This Business Myth Needs To Die | Ep 863
In this episode of The Game with Alex Hormozi, he addresses the common challenges and mindsets surrounding business scaling. Hormozi explains how different business models face varying constraints and hurdles when attempting to scale. He stresses that implementing solutions requires patience, as problems are inherent "features" of any business model that must be managed consistently.
Hormozi advises against expecting rapid growth and quick fixes. Instead, he advocates adopting a decade-long perspective and maintaining focus on the core business operations. The key, he argues, is recognizing that difficulties during scaling indicate natural growing pains rather than flawed models, and that persistent focus on executing the long-term strategy, despite slow progress, is crucial.
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1-Page Summary
The Scalability Challenges of Different Business Models
Varying Constraints and Growth Hurdles
Alex Hormozi explains that service businesses struggle with maintaining quality and training staff as they scale. E-commerce businesses can scale rapidly but face supply chain issues. Software businesses have high upfront costs but lower marginal costs for growth once established, according to Hormozi.
Some businesses are demand-constrained, struggling to attract customers; others are supply-constrained, finding it difficult to hire skilled workers. Hormozi suggests promotion is key to overcoming these constraints.
Scaling Business Challenges
Solutions Take Time, Patience is Required
Hormozi recognizes that implementing solutions doesn't provide immediate relief. He advises entrepreneurs to be patient, as solutions take time to unfold. Hastily altering business models to fix lingering issues can degrade service quality.
Problems Are "Features" to Manage, Not Solve
Hormozi stresses that expecting a problem-free business leads to poor decisions. Many issues like staffing difficulties are "features" inherent to a business model that must be managed, not bugs to solve. "Problems will not end," he states.
Importance of Patience and Persistence When Implementing Solutions
Adopt a Decade-Long Mindset for Scaling
Hormozi warns against expecting rapid growth and quick fixes. He advocates for a decade-long perspective, noting significant businesses take years to emerge. Unrealistic timelines lead to compromises.
Focus on the Core Business
Chasing new opportunities can undermine progress on the primary business, according to Hormozi. He counsels dedicating efforts to successful existing operations.
The Mindset Required to Successfully Scale a Business
Problems are Natural, Not Signs of a Broken Model
Hormozi asserts that difficulties during scaling indicate natural growing pains, not necessarily flawed models. He cautions against frequent changes which can worsen issues.
Maintain Focus Despite Slow Progress
When progress seems slow, Hormozi insists entrepreneurs resist the urge to "fix" persistent problems through constant alterations. Maintaining discipline and the long-term strategy is crucial.
1-Page Summary
Additional Materials
Clarifications
- In the context of business, being demand-constrained means a company struggles to attract customers or generate sufficient demand for its products or services. On the other hand, being supply-constrained indicates difficulties in meeting the demand due to challenges like hiring skilled workers or managing the supply chain effectively. These constraints can impact a business's growth and require specific strategies to address them effectively. Understanding whether a business is demand-constrained or supply-constrained is crucial for implementing targeted solutions to overcome these challenges.
- Viewing problems in businesses as "features" means understanding that challenges and difficulties are inherent aspects of a business model that need to be managed continuously rather than expecting them to be completely solved. It emphasizes the idea that some issues may persist despite efforts to address them, and the focus should be on effectively navigating and mitigating these challenges over time. This perspective encourages entrepreneurs to approach problems as ongoing elements to be integrated into their operational strategies rather than seeking immediate or permanent solutions. It underscores the importance of adaptability and resilience in managing the complexities that come with scaling a business.
- In the context of business scaling, the notion that problems will not end highlights the ongoing nature of challenges that businesses face as they grow. It suggests that as a business evolves, new issues may arise even as existing ones are addressed. This perspective emphasizes the need for adaptability and continuous improvement to navigate the complexities of business growth effectively.
- Adopting a decade-long mindset for scaling a business emphasizes the need for long-term planning and patience in achieving sustainable growth. It involves understanding that significant business growth often takes years to materialize, requiring consistent effort and strategic decision-making over an extended period. This approach discourages expecting rapid results and quick fixes, promoting a focus on steady progress and the core aspects of the business. By embracing a long-term perspective, entrepreneurs can navigate challenges, maintain consistency, and build a solid foundation for lasting success.
- When a business faces challenges during its growth phase, it doesn't always mean that the fundamental business model is flawed. These difficulties are often considered normal and expected as the business expands and encounters new complexities. It's a common belief that overcoming these obstacles is part of the natural progression of scaling a business, rather than a sign of inherent problems within the business model.
Counterarguments
- While service businesses may struggle with maintaining quality and training staff, some service businesses have successfully scaled by leveraging technology and creating standardized processes that ensure consistency.
- E-commerce businesses may face supply chain issues, but many have developed robust logistics and inventory management systems to mitigate these challenges.
- Software businesses do have high upfront costs, but the assertion that they have lower marginal costs for growth might not account for ongoing costs such as customer support, infrastructure maintenance, and continuous development.
- While promotion is important, it is not the only key to overcoming constraints. Product quality, customer service, and operational efficiency are also critical factors in attracting and retaining customers.
- Patience is indeed important, but timely and strategic changes can be necessary to adapt to market conditions and should not always be discouraged.
- Not all problems in businesses are "features" to manage; some are indeed flaws that can and should be resolved to improve the business.
- The idea that problems will not end in a business might be overly pessimistic; while challenges are inevitable, some problems can be permanently solved, leading to more stable operations.
- A decade-long perspective for scaling is prudent, but some businesses, particularly in fast-moving industries, may need to adapt and scale more quickly to remain competitive.
- While focusing on successful existing operations is important, diversification can be a valid strategy for growth and risk management.
- Difficulties during scaling might sometimes indicate a flawed model that requires significant changes, rather than just natural growing pains.
- Constant alterations can be detrimental, but iterative improvements based on feedback and data can be essential for continuous improvement and staying relevant in the market.
- Discipline and long-term strategy are important, but flexibility and the ability to pivot can also be crucial in responding to unforeseen challenges or opportunities.
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The Scalability Challenges of Different Business Models
Alex Hormozi discusses the challenges that varying business models face when it comes to scaling. Each type of business has unique hurdles when it expands.
Different Business Models Have Varying Scalability Constraints
Service Businesses Struggle With Quality and Talent as They Scale
Hormozi points out that service-based businesses, which revolve around humans offering services to other humans, can be profitable and straightforward to start but face challenges in scaling. The difficulties stem from the need to maintain a certain level of quality and the challenge of training new staff without diluting the quality of the service being offered.
E-Commerce Businesses Scale Faster but Face Supply Issues
He also notes that e-commerce businesses can be set up swiftly and are capable of fast scaling. However, these businesses often run into supply chain and logistical issues that can hinder their growth as they expand.
Software Businesses Have High Upfront Costs but Are Easier to Scale Once Established
Furthermore, Hormozi describes software businesses, especially those in the Software as a Service (SaaS) sector, as having high initial financial and temporal costs. Yet, once they reach a certain level of establishment, software businesses are much easier to scale in comparison to service and e-commerce businesses, due in part to their lower marginal costs for each additional user.
Businesses Can Be Either Demand-Constrained or Supply-Constrained
Demand-Bound Firms Struggle For Customers, Supply-Bound Firms For Workers
Hormozi explains that businesses face different types of constraints: some are demand-constrained while ...
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The Scalability Challenges of Different Business Models
Additional Materials
Clarifications
- Demand-constrained businesses struggle more with acquiring customers than finding workers or resources. Supply-constrained businesses have difficulty in sourcing or retaining the necessary workers, materials, or resources for their operations. Businesses can face challenges related to either demand or supply constraints, impacting their growth and scalability. Overcoming these constraints often involves strategic promotion efforts to address either customer acquisition or talent attraction needs.
- Different types of businesses face unique challenges when it comes to scaling. Service businesses struggle with maintaining quality and training staff. E-commerce businesses often encounter supply chain issues. Software businesses have high initial costs but are easier to scale once established.
- Service businesses face challenges in ma ...
Counterarguments
- Service businesses may leverage technology and standardized processes to maintain quality during scaling, challenging the idea that quality must inevitably suffer.
- E-commerce businesses can mitigate supply chain issues through diversification of suppliers and better inventory management, suggesting that these issues are not insurmountable.
- Software businesses, while potentially easier to scale, may face significant competition and market saturation, which can be a barrier to scaling even with low marginal costs.
- Some businesses may simultaneously face both demand and supply constraints, indicating that the dichotomy between demand-constrained and supply-constrained may be oversimplified.
- Effective promotion is important, but it is n ...
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Scaling Business Challenges
Entrepreneur Alex Hormozi delves into the intricacies of growing a business, emphasizing the necessity for patience and the acceptance of inherent difficulties.
Implementing Solutions Takes Time, Causing Ongoing Business Issues
Hormozi recognizes that finding solutions to business problems doesn't provide immediate relief. Patience is crucial during the implementation period, as described in the example of overcoming a supply constraint by hiring and training new employees. Hormozi advises, "You need to deal with the fact that solutions take time and that this might just be a feature of the business you're in."
