The evening of Monday August 20th was a night to remember. Verne Harnish, who is Founder of Entrepreneurs Organization (EO), Founder and CEO of Gazelles, Venture Columnist for Fortune Magazine, and Author of the international bestseller “Mastering the Rockefeller Habits,” spoke to the Washington DC Chapter of EO. His visit was especially meaningful because EO is celebrating its 25th year, and the DC chapter was the inaugural EO chapter.
Harnish brings more than 30 years of entrepreneurship experience, a global perspective, and an unmatched understanding of what business owners require to build lasting companies. Fifty business owners gathered at the home of our chapter president for education and inspiration from the individual who was responsible for creating the world’s largest entrepreneurial community.
Hitting Your Stride at Twenty-Five
Referring to Steve Jobs throughout his remarks, Harnish discussed what is required for a company to endure and scale. “Companies don’t hit their stride until 25 years,” he said. Apple is a perfect example of this. Jobs launched the company in 1976, it experienced turmoil through the 1980’s and 1990’s, returned to profitability in 2005, and then rolled out the iPhone, iPod, iTouch, and iPad from 2007-2010. In October 2010, Apple shares hit an all-time high, climbing above $300. On August 24, 2012, Apple was valued at $624 billion dollars.
Jobs was the first young entrepreneur to hit $1 billion in revenue. At the age of 29, Jobs saw Apple ‘s revenue climb to $1.9 billion. He “legitimized” young entrepreneurship.
Staying True to Your Seven Percent
“When Apple’s value reached $161 billion, it was the most valuable company at its time,” said Harnish. What is important to note, however, is that its combined global market share at this time was only 7%.
This fact poses the first important question: Who is your 7%?
Are you going after the right 7%? Or are you going after a target market that isn’t aligned with your solution?
“The most dangerous thing a company can do,” said Harnish, is to “go after low hanging fruit.” Too often, business owners want to grab any sale they can to keep revenue flowing. This is dangerous because those efforts deplete the time and resources we need to go after our true target market.
In addition to knowing our personal 7%, business owners also must focus on one priority. “Steve Jobs discovered the power of having only one priority for 6 months to 2 years,” said Harnish. When Jobs worked at Pixar, the company’s sole focus was on Toy Story.
“You have to discover your one thing and make sure it’s the absolute best. We have to stop talking ourselves into things that are strategic. And whatever you focus on, you need to provide the 100% solution – the whole solution.”
This fact poses the second important question: Are you crystal clear on what you are going to completely focus on for the next 6 to 24 months?
“Picking one thing is free and liberating,” said Harnish.
Identifying Your Constraints
Once a business owner has identified your 7% and you know the one priority that requires your focus, we need to ensure we are directing our limited time and resources at “the choke point or constraint in the system.” Steve Jobs was focused on the mobile apps. He was dedicated to getting them up and running. He knew that without the apps, his product line was constrained.
This poses the third important question: What are your constraints within yourself, your business model, or your industry?
To summarize, the three lessons Harnish conveyed are:
- Identify your target market – your personal top 7%
- Have a radical focus on one solution, and deliver 100% of that solution
- Focus on eliminating the constraints that impede your ability to be the best
Moving into an Age of Abundance
Harnish also shared his vision of what the entrepreneurial world will look like for the next 20 years. “If you can’t make money over the next 10-20 years, you are screwing up,” he said.
“The good news for entrepreneurs is that half the planet in 9 years will be middle class, and will be able to buy your product. That is 3.2 billion people,” he said.
“The bad news is that 1.4 billion people around the world are motivated and hungry.” With technologies blurring boundaries, they can provide services globally and cheaply.
A Demographic Crisis: Shifting The Supply-Demand Relationship
Harnish explained that the 2007 financial crisis was actually an outcome from a demographic crisis. From World War II until 2007, demand outstripped supply. Then in 2007, supply and demand flipped. There was more supply than demand. And it has remained this way.
So what does it mean for business?
“Business leaders must make their most important pivots ever. They must look at their industries and their customers through a different lens,” Harnish explained.
One of the industries that is successfully pivoting is the pet supply industry. Previously, suppliers looked at their target markets according to the size of the animals. Food and supplies were sold according to a pet’s weight or age.
Now, new suppliers are selling products that appeal to the emotional side of the buyer. They are answering the question, “what is the owner’s relationship with the dog?”
Rather than simply providing the essentials for pet owners, they are shifting to products that enable owners to provide better care and have more quality time with their pets. They have replaced a commodity-driven business model with a relationship-driven business model.
Keeping Your Finger On the Pulse of the Customer
So how does a business owner stay current with required marketplace shifts? “The best CEOs focus on two things: innovation and marketing,” said Harnish. A CEO should not get sucked into the day-to-day operations. The best CEOs are focused on the demand side – knowing what is happening in the market, enivisioning new solutions, staying connected with the customer.
Opportunities Abound
Global competition is increasing. However, opportunities for growth, job creation, and wealth creation are unlimited for those that adopt the practices and lessons learned.
- Know your target customer – your 7%.
- Maintain a radical focus.
- Identify your constraints and fix them.
- View your market from the “demand” perspective (what will they buy versus what will you sell).
- Get out of the day-to-day and innovate.
These strategies will enable you to build a company that is still thriving at its 25th anniversary too.
Verne’s Suggested Reading
“The Goal” by Eli Goldratt:
http://www.amazon.com/The-Goal-Process-Ongoing-Improvement/dp/0884271781
“How Companies Win” by Rick Kash and Dave Calhoun:
http://www.amazon.com/How-Companies-Win-Profiting-Demand-Driven/dp/0062000454
“Abundance” by Peter Diamandis and Steven Kotler:
http://www.amazon.com/Abundance-Future-Better-Than-Think/dp/1451614217
“Pricing With Confidence: 10 Ways to Stop Leaving Money on the Table” by Reed Holden and Mark Burton:
http://www.amazon.com/Pricing-Confidence-Leaving-Money-Table/dp/0470197579
“Hidden Champions” by Hermann Simon:
www.amazon.com/Hidden-Champions-Hermann-Simon/dp/0875846521
