Mastering The Rockefeller Habits by Verne Harnish

Summary

Identify your business’ chokepoint, have 1 priority, only plan 10-25 years and 3 months, keep everything stupidly simple and the best data is firsthand data. All you need from this book. For more, read Titan instead.

Key Takeaways

• “If you want to teach people a new way of thinking, don’t bother trying to teach them. Instead, give them a tool, the use of which will lead to new ways of thinking.” – Buckminster Fuller
• The “x” factor: identify the chokepoint in your business model and industry and then gain control of that chokepoint.
• Successful business practices:
  • Barbell: identify where you want to be 10-25 years from now AND 3 months from now. Every other planning is a waste.
  • Have only 1 priority. If more, eliminate until you have 1.
  • Keep everything stupidly simple.
  • Best data is firsthand data.
  • Review data at minimum on a weekly basis.
• Defining a simple long-term vision 10-25 years out and deciding on a handful of priorities for the next quarter are the two most important decisions a business leader makes.
• You only have a real strategy if
  • What you do matters existing and potential customers
  • It differentiates you from the competition
  • You can become the best at it
• Three decisions an executive team must make – ask regularly:
  • Do we have the right People?
  • Are we doing the Right Things?
  • Are we doing those Things Right?
• The organization with too many priorities has no priorities.
• Identify the single most important measurable in building value.

What I got out of it

Reading Mastering the Rockefeller Habits reminded me of the late Bob Proctor: by obsessively studying one great book, person or theme, distilling the principles to their core components and mastering it to the extent you can teach it to others in any circumstance allows you to build a great life and business. Proctor studied Think and Grow Rich, Verne Harnish studied John D. Rockefeller.

The lesson here: simplicity, focus on fundamentals and study 1 (or a few) great role model(s) until their lessons become second-nature. Everything else is noise.

The business practices and strategy in this book are useful, but I suggest reading Titan and other (auto)biographies on Rockefeller instead. Always learn from the source.

Summary Notes

Introduction

Buckminster Fuller quote that embodies our change management philosophy, “If you want to teach people a new way of thinking, don’t bother trying to teach them. Instead, give them a tool, the use of which will lead to new ways of thinking.”

Overview 

Three habits that are key to the successful management of a business:

• Priorities
  • Does the organization have objective Top 5 priorities for the year and the quarter (the month if growing over 1000 A > annually) and a clear Top 1 priority along with an appropriate Theme?
  • Does everyone in the organization have their own handful of priorities that align with the company’s priorities?
• Data
  • Does the organization have sufficient data on a daily and weekly basis to provide insight into how the organization is running and what the market is demanding? 
  • Does everyone in the organisation have at least one key daily or weekly metric driving his or her performance?
• Rhythm
  • Does the organization have an effective rhythm of daily, weekly, monthly, quarterly, and annual meetings to maintain alignment and drive accountability? 
  • Are the meetings well run and useful?

Titan confirmed that there is only one underlying strategy – what can be called the “x” factor – which must be discovered, defined, and acted upon to create significant value and ultimately significant valuations within a business:

The “x” factor: identify the chokepoint in your business model and industry and then gain control of that chokepoint.

Three keys to GE’s success that are useful to mid-size firms:

1. In planning, the “middle” is gone. You only have to define two points: where you plan to be 10 to 25 years from now and what you have to do in the next 90 days.
2. Keep everything stupidly simple. If your strategies, plans, decisions, systems, etc. seem complicated, they are probably wrong.
3. The best data is firsthand data.

Defining a simple long-term vision 10-25 years out and deciding on a handful of priorities for the next quarter are the two most important decisions a business leader makes.

You don’t have a real strategy if it doesn’t pass these two tests:

• That what you’re planning to do really matters to your existing and potential customers
• It differentiates you from your competition.

Add to this the requirement that you have the ability to become the best at implementing this strategy and you have a clear idea whether you really have a strategy or not that will work.

Mastering Growth 

Three barriers to growth common among all growing firms: 

• The need for the executive team to grow as leaders In their abilities to delegate and predict
• The need for systems and structures to handle the complexity that comes with growth
• The need to navigate the increasingly tricky market dynamics that mark arrival in a larger marketplace.

Mastering The Right People Doing The Right Things Right

Three basic decisions an executive team must make:

1. Do we have the right People?
2. Are we doing the Right Things?
3. Are we doing those Things Right?

The Right Things Right model illustrates the fundamental decisions, relationships and functions of a business. 

• The three ovals on the left side of the model show the Right Things; 
• The three ovals on the right show how to do Things Right. 
• Every business theory can be mapped onto the model
  • It provides a framework to integrate various business theories. 
  • It’s also a useful model to help explain to all employees the fundamentals of business. 
  • It serves as a useful tool for choosing quarterly priorities.

