clarity day, that's when you're going to, you know, build your, figure out like what's your three year targets, you know, where are we going? Like long term, kind of short term, that that's what are our values. So day one is a clarity day. And then day two, you do your first quarterly Sprint plan for that next quarter. But you're looking back over the previous quarter because again, we would have had that time to build up that data. If you go in day One, you're like, all right, let's plan. I mean, I can tell you how to run a quarterly sprint planning meeting, but step one is let's go and look at our scorecards. How we doing? What's red, what's yellow scorecards?

Are they similar to a dashboard? So that something you're looking at every day or what, weekly?

Yeah. So the way that, the way the cadence goes is we're going to do a clarity day. And a clarity day happens ideally once every about three years. Right. Because when you do that clarity day, you're setting a three year target. Then every quarter you do a quarterly sprint plan. And that's where you're looking back and you're figuring out, okay, what must we do in the next quarter to stay on target, to stay on track for that three year goal. You're also doing within a quarterly sprint, you're doing monthly business reviews. And so that's when you're looking, you're saying, okay, how are we doing? Are we generally on track for our quarterly sprint plan? And then each team should be meeting weekly. And it's at those weekly team meetings where you're reviewing the scorecards and you're seeing like, are the actions that we're taking during this sprint or the ones we did, are they having the, are they doing the job? Are they making it work? So it's a weekly scorecard review, it's a monthly business review where you're doing a broader look. And then quarterly you're doing a new, a new sprint. And look, sometimes you get to the end of a quarter and you go like, this happened to us, I think a quarter or two ago where we said, you know, our theme is finish what we started. We're not done yet. We have, we, we had a lot of stuff that we wanted to do in the last quarter. It's the right things. It seems to be working. But we're not done. So we're just going to reset, we're just going to, you know, hit, hit the repeat button and we're going to run this next quarter just like we planned. That was a nice short planning meeting because we'd already done it. Like, let's keep doing what we're doing. But yeah, that's the general cadence. And then, you know, usually once a year, towards the end of the year, it's good to kind of take a look and evaluate, hey, with our desired outputs, you know, these values still alignment, kind of our strategic anchors, our three year target, do we still feel good about that? Sometimes you need to readjust, that's fine. But you know this Roland, like we're not believers, big believers in annual planning. You know, you could set an annual budget from a finance perspective, but in terms of strategy, I believe that the year the anim is a spork, I think it's trying to do too. It's too long to be accurate, too short to do anything truly meaningful. So we plan in three year, we call 12Q chunks and we execute in 90 day sprints. So plan in three year cycles. Execute 90 day sprints.

Hey business lunch listeners. We're going to get right back to the show, but Roland wanted me to invite you to a brand new training that he's doing on acquiring businesses with no money out of pocket. It's something that he's talked quite a bit about on the show but he's doing a free training where he's going to walk through the entire process. So if you want to get access to that, go to businesslunchpodcast.com epic that's businesslunchpodcast.com epic and you can get signed up.

Is there anything in any parts of an operating system or the ones that we've developed that are helpful that we didn't really cover here that you think would be good for people to know that are other components that they want to think about having as part of the system?

Yeah, I mean, so there's six primary tools that go into what we call a scalable operating system. The first is your value is the value engine and that's kind of the visual representation. It's, you know, we use post it notes. If you're watching this on YouTube, there's actually a picture of one of our value engines on the whiteboard behind me. And if you're listening to this, it might be worth checking it out on, you know, on YouTube to see it. But yeah, so the Value engine is the first kind of tool. Then there's the playbooks. And the Playbooks are you know, the step by step checklists that sort of drill down into each one of those stages. But again you don't have to document all of them, just kind of those power stages. There's the hot canvas where we're actually assigning responsibility. Those are the first three tools. They're what form the set of output.

H O T is high.

Then you have team.

Right?

