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Transcription – Luke Carlson Show 108

Chantal : Ive been lucky enough to see today’s guest present twice this year. And most recently, it was his trip to Australia when he spoke at the FILEX Business Summit. Given how popular he was with all of you with his first appearance on the show, there is no way we are going to celebrate our birthday without inviting Luke Carlson back. One of the things that you may recall about Luke is that he is constantly learning. And he encourages his team to do the same. So before we get stuck into his insights around leadership and goal-setting, I first asked him to explain how he uses the Fitness Business Podcast as a learning tool for his team at Discover Strength.

Luke: So, what we love to do, is we think that we are strong in developing our managers and leaders in every conceivable facet of management and leadership. I mean, we are reading books, guest speakers coming in on a regular basis and speak to our managers and leaders. And we are just working through all of this content. And what I realised is that we really are not covering anything that is germane to the industry. So what we’ve done in our monthly management meeting, we have all types of meetings and have different training vehicles for how we develop people. In our monthly management meeting is where I have breakfast for an hour with our managers and then we get into a three-hour meeting.

And then the first hour of that three hour meeting, we just play live an episode of the Fitness Business Podcast. And so, I’m picking those. I am selecting the ones that I think that are relevant and I think the whole team would love to listen to and have a discussion around it.

It is our way of having our leaders and managers get more connected to the industry rather than just reading a book by a management guru, they’re understanding sales information, and social media, and marketing and all the different leadership topics that you’ve covered over the past many months.

They’re understanding the content from the perspective of, with the filter of, our industry and we’re really weak in that area. And now, that is something that we are so incredibly excited about and we’ve just been doing it for a few months now. In addition to that meeting, it is a great format where we are constantly covering the content because Chantal, it is not enough for me to listen to the information and then go back to my team. I want my team to hear it first hand and then we are going to have a great dialogue around each episode.

Chantal: Well, I’m so grateful for you, as a the business leader, to be utilising the podcast as a tool in encouraging your team. And I know how important on-going education is for you and the team and it is one of the areas that your business excels in. And it is one of the areas that your business prides itself in as really being the most educated and the most up to date. And the fact the the podcast can provide you some content that you can use in a practical way to improve your team’s knowledge and to keep them up to date with the latest and greatest news in the industry. That means the world to me. So, thank you so much for doing that and for sharing that story with the rest of our listeners.

Luke: Let me mention one thing about that. I don’t mean to cut you off. The magic of it is we do it live. I never say, “Hey, listen to this episode and then lets’ get together and talk about it.” It is just different when we are all together, listening to it together, and we can stop it midstream if we want to and make some comments. Just listening to it live together rather than sending it out as a homework assignment in preparation for the meeting, we found to be important and powerful.

Chantal: Ah ha, and I love the idea of it generating conversation amongst your team. Now, Luke when you were in Sydney, you presented at the business summit and that was just a tremendous experience to see you present up there on stage and hear you talk all around the topic of leadership. When I saw that presentation, I immediately thought that I wanted to get you on the show to talk about that. And I was hoping that you could start today by giving us a definition around what it means to lead with vision?

Luke: So, my definition is that first of all, the leader of the organisation understands the answers to a few really basic questions. Those questions really articulate where we are going and how do we plan on getting there. But the real key is, it’s not just your vision. And I think this is where so many leaders, so many entrepreneurs, so many owners of companies of all different sizes, this is where they stumble. They have a clear vision about where they are headed or where the organization is headed but they have not inspired the shared vision. And so the idea that everybody in the organisation understands where we’re going and in fact is rowing the same direction, and is excited about driving the progress of the organization toward that end goal – that is your vision. So to me that is really the concept of leading with vision. Do we understand where we’re headed? Have we articulated it, and have we inspired the team to row in the same direction?

Chantal: Luke, I believe in order to lead with vision there are some key questions that we need to ask ourselves as leaders. Can you talk us through what some of those key questions are?

