Scaling Up: How a Few Companies Make It...and Why the Rest Don't (Rockefeller Habits 2.0)

by Verne Harnish

Patrick M. Lencioni’s best-selling book The Five Dysfunctions of a Team: A Leadership Fable

At a minimum, require all leaders and managers to read his book once a year. It’s a quick read, and doing a refresher can prevent new problems from arising within the team as you scale up.

this Critical Number, introduced and popularized through Jack Stack’s classic book The Great Game of Business: The Only Sensible Way to Run a Company.

For more on how to choose this “critical” constraint, read my favorite biz book of all time titled The Goal by the late Eli Goldratt. Scaling up is all about eliminating constraints — in the business and for customers.

Again, we strongly encourage you to read Stack’s book The Great Game of Business, and have a team travel to Springfield, Missouri, to attend his two-day “Get in the Game” workshop. It’s particularly useful for CFOs and COOs.

For an excellent look at the “Growth Process” at GE, read the interview with Immelt in the June 2006 issue of the Harvard Business Review. You’ll see how GE is using a red, yellow, and green measurement system;

Therefore, we strongly recommend holding a middle-management team responsible for responding to employees’ feedback on all obstacles and opportunities.

Reading Titan: The Life of John D. Rockefeller, Sr., by Ron Chernow, Verne was struck by the magnate’s daily luncheon routine.

alpha state,

You can get by with decent People, Strategy, and Execution, but not a day without Cash.

Co-written with Greg Crabtree, author of Simple Numbers, Straight Talk, Big Profits! 4 Keys to Unlock Your Business Potential,

Co-authored by Alan Miltz and his team, who created the leading software tool for banks to evaluate the financial health of businesses, it walks you through the 7 financial levers that every business leader can control to scale up cash. “The Power of One” refers to the benefit to cash flow if a 1% or one-day change is made to each of the 7 levers that affect it.

To tackle the cash conversion cycle, start by reading “How Fast Can Your Company Afford to Grow?” a Harvard Business Review article by Neil C. Churchill and John W. Mullins. It provides the formulas to help your team calculate the company’s overall CCC and discusses many of the financial levers highlighted in the last chapter of this “Cash” section of the book.

Just as we were going to press, John Mullins published a new book that Verne endorsed, titled The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers’ Cash. The title says it all! Read it for an advanced look at the cash side of your business and for ways to get your customers to fund growth, like Costco did.

For sources of cash other than loans or investors, read the Fortune Small Business article Verne wrote titled “Finding Money You Didn’t Know You Had.”

Read the Harvard Business Review article by Neil C. Churchill and John W. Mullins titled “How Fast Can Your Company Afford to Grow?”

EXECUTIVE SUMMARY: Greg Crabtree’s highly readable book, Simple Numbers, Straight Talk, Big Profits! 4 Keys to Unlock Your Business Potential, pioneered new territory for growth firms.

For more insight into this common strategic mistake, read Brenneman’s Harvard Business Review case study on the turnaround of Continental Airlines.

we encourage all CFOs to read Thomas A. Stewart’s classic book Intellectual Capital: The New Wealth of Organizations. Pay particular attention to the extensive appendix,

If the market tells you the price that customers are willing to pay, you have to make your costs fit and still turn a profit. This is called a cost-led pricing strategy.

imperative

Having sufficient cash is key to surviving another day. We hope the ideas, tools, and techniques covered in this section help you through the rough times and fuel your good times as you scale up your business.