High output team. Yeah, thanks. High output team canvas. And then you've got your, your, your scorecards. There's going to be team scorecards that all roll up to a company scorecard. That's that kind of dashboard. Red, yellow, green. We're picking the metrics that we're going to look at. Those are being tracked weekly, reviewed monthly, at the monthly business reviews and then your meeting rhythm, you know, and that's, these are things, once they're set, they're generally set. They might get updated. You're updating your score. Yeah, so those are, yeah, those are five. And then the sixth is your clarity compass. And the clarity compass is where we're visually saying these are our desired outputs. So if you want to think about it, the reason we call it a clarity compass is there's four points to it. So if you want to think about kind of the north point, like your north star, that's your three year target and that is specifically, you know, within three years. So by this date we will have, we will be doing this much in revenue at this profit margin, serving this many customers. So X revenue, Y margin, Z customers and the number of customers just helps to give you a sense of, you know, we go in like higher ticket, you know, that type of stuff. And it's just, it's a broad based view. This is, this is kind of our goal at the South Pole. You have the company purpose, you know, the why. Okay, why are we going to do that? Like why do we believe that we should be doing this? What's kind of that driving force? So and the reason we say through your target and your purpose is because other companies talk about your mission and your vision and nobody's goal, nobody seems to agree with any of these things mean, so we don't use any of those terms. But some people might call your purpose, your vision. Right. And your three year target might be your mission. You know, Simon Sinek has what's your why? That's the self, that's your purpose. And again, that's the thing that's going to drive you. That's what's going to inspire your team. It's what's going to inspire like I know at the scalable company, you know, we want to help, you know, we want to our mission, like we want to create more level seven entrepreneurs. But you know, our whole purpose behind that is we want to help entrepreneurs scale themselves so that they can scale their companies. Like we're sick and tired of entrepreneurs burning out and quitting on themselves. You know, it's better for businesses and families and whole world economies if entrepreneurs stay at the helm of their companies as long as they want to. We believe that. And so that's kind of the driving force because we've been that entrepreneur, like we've been those people ready to quit. So that's kind of the south pole, the Clarity Compass. On the east, you've got your company's core values and then on the west you've got, we call strategic anchors. So these are the things where you're acknowledging this is what we're really good at. And kind of east and west are there to keep you literally in your lane. So as we're being motivated by the south to, you know, pushing towards those three year targets, it's going to be our values and our anchors that keep us from deviating too much from the plan, from keep us from behaving in a way that we shouldn't behave. That's what your values do. And the anchors keep us from, you know, maybe pursuing certain business ideas and objectives that we maybe shouldn't pursue because we maybe suck at that or we're simply not taking advantage of a key kind of competitive or strategic advantage. And so that's how we visualize, you know, the Clarity Compass. That's how we visualize the desired outputs. And the beautiful thing is you really only need to do that once about every three years or so. And so it's kind of cool. And that's what you're building in that first sort of Clarity day. That's when you're installing your company's operating system.

So there are several different operating systems that are out there. There's Gino Wickman, who we work with, and his EOS entrepreneurial operating system. There's Verne Harnish, who we work with, who has scaling up. And there's us. I'm not, I can't think of any others off the top of my head, but how does somebody decide which of those is the right one, do you think?

Look, I think all those are good. They all have. And we've learned a lot from both of the gentlemen that you mentioned in those companies. I think my challenge with a lot of the ones that are out there is they speak to things like how often do you meet? And they speak to the importance of documentation and goal setting. But the part that I think most of them miss or just under emphasize is starting from the customer and working your way back. How the heck do we create value?

Right.

It's the question that most businesses, most entrepreneurs don't ask, like, how do we create value? Like, what reason do we actually have to exist? Like, why do people give us money? Let's start from there. That's why for us, it all begins with the value engines, then we document based on that, then we optimize all those other components. And so I think it's the, again, it's the sequence that makes the biggest difference. But I would say, you know, read them all, learn from all of them. I know we did. I don't think any of those are, you know, are bad. You know, we just sought being in the arena, right. Being out there. You know, we sought to do the things that we felt were maybe missing from some of the other ones. But I'm very thankful for all of those as well.

And I agree with you. I would say to read them all, including ours, which is in the January, February 1st, first draft in our hands. And I know, but we do have a thing right now that might be helpful to people, I think that you wrote, Ryan, don't we? That is a kind of a summary of the seven levels.

Yeah, I mean, so if you're, if you're liking this, be sure to go to 7levelsofscale.com and you can actually take a very brief assessment so you can figure out, okay, what level am I at? In case you're wondering. And then, yeah, as a part of that, we'll also send you a workbook and a report on kind of what actions to take. And it tells you, like, when you go through the assessment, it says, okay, you're at this level. And here are some of the steps that you should take if you want to proceed on to the next level. So, yeah, 7levelsofscale.com. Whether you spell out 7 or you do the number 7, all those will get you the right.

That's awesome. So that's, that is really the level three that we wanted to cover today in the deep dive. And next time we will be talking about how can you get more money from this. Let's talk about doubling your salary. And I don't know if that'll be a very long one, but there are some specific strategies that we have that will help you get there. And so definitely want to tune in for that. And if you like the podcast, we would please ask that you take the time to review us and give us our five star review. We'd also appreciate it if you'd subscribe if you're not currently subscribing because you don't want to miss out and only know level 1, 2 and 3 and not know level 4, 5, 6 and 7. Right. So other than that, thank you guys all for watching or listening. Ryan, anything else to close?

No. Well, I'll say one thing. When you get to, when you, when you pass level three, you pass what we call the scalable line, right? That is when we would say, okay, your company is officially scale able and it is time to scale. It's time to go nuts. And I would say, you know, you're going to grow throughout but that order of magnitude growth, making that really, really big leap. Step number one, you got to get those first 10 sales, like prove that it's worth building a flywheel, you know, around which is level two. And then let's get that operating system installed, then we can talk about scale prior to that until these other pieces are in place. I wouldn't necessarily pursue scale like what we're talking about here. But yeah, if you like this, if you're like, hey, I got that, I got that, then congrats, you passed the scalable line. And if you're thinking, I like that, just know that's kind of what we're here to help you do at the scalable company. Awesome.

Don't forget, subscribe to us so you don't miss anything out like us and follow us and hopefully you too can be scalable.

You've been listening to Business Lunch with Roland Fraser. If you're enjoying the show, let us know by subscribing and leaving a review. And for more information go to businesslunchpodcast.com thank you for listening.

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