Build it like Rockefeller; “Most small businesses are job replacements at best. They’re doing nothing to move the needle of the economy.”

Build it like Rockefeller

September 9, 2013

Adam Courtenay

Businesses can learn a lot from ‘history’s greatest entrepreneur’. If entrepreneurs around the world could claim a guru it might well be the man they call “the growth guy”, the founder of the US-based Entrepreneurs’ Organisation, Verne Harnish. Harnish is the chief executive of Gazelles Inc, an education and coaching company in the US which specialises in educating entrepreneurs on how to grow their businesses and how to manage the difficulties of growth. Harnish represents something you’re unlikely to find in Australia: an SME evangelist who champions the right of mid-cap companies to grow sans bureaucracy in a laissez faire economy with few constraints.  He will be preaching his growth strategy – and the pitfalls of hyper growth – across Australia over the next two weeks. Harnish says he doesn’t represent the little company and he is definitely not interested in corporate behemoths – his mandate is the fast-growing “gazelles”. Australians like to think of small business as the backbone of the economy, but not Harnish. “Most small businesses are job replacements at best,” he says. “They’re doing nothing to move the needle of the economy.” What about the corporate big boys? Harnish reckons they get their way because governments are scared of them.

“They’re not the engines of the economy,” he says. ”Most of them are shedding jobs, but they never get the blame for anything. They have strong lobbies to dodge all the bullets.

“In between them, and often neglected by government and banks, are the only real growth machines – the mid-sized gazelles creating all the jobs. To be a gazelle the company must be able to sustain a 20 per cent growth rate for a period of four years.” By Harnish’s reckoning, gazelles represent only 2 to 3 per cent of all companies.

“We’re trying to bring the tools and support that these mid-sized gazelles need, despite the fact they have very little support from the government and experience sometimes outright hostility from the banks. Yet they are the best employers in the land,” he says.

Harnish, who has been coming to Australia for close to two decades, is first and foremost a communicator. He has written two books – Mastering the Rockefeller Habits and The Greatest Business Decisions of all Time. He’s big on entrepreneurial maxims. These include “The country with gazelles excels” and “Routine will set you free”.

He says a company is more likely to “die from indigestion than starvation”.

Harnish believes in the importance of routines and rhythm in business, and from this has spawned the idea in the US of business “rhythm” coaches.

Of all his philosophies, he is probably best known for his explanation of the “Rockefeller habits”. It all goes back to Standard Oil legend John D. Rockefeller, whom Harnish describes as “history’s greatest entrepreneur (including Bill Gates) by a factor of three”.

While some would have described Rockefeller as an unprincipled oligarch, there is no doubt he found the all-important “choke points” in his industry. Rockefeller knew that oil would need transportation, so he ensured that his company grew vertically to encompass the railroads. Competitors were quite literally stopped from competing by the transport choke point Rockefeller identified.

Likewise, Harnish mentions Apple, which bought up all the music hard drives available when it launched the iPod.

“Apple controlled the supply of these small disks on which music could be played to keep the Sonys of the world at bay,” Harnish says. “They locked up the inventory of these music disks for a couple of years. It was just like Rockefeller. If you control the choke point you will win against the rest.”

Among Harnish’s mission statements is his aim to help growth-oriented companies identify the choke points in their industry and control them.

What about Australian choke points? While he doesn’t give examples of companies that have completely strangled the competition, he mentions several that have come to dominate their individual spheres.

Aussie gazelles include gift company RedBalloon, software developer Atlassian, microphone and software company Rode Microphones, hospitality equipment firm Silver Chef and payment company Ezypay.

Harnish says: “These are all great companies with a few things in common: they’re almost all great places to work and customers love dealing with them. Another thing they have in common is they all have a leader who is hungry to learn more. The best companies are led by people who realise they haven’t got it all worked out.”

Verne Harnish will be in Australia to present his Go For Growth seminars, September 10-12. Tickets are available at www.thegrowthfaculty.com.au.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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