Luke: Of course. Now, I’m passionate about these questions but I am also passionate about the idea that this is really it. It doesn’t really have to be more complicated than this: Most leaders, leaders that I really really respect make this more complicated than it needs to be. And at the end of the day, what happens Chantal, really and truly, only the leaders of the organisation or maybe an executive team understands the vision component of the business. Because the leader that has crafted it, they’re really the only that really understands it. If you ask the frontline employee, if you asked someone who has only been there for a year, or if you ask someone who is working part-time…Do they really understand this whole vision component? So, I think the whole vision component should be simplified. The questions that I should work through are:

“What are the organisation’s core values?
Why does the organisation exist?” And when I think about that, I think about two things. “So, what’s the purpose of the organisation, the core purpose?” That’s terminology that we are familiar with. But then, along with that is, what is our strategic niche? What do we really want to be the best in the world at? By the way, in our industry, that is the single most strategic question that we need to answer. And I think, it is the question that we are all struggling with. Even the great operators are struggling with “What is our strategic niche?” The third overarching question is:
“What is our longest term goal?” What is our ten year goal? Our big hairy audacious goal? Where are we going long term?” And then I think, the fourth question is, “What is the three-year goal, that we can build our strategy around?” Where do we want to be three years from now, which is so key to understand because it is really what puts us on track for our longest term goal and our big hairy audacious goal. The fifth question is, “What is our one year plan?” Now, we are no longer dreaming. No longer do we have a big hairy audacious goal, we are talking about in the next year, what do we need to accomplish. What’s that goal look like? And then the last question is, “What is our marketing strategy?” And specifically, when I think about marketing strategy, I think it all starts with understanding how we are different?” Not how are we better, but how are we unique, how are we differentiated with the rest of the competitors in our industry, in our space. So, to me, those are the six questions that you really have to start with.

Chantal: Luke can we go into detail with that first one. You were saying how important is that we don’t overcomplicate the message, so that everyone understand what it is, the vision of the business, can you share an example of what you mean by that?

Luke: Yes, I have been like you Chantal, I’ve been to so many conferences and I’ve visited so many colleagues that I respect so much. And I’ve listened to their presentations, I’ve listened to an hour presentation and 70 slides that explains what the vision component of their business is like. And first of all, I’m always impressed by it. So, I think, wow, that is absolutely incredible. We need to be on that level. And I thought that for many many many years and then I realised, hold on, the only person in that entire organization or in that club that really understood that was the person that created it. Or maybe the team of people that created it. And so I think, the power of that clearly articulated vision diminishes when it is so complicated and nobody actually can articulate it and talk about it and touch it and they can’t interact with it. Unless, they maybe come back to the powerpoint or an employee manual. So your vision component is not that strong, unless everybody is the organisation has the same answers to these basic questions. And I’ve just seen too many examples where it gets too complicated, then no one is making key decisions around these key questions. And I think they losing having a state of vision or strong vision component. We just lose so much by not having clarity around the basics.

Chantal: When we first caught up back in show 91, we did touch on some of these areas. We talked about the purpose, we talked about some of the core values and also the niche for Discover Strength. But just in case anyone missed that, do you want to share with us what that vision is for Discovered Strength?

Luke: Yes, I’ll share a couple of those answers. Chantal: Thank you.

Luke: For us, why do we exist? So that’s like the second question. You have to have an overarching core purpose that’s turns you on emotionally. Like, why do you get out of the bed in the morning? What do you aspire to achieve? And it really should have nothing to do with the technical work that you do. It has nothing to do with the industry. So Disney says, “Make people happy.” is their core purpose. For us, our core purpose is “Never stop improving.” That’s what’s turns us on. It doesn’t tell you anything about what we actually do. I mean, we do personal training. That’s all we do in our facilities. All we do is personal training around strength training but the core purpose is broader than that. It’s really baked into the essence of our DNA, who we are as a human being, that’s what gets us excited. When we wake up in the morning we go to work, we want to be a part of this process of “Never stop improving”. Now, the second part of that is understanding what our strategic niche is. And strategic niche for us is what we call “Personalised Strength Training”. That is all we are going to do is personalised strength training. So, I think in our industry, we struggle with the idea of a narrowly defined strategic niche. Why? Because we all love everything related to fitness. We love Pilates. We love Yoga. We love strength training and personal training and cardio and we love boot camp, and we love spin. And we can go on and on and on but at some point, it’s not our responsibility to offer all of these products and services. And by offering so many products and services, we really dilute the brand. I mean, I just believe strongly that the strength of a brand is in indirect proportion or has an indirect relationship to the scope of the brand. So the more you try to do, the weaker your brand becomes. And we’re in an industry where most health clubs try to do everything. We feel pressured to do everything. And we’re finally seeing players emerged the focus on just one thing. For example, Soul Cycle. You know, walk in a Soul Cycle and you’re not upset that you can’t do a pilates class. And Soul Cycle doesn’t apologise for the fact that all you can do is a spin class. And their brand gets stronger and stronger by focusing on just one thing. And we can see that in so many other industries and we see that in our industry struggling with that right now. So for us, that strategic niche, the one thing that we want to be the best in the world at, that drives our economic engine. It is our obsession is personal strength training. Now, that doesn’t mean Chantal that I don’t love every other aspect of fitness. I love it all, but we’re not going to do it. We’re not going to sell it. And I was interviewed for a magazine, a business magazine recently, and the example that I always use is Victoria Secret. Victoria Secret has a big presence in the U.S. and I know they’re in Australia and in some parts of the U.K. Victoria Secret’s strategic niche is women’s intimate apparel, it’s bras and underwear. I can’t walk in the Victoria Secret and be upset that I can’t buy like a winter coat for a man at Victoria Secret, they’re not going to apologise for that. They know that I need a winter coat but it’s not their responsibility to sell me one. And I think that we have so many players in our industry that feel, if it’s a popular fitness trend, if it’s a popular fitness fad, it’s the health’s club responsibility to sell it and that could not be any further from the truth. Victoria Secret is strong and has been able to scale as a concept because they just stay true to their strategic niche.

