Turbocharge Your Business the 3HAG Way
I first encountered the term "3HAG" while working with a client. We were considering implementing the EOS (Entrepreneurial Operating System).
My client inquired if I was familiar with the 3HAG Framework, and I must admit, the name initially struck me as peculiar. I briefly pictured an old woman on a broomstick and nearly dismissed 3HAG as just another untested business growth fad.
However, I couldn't have been more wrong...
After purchasing Shannon Susko's book, I quickly realized that 3HAG was the vital missing ingredient in business growth.
Over the years, having advised and coached hundreds of business owners and leadership teams, I’ve observed that many organizations lack a clear, long-term goal that unites everyone—not to mention a strategy to get there. And when one does exist, CEOs can be hesitant to share their plans with their team members, or the strategy is so complex it takes 20 minutes to articulate.
Unfortunately, these are the owners and CEOs who are most frustrated as they continue to bang their heads against that invisible growth ceiling.
For those who do have a Big Hairy Audacious Goal (BHAG), the question is how to get from where they are now to the top of what feels like Everest.
The answer lies in the 3HAG...
Shannon's 3HAG, which stands for 3-Year Highly Achievable Goal, bridges the gap between where you are now, the 5 Year Wild Assed Guess (5WAG), and what Jim Collins refers to as your BHAG (Big Hairy Audacious Goal).
The 3HAG provides a structured, 12-quarter-by-quarter roadmap that guides you through the next 36 months, propelling you toward your ultimate BHAG.
The 3HAG Framework: A 3-Year Compound Growth Plan
As a business owner or CEO of a growth-oriented company, developing a 3-year plan is a crucial aspect of your strategic planning process.
Forecasting your company's position in three years can be daunting, but with the right tools and understanding of your core customer, profit-driving factors, and the key capabilities and differentiating attributes needed to stand out, you can build a unique strategy to avoid competing on the same dimensions as your competitors.
The 3HAG approach offers CEOs and their leadership teams a simple framework for 'gutting-out' their goals for the next 36-months, but before you can create your 3HAG, you need to work on 3 Foundation steps:
Foundation 1 - Core Purpose and Core Values
As a business owner or CEO, your core purpose acts as the guiding star for your organization, providing focus and direction as you navigate an ever-evolving market. It's the fundamental reason your company exists in the first place, going beyond the pursuit of profit or market share. It is the heart and soul of your business that resonates with employees, customers, and stakeholders alike, and serves as the driving force behind your company's growth and success.
A powerful core purpose emerges from the founder's original vision. When gathering your leadership team, ask yourself and your team the pivotal question: "Why did we start this business in the first place?" The answer to this question is the foundation upon which your core purpose is built.
Remember that the most effective core purposes are clear, concise, and easily communicated. Take, for example, Google's core purpose: "To organize the world's information and make it universally accessible and useful." Or Paradata's in the example above: "To create an organization others value. And, to create a great place to work.". These powerful statements not only reflects the essence of their business but also serve as a constant reminder of their commitment to making a difference in the world.
Core values are a company's fundamental beliefs that shape its culture and identity. Serving as a moral compass, they guide decisions and actions, promoting unity, collaboration, and a sense of purpose among employees. Clearly defined and communicated core values build trust, credibility, and a strong reputation, driving long-term success and sustainability in a competitive business landscape. Most companies already have core values, which just need to be uncovered, and articulated. If everyone on your team has the same core values and believe in the company's Core Purpose, it will be much easier to get where you're going.
Foundation 2 - BHAG
BHAG (Big Hairy Audacious Goal) is a bold, long-term vision that inspires and unites an organization in pursuit of a transformative achievement. By setting a seemingly unreachable target, a BHAG challenges a company to think creatively, innovate relentlessly, and strive for excellence. It fosters a sense of shared purpose, motivates employees, and propels an organization to transcend its perceived limitations, ultimately leading to remarkable growth and enduring success.
For Paradata (in the image above) that was: To be the leading Global Payment Service Provider.
Foundation 3 - Profit/X
The Profit/X concept was created by Jim Collins to clarify what you are passionate about, what you can be best at in the world, and how you will make money on it. By identifying a key variable (X) that drives value in your business, you can focus on improving that specific aspect to maximize profits. Profit/X offers a clear, quantifiable goal for your organization to rally around, encouraging innovation, teamwork, and the efficient allocation of resources. This concentrated approach not only enhances financial performance but also fosters a culture of continuous improvement, ultimately contributing to the long-term success and resilience of your company.
For Paradata, their X was Merchant.
Your 'Gutted-Out' 3HAG
Here's how you have your leadership gut out your 3HAG:
- Clarify what the ending date of your fiscal year is three years away. In the example for Paradata the date of their 3HAF was June 30, 2004.
- Ask, "How much cash do we want in the bank on this date, and what do we want our top-line revenue to be for the fiscal year-end 3 years away?". Before anyone calls out the answer, give each person a piece of paper and ask them to write down the number. When everyone is done, have each leader share their number. In the Paradata example, they agreed on: Cash in the bank: $2M and revenue of $20M.
- Next, agree on the total widgets you will have to sell to hit your numbers: cash in the bank and revenue. Here are Paradata's figures: New Merchants: 12,000 and Cumulative merchants: 30,000.
- Next, "What is your 3 Year Highly Achievable Goal?". Write a sentence that describes your company in year three—without using numbers. For Paradata's 3HAG was to be the "Leading North American Payment Provider.".
- What are the 3-5 Key Capabilities you need in place to deliver on the goals stated above? These are the Key Capabilities that must be in place by the end of year 3 to be able to achieve the fiscal and company goals. In Paradata's case these were: 1) Answer the phone service 2) Setup merchants in less than an hour 3) Reseller Program 4) Support any currency.
- Last step. With your leadership team, ask, "What do we want to be known for in 3 years?".
Congratulations, you have your first gutted-out 3HAG, you are on your way! It's not perfect, but it's the first step toward your BHAG.
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