Author and speaker Verne Harnish is founder and CEO of Gazelles Inc., a global executive education and coaching company. He is also founder of the Entrepreneurs' Organization (EO), which has more than 12,000 members worldwide, and chaired for 15 years EO's premiere CEO program, the "Birthing of Giants" held at MIT, a program in which he still teaches today. His most recent book is Scaling Up: How a Few Companies Make It...and Why the Rest Don't (Rockefeller Habits 2.0).
Harnish was the keynote speaker at IT Glue’s GlueCon partner conference in Phoenix earlier in the month, where ChannelPro’s Associate Publisher Joel Zaidspiner had a chance to catch up with him. This is an edited excerpt of that interview.
ChannelPro: How do you take a small business like an MSP that's just beginning to the next step?
Verne Harnish: Mainly it's through education. We talk about the three barriers to scaling, and the No. 1 barrier is right between their ears. When it comes to startup, there's an incubator on every corner—every junior college, community college, has a course on how to start. You can go to the SBA [Small Business Administration] and get free help. I have an MBA, that's supposed to teach you how to run a big company. Not sure how useful any of that is. But there's nothing that teaches you what you do between startup and being big.
When we launched the Executive Program hosted at MIT, it was from scratch. It was like parenting, there was no manual that comes with what it takes to scale a business. So we pulled together the best practices from top authors. I always felt it took a village of gurus. … Entrepreneurs don't have weeks that they can sit in an executive program. And so we structured something that was three days a year for three years, called The Birthing of Giants, that we partnered with Inc Magazine and MIT on. I moved thousands of entrepreneurs through that, and it was their real-time feedback of what worked and didn't work that allowed me to perfect that curriculum that resulted in my first book, Mastering the Rockefeller Habits. It really was the first book to teach people in a practical sense what you have to do from a business perspective, not an industry perspective, to scale. And then we continued to perfect our craft since.
ChannelPro: MSPs and VARs go to trade shows and events trying to capture some nugget of advice for their business. How do you coach them to get to the next level?
Harnish: Everything I've talked about is in the book Scaling Up, and then more importantly we have this two-and-a-half-day intensive course that we put the senior leadership of growth companies through. It’s all online 24/7, so people don't have to wait for me or any of our coaching partners. They can, at their own pace, pick around at the pieces they think interest them. Like learning language, over time, they'll have most of these in place and they'll see the massive impact.
Today we have about 2,700 active clients. Now we're getting ready to 10x that, so we're bringing on coaching partners every week that we train. Many of them are CEOs who used our tools to scale their business, and they'd like to share their expertise, and so they're very experienced entrepreneurs.
ChannelPro: You listed some books everyone should read. How important is reading for scaling your business?
Harnish: Leaders are readers. Those who don't read barely have an advantage over those who can't. Mark Cuban, who I've known since his early days with his IT services firm in Dallas, has read three hours a day, every day. What you have to do is say, “I'm not going to beat myself up for everything I'm not doing. What I'm looking for [in a book] is one idea that I can apply today to one of the things that I'm doing.” And know that all those data bits are up there, because nothing interesting can come out of this operating system we have called our brain that we didn't stuff in first.
Warren Buffet [reads] 500 pages a day ... Bill Gates is famous for his 50 books he reads, basically one a week, and he puts that list out. Mark Zuckerberg took up that challenge. … Leaders are readers. Doesn't mean all readers are leaders, but the real great ones know that you've got to keep up.
ChannelPro: And there are options for folks like MSPs who may be on the road during the day.
Harnish: You've got the audibles that you can do in all your drive time. Or Ted Talks are spectacular. We're big fans of getAbstract if you want to look at the best abstracts written of books… if it interests you then you go ahead and get the book. But it gives you enough that you've got the data bits.
ChannelPro: What’s your favorite book?
Harnish: Number one is Eli [Eliyahu] Goldratt, The Goal. He really put forth what I think is the most single, powerful business idea, which is the theory of constraints [a constraint is any factor that limits an organization]. …This theory of constraints, if you really understand it deeply, should drive almost every tactical and strategic decision you make in the business.
ChannelPro: Changing the subject to the industry, venture capitalists and private equity groups are buying up technology vendors. Do you see this trend continuing?
Harnish: That is the opportunity over the next decade. Growth through acquisition is a legitimate strategy that the PE firms are using. They'll buy a company and its platform. K1 Investment is a big client of ours. They look for what's the anchor company that provides the platform? And then they say, “Let's help you buy up the right people so that you can build out that service platform to serve these very niche markets.”
Without being too technical, we never can fight what [Harvard Business School professor] Michael Porter discovered: these five competitive forces that drive every industry. What you've got to do is understand where you play in those five competitive forces, and the PE firms understand that chess match very well.
ChannelPro: How does that impact the MSPs that are doing business with a smaller vendor that gets acquired and becomes part of a larger vendor?
Harnish: Every industry that's hot like this ultimately slows and everything consolidates to three main players. Or you have these boutiques that survive, because they have really narrow niches that they go deep with, like we're only going to be MSPs to law firms, or personal injury law firms. And we're going to travel all over the world taking care of that unique niche, because they have enough differences.