Chantal: I’m jumping away from the interview with Luke for just a second. In case you missed it, in show 106, I interviewed Lisa Simon Richards. And one of the things we spoke about was creating an Audio Logo for your business, which is effectively a modern day elevator pitch and a great way to succinctly define your niche. If you missed that interview, jump over to fitnessbusinesspodcast.com and search 106. Now, let’s get back to Luke. At the start of the show he mentioned, three levels of goals: short, medium, and long term. So I asked him to help us better understand each goal level and work out how we ensure we’re on track without business goal setting. Here’s what he had to say.

Luke: Chantal, I’ll start by saying that actually setting the BHAG, maybe the easiest of the three goals. I like to define the BHAG as a ten year goal. Now, if you’ve only been operating for one year, maybe you’re not comfortable with ten years and you may want to pick that time frame as five to seven years, that’s fine. But if you’ve been operating for forty years, I think picking a BHAG, thats ten years down the road is realistic or fifteen years down the road is realistic. So the first thing you have to do is have the goal time specific. So you have to have the exact date that this is due by, so if it’s December 31st, you know five years from now, you have to define it.

The second I think you have to do with the BHAG and believe me the BHAG can be a little bit more aspirational. “We’ll put a man in the moon by the end of the decade”, that’s what JFK said or Henry Ford said, “I will democratise the automobile.” I think, the BHAG is the longest term goal should be written in a way that it’s about the revenue of the organisation. Because revenue tells us the size of the company. Now, it not all about money. It’s about impact and some of the other things, I understand that. But if we don’t understand the size of the company we’re trying to create, I don’t know how we build strategy after that. So I think, you pick a ten year goal that has a specific date and then you say it’s a number. Do we want to be a five million dollar company? Or maybe one small independent club. Do we want to be a ten million dollar company? A hundred million dollar company? Or do we want to be a one billion dollar company? Which is, for example, what Lifetime Fitness here in the U.S. and they’re based in Minnesota where I live. I mean, they’re right down the street from us. They’re right now they are just over a billion dollars. And so, none of those, you know, five million, ten million or hundred million or one billion, none of those are the right or wrong BHAG but they have different implications as to how are you going to build strategy and how you’re going to move the organisation forward. So I think, the leader of the organisation, the leadership team needs to talk about, what kind of business do we want to be managing or running? The mistake I see so many leaders make, I mean, intelligent leaders who show up at work and bust their tail, they don’t understand where they’re actually going with the organisation. And I don’t know how you construct your day in and day out work and your priorities for the quarter and your goals for the year, if you really don’t know where you’re ending up. So, I see very few companies that really articulate the size of the organisation long term.

Then, you decide and the reason I say that’s actually the easiest goal to set, Chantal, you’re dreaming at this point. I mean, no one’s holding your feet to the fire that you got to achieve that ten year… I mean you’ve got ten years to achieve it. So you can dream big here and I truly believe, you got to be careful what you wish for. Because I think, you’re going to achieve it if you follow these steps. I think that whatever you dream, in terms of a ten year is doable, one billion, a hundred million, ten million. Then from there, we start to build strategy. So, you don’t build strategy over ten years or for ten year period, you look at strategy in like a two to three year chunk. So that next goal is over the next three years, where do we need to be. And I think you use the exact same approach. You have an exact end date and then you have the revenue number and a profit margin. So let’s say ten years now, we would have a hundred million dollar company. Three years from now, maybe we should be, if starting from scratch, we should be probably at twenty million, twenty five million, we don’t have to be a third of the way there. We want to be a thirty three million but we’re on our way. We’re starting to grow, we’re starting to build some infrastructure. And then we just build a profit goal along with that. So the goal is, three years from now, we’re going to be at twenty million dollars and we want to have to a twelve percent profit margin. And then you can articulate a couple of measurables along with that. We have three clubs, we have eight clubs, how many people will we employ? Just a few measurables that are associated with that three year goal. And then, when we have that three year goal set, that’s our strategy, now we can understand what our one year goal should be. So if we set the three year goal correctly, it put us on track to the ten year. Now, we’re setting the one year. To set the one year goal correctly, it better put us on track when we achieve it for that three year goal. That’s what the process looks like. Now, when you’re doing that one year goal, man, you’re feet are held to the fire. You have to be accurate. We’re not daydreaming anymore. We’re thinking what we can actually achieve for the next fifty two weeks, so this better be realistic.

Chantal: I think this is actually a really good reminder that no matter what stage you are in your business and no matter what size of business you have, having these three goals is an absolutely essential part of our growth as a business owner. And having vision, or being a visionary leader, as we started our talking earlier, they’re all essential elements to having that vision.

Luke: And Chantal, furthermore, think about it from the perspective of your team members, all the people that you’re hiring. I mean, you want to enlist them into this process, this journey of achieving this long term vision. Well, if you don’t know what that vision is, if you don’t know that long term goal is, how are you going to inspire them? How are you going to enlist someone to pour their heart and soul and their effort into this important work if you haven’t defined where the heck we’re going. So we find that, that’s a powerful recruitment tool. We can let people understand, “Hey, this is where we are going. You’re excited about it, if you want to take us there, if you want to be a part of this journey, then, come join us.” And so, we all have to understand what is our world look like. What’s the organisation look like ten years from now? Three years from now? One year from now? Otherwise, it’s just not…there’s just not enough meaning in just showing up for work, executing day in and day out if you don’t know what you’re a part of from a big picture standing point.

Chantal: We’ll be back with Luke in just a second. Where he’s going to leave us his advice for business owners to grow in the next twelve months. But first, here’s a message from our podcast partner, ABC Financial.

Luke: So three things, number one, have incredible focus around a clearly defined strategic niche. Understand what you want to be the best in the world at and be relentlessly focused just on that. I would argue that 95% of business failures, whether that means the business goes out of business or just starts to struggle as the economy starts to change and things become tumultuous, in an unknown horizon that’s in front of us, we struggle because we loose focus on that niche. That’s number one. Number two is as the leader, focus on the constraint. What is the constraint that’s holding you back from moving to the next level as an organisation? What the one constraint? We’re all dealing with one constraint. So instead of saying, man I have to improve every aspect of my club or my business, all at once, focus on the constraint. And once you solve that constraint, then you could start to grow in scale faster. So instead of taking a shotgun approach and focusing on everything, identify the constraint first. And the last piece I would say is and this is not a cliche, I think we have to build all of our strategy around this is, that we win with people. Men, the strength of the business is people. Our businesses are going to grow by having great people. And I think that who comes before the what. Having great strategy is so incredibly important, having great execution is important, but people, the who comes before everything. So, renew yourself with obsession over having the right people on the bus in the right seats. That’s the best way I know to grow. It’s not better strategy, which I’m obsessed with. It’s not better marketing, which I’m in love with. It’s not better sales tactics, it’s do you have the right people in the right seats. Are you obsessed with that mindset, first who and then what. So those will be my three, Chantal.

Chantal: Luke, we are so grateful for you coming back on the show. You are inspiring. You are an amazing leader and I just feel personally very very blessed that you’ve taken the time to come back on and share your knowledge with us once again. So, I just want to say thank you so so much. And tribe, if you ever have the opportunity to go along to any of our industry events and to hear Luke speak, then, I cannot encourage it strongly enough, you must make the opportunity to go and hear Luke speak in

Luke: It’s my pleasure, Chantal. Thank you so much and continued success on the very important work that you’re doing. Thank you.

 

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