It’s surprising how many start up’s or established businesses that create new businesses, plan for growth and not take in to account the importance of building to scale. Given this, in the context of setting up a new enterprise what is the difference between planning for growth or planning for scale?
Put simply “Growth means adding revenue at the same pace you are adding resources; scaling means adding revenue at a much greater rate than cost.” (1) This difference is really important as thinking about scale from the start enables you to develop and invest in systems, processes and products that will scale even if that means you spend a little bit more up front to make this happen.
Having the fortune of hindsight and the experience of working in publicly listed (NASDAQ) new enterprises and private start up’s there have been a couple of lessons I feel are worthy of sharing to reinforce this important distinction:
Process and Systems
- Identify what it is that your business actually does and the activities it creates by conducting that business.
- Map out each of these activities and create metrics that will enable you to measure the process; you can’t improve what you don’t measure.
- Think about your customer and build systems that are customer centric and are not inward focused.
- Measure, measure and measure to ensure you establish a baseline to measure success from.
- Measuring performance allows you celebrate key milestones and events which helps to build team commitment and momentum to what you are trying to achieve.
- The old belief that management systems kill the entrepreneurial spirit is wrong. (2) There is a lot more time and effort wasted fixing poor process and systems that are developed in early enterprises rather than spending the time to build it right at the start. Playing the long game in this area is critical to long term sustainability of your organisation.
- Outline your organisations core values and ensure that these are transferrable beyond the entrepreneur or team that created the new enterprise.
- Develop position descriptions to ensure that employee’s that are performing in a role understand their purpose, the roles of others in the team and the measurable outcomes you need from that role.
- When hiring use interview questions that focus on behaviour;
- Personal effectiveness – problem solving, time management and organisational skills, quality, risk taking, project management, personal strength and development needs
- Leadership values – accountability, communication, strategic thinking, empowerment, coaching and people development, vision and integrity
- Influencing – communication, presentation skills, interpersonal skills, training and coaching
- Look for people that are strong in culture, integrity and process; you can always teach them the widget or technical skills required to undertake a role.
- Hire the right people and get out of the way. Empower and trust rather than manage and control. This is particularly important when recruiting great people as they are keen to always align with you on the why and the what but do not want to be micromanaged on the how.
Most importantly enjoy the