The key questions on the Right Things side of the model are:

• Do you have a viable economic model? Or, more bluntly, can you ever make real money doing what you’re doing? 
• Do you have a product or service that enough customers value to make a viable business? 
• Have you determined the X factor that you can control that differentiates you from the competition, matters to customers and provides you with an advantage in the marketplace? 
• Can you be the best in your chosen sandbox?

The key questions on the Things Right side of the model are:

• Do you have the management practices and processes to take advantage of the market opportunity you’re pursuing? 
• Do you have the habits and disciplines in place to maintain your competitive advantage? 
• Is your organization structured properly to maximize the productivity of the employees? 
• Can you deliver a consistent service or product offering?

Mastering A One-Page Strategic Plan 

The Planning Pyramid and the One·Page Strategic Plan, a simple yet powerful tool that helps you edit your vision and strategy down to a single, action-oriented page.

To become and remain competitive, your organisation needs three things:

1. A framework that identifies and supports your corporate strategy, 
2. A common language in which to express that strategy, and, 
3. A well-developed habit of using this framework and language to continually evaluate your strategic progress.

Most important, you’ve got to keep it simple.

Mastering The Use Of Core Values 

Having a few rules, repeating yourself a lot, and acting in ways that are consistent with the rules – these are the three keys whether you’re providing your children with a good moral foundation or providing a company with a strong cultural foundation. 

Mastering Organizational Alignment And Focus 

The organization with too many priorities has no priorities.

Mastering Employee Feedback 

Recurrent customer and employee hassles cost your employees 40 percent of their time, not to mention what it’s costing your company in lost customers and revenues. You should construct a system of employee feedback to figure out which problems (opportunities in disguise) are arising and recurring in your organization or with your customers. 

Mastering The Daily And Weekly Executive Meeting 

To make more than just noise in your business, you’ve got to have rhythm. And the faster you want to grow, the faster you have to pulse. 

At the heart of executive team performance is a rhythm of tightly run daily, weekly, monthly, quarterly, and annual huddles and meetings – all of which happen as scheduled, without fail, with specific agendas.

With these meetings you’ll have opportunities to focus your executives on what’s important. You’ll also solve problems more quickly and easily, you’ll achieve better alignment around strategic decisions, and you’ll communicate more effectively.

Rockefeller understood that the word company meant “to share bread.” He knew that by gathering his top lieutenants and advisors each day for a meal, their personal and professional relationships would be strengthened.

Mastering The Brand Promise 

Identify the single most important measurable in building value.

Control Your Bottleneck or Chokepoint – Rockefeller’s key strategy:

• You’ve put a stake in the ground by determining your measurable brand promise.
• What are you going to do to lock it up, to hold that position? 
• You’ve got to look for the bottlenecks or chokepoints – there’s always one or two – and figure out a strategy to either blow them up or neutralize their threat.

For instance, early in the oil business Rockefeller determined that the real shortage in the industry was not oil (it was gushing out of the ground) or refineries (over 1,000 popped up overnight), but oak barrels for capturing the oil, and very specifically, the iron rings that hold the oak slats together. So, one of his first acquisitions was a key firm that made the all-important iron rings. Later, when it became clear that transportation costs were the biggest threat to profitability, Rockefeller shifted his energies to that chokepoint.

Value-Add 

• What is your BHAG?
• How do you define your Sandbox geography, product lines, distribution channels?
• What Is the biggest “need” your customers have, distinguished from all their “wants”?
• What is your measurable Brand Promise?
• What Is the bottleneck/shortage/chokepoint in your sandbox/Industry and how are you going to control It?
• What are you going to do to utilise technology?

Mastering The Art Of Bank Financing 

A Knock Your Socks Off Loan Package Will:

• Define your mission or niche in the marketplace 
• Present a vision of what the business can accomplish if it is successful
• Demonstrate that you can track your money 
• Illustrate how well thought out your strategies are and how you are prepared to deal with adversity if it arises 
• Outline specifically what you are going to do and how you will accomplish it 
• Identify the resources you will need and how you will access the capital to acquire them 
• Project where you will be in three to five years and what additional challenges you will face

A red flag is anything that could reflect negatively on your company, including:

• A downturn in your industry 
• A poor credit rating 
• Increasing accounts payables 
• A declining balance sheet 
• Ratios that areoutof line with industry averages 
• New competition 

Once these red flags are identified, you should take the initiative in discussing them with your banker, explaining what has occurred and how you are addressing it.