Rushing to Fix Problems While Awaiting Solutions Can Worsen the Situation By Disrupting What Previously Worked Well
Furthermore, Hormozi explains that entrepreneurs often respond to the delayed effects of solutions with impatience, hastily altering their business models in ways that can degrade service quality and increase customer churn. He warns against making structural changes, especially when the original business model had positive margins and retention rates.
Hormozi urges restraint in implementing team members' suggestions too quickly, noting that the cost of transitioning between solutions can exacerbate the initial issue.
Businesses Inherently Have "Features and Bugs" to Manage, Not Solve
Addressing the mindset of entrepreneurs, Hormozi points out that expecting a business to be free of problems leads to poor decision-making. He explains the importance of distinguishing between the inherent "features and bugs" of a business. For instance, the difficulty of finding good staff in a service business is a feature, not a bug that can be eradicated; similarly, sourcing skilled and costly soft ...
Here’s what you’ll find in our full summary
Scaling Business Challenges
Additional Materials
Clarifications
- In the context of managing business challenges, the "features and bugs" analogy suggests that businesses, like software, have inherent characteristics (features) that can be managed but not completely eliminated, and issues (bugs) that need to be addressed continuously. Just as software may have persistent glitches, businesses will always face ongoing challenges that require attention and adaptation. This analogy emphasizes the need for entrepreneurs to accept and work with the inherent complexities and difficulties of running a business, rather than expecting a problem-free environment.
- In the context of business, the idea of "features and bugs" suggests that challenges and issues are inherent and ongoing, much like how software has both intended features and unintended bugs. These challenges are not meant to be completely eradicated but rather managed continuously as part of the business landscape. Entrepreneurs need to accept that certain difficulties will persist and focus on effectively navigating and mitigating them for sustainable growth.
- Understanding that problems are part of the inherent cost of doing business means accepting that challenges and difficulties are a natural aspect of running a company. These issues are not anomalies to be completely eradicated but rather ongoing factors that entrepreneurs must manage and navigate. It highlights the need for business owners to shift their perspective from seeking to eliminate all problems to effectively dealing with and mitigating them as they arise. T ...
Counterarguments
- While patience is important, there can be a balance between swift action and patience to ensure that opportunities are not missed and that problems do not escalate.
- In some cases, quick decision-making and rapid implementation of solutions can be beneficial, especially in a fast-paced industry where delays can lead to competitive disadvantages.
- Not all structural changes are detrimental; some may be necessary for adaptation and could lead to long-term improvements in service quality and customer satisfaction.
- While restraint is generally good advice, there are situations where acting on team members' suggestions quickly can lead to innovation and positive change.
- Some business "bugs" can indeed be solved or significantly mitigated with the right approach, investment, or technological advancement, rather than just managed.
- Aiming for a business with fewer problems is not inherently poor decision-making; it can drive process improvements and operational excellence.
- Entrepreneurs who are problem-solvers by nature may find it counterintuitive to accept problems as an inherent cost of do ...
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Importance of Patience and Persistence When Implementing Solutions
Alex Hormozi emphasizes the value of having patience and practicing persistence when growing a business, proposing a long-term approach to implementing solutions and scaling operations.
Scaling Demands a Decade-Long Mindset, Not Short-Term Expectations
Unrealistic and Counterproductive: Rapid Growth and Immediate Problem Solving
Hormozi warns against expecting quick fixes and immediate results when it comes to business scaling, referring to this mindset as both unrealistic and counterproductive. He voices that business issues often stem from a misalignment between expectations and the timeline required to achieve them, emphasizing that significant changes are not overnight occurrences. Hormozi advocates for a decade-long perspective, referencing the time it took companies like Microsoft and OpenAI to reach prominence, often taking six to eight years to emerge as significant players. He challenges the idea of rapid growth, noting that the urgency to grow quickly is typically self-imposed and lacking a solid base.
Hormozi advises on the importance of patience in scaling, discussing the pitfalls of unrealistic timelines which can lead to compromises and improper business development. He outlines the necessity of a long-term mindset for effectively scaling a business, underscoring that many significant businesses take decades to fully blossom.
Focusing On Core Business By Declining New Opportunities
Chasing New Ideas Can Undermine Primary Business Progress
Hormozi counsels against the instinct to chase after di ...
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Importance of Patience and Persistence When Implementing Solutions
Additional Materials
Clarifications
- Alex Hormozi is a well-known entrepreneur and business strategist who emphasizes the importance of patience and persistence in business growth. He advocates for a long-term approach to implementing solutions and scaling operations, highlighting the need for a decade-long mindset rather than expecting quick fixes. By focusing on continuous improvement and avoiding distractions from new opportunities, Hormozi believes businesses can achieve long-term success. His insights are based on his experiences and observations in the business world, where he has seen the benefits of staying committed to core objectives over time.
- A decade-long mindset for business growth emphasizes the importance of long-term planning and patience in achieving significant success. It involves understanding that substantial growth and impact often require years of consistent effort and strategic decision-making. This approach contrasts with seeking quick fixes or immediate results, focusing instead on sustainable progress over an extended period. By adopting a decade-long mindset, businesses aim to build a strong foundation and allow time for strategies to mature and yield substantial outcomes.
- Significant businesses often require decades to fully develop due to the complexities of scaling operations, establishing market presence, and building a strong brand reputation. This extended timeline allows for sustainable growth, strategic adjustments, and the cultivation of a loyal customer base over time. Companies like Microsoft and OpenAI serve as examples of entities that took years to achieve prominence and solidify t ...
Counterarguments
- While patience and persistence are valuable, there are instances where rapid iteration and pivoting are necessary to respond to market changes or disruptive technologies.
- Some businesses, particularly in the tech industry, have achieved significant growth and success in a relatively short period, suggesting that a decade-long mindset is not always a prerequisite for success.
- A focus on long-term growth should not preclude the ability to seize timely opportunities that could accelerate growth or provide strategic advantages.
- The concept of a "decade-long mindset" may not be applicable to all industries, especially those that are rapidly evolving or have shorter product life cycles.
- While focusing on core business is important, diversification can spread risk and open up new revenue streams, which can be beneficial for business resilience.
- Some businesses may require a more aggressive growth strategy to secure market share or to take advantage of a unique market window, which could contradict the idea of slow and steady growth.
- The advice to decline new opportunities in favor of focusing on the core business may not be suitable for all ...
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The Mindset Required to Successfully Scale a Business
Alex Hormozi discusses the mindset entrepreneurs need to adopt to successfully scale a business, with an emphasis on understanding that problems are natural and should not prompt hasty fixes or constant changes.
Problems Are Natural When Scaling, Not Signs of a Broken Business
Frequent Business Changes Can Worsen Problems
Hormozi points out that difficulties encountered during scaling are natural and do not necessarily indicate a broken business model. He underscores that what some business owners perceive as problems in their company may stem from misaligned expectations and not from actual faults in the business itself. Hormozi asserts, "You decide that there isn't a problem with having problems. You accept that having problems is a fact of life. It's a fact of business." He warns against changing aspects of the business that are functioning, as frequent changes can make the situation worse.
Maintaining Focus and Discipline Despite Slow Progress
Resisting the Urge to "Fix" Ongoing Issues
Hormozi expresses that progress might indeed be slow, but maintaining the current strategy and being patient with the gradual resolution of issues is crucial. He emphasizes the need for entrepreneurs to resist the urge to make unnecessary changes in response to persistent problems, balancing the addressing of daily micro issues w ...
Here’s what you’ll find in our full summary
The Mindset Required to Successfully Scale a Business
Additional Materials
Counterarguments
- While problems are natural when scaling, not all problems are equal, and some may indeed signal fundamental issues with the business model that require significant changes.
- Frequent changes can sometimes be necessary if the business environment is rapidly evolving, and staying static could lead to obsolescence.
- Misaligned expectations might not be the only reason for perceiving problems; there could be real and critical issues that are being overlooked.
- Accepting problems as a fact of business does not mean one should become complacent about finding solutions and improving processes.
- While it's important not to make hasty changes, periodic reassessment of business strategies is essential to ensure they remain aligned with long-term goals and market demands.
- Patience is important, but there should also be a sense of urgency to resolve issues that could have long-term negative impacts on the business.
- Balancing daily micro issues with strategic goals is crucial, but sometimes micro issues can accumulate and lead to significant strategic problems if not addressed promptly.
- The advice to "give time time" may not always be applicable, especially in fast-paced i ...
Actionables
- Create a "Problem Journal" to document and reflect on issues without rushing to solve them. By writing down problems as they arise, you give yourself space to accept their existence and observe patterns over time. This can help you distinguish between systemic issues and one-off challenges, allowing for more thoughtful responses rather than impulsive fixes.
- Implement a "Change Freeze" period where you commit to not altering any part of your routine or strategy for a set time, such as one month. During this time, focus on consistency and discipline in your current practices. This will help you resist the urge to make unnecessary changes and give you a clearer picture of what is truly working.
- Schedule regular "Progress Reviews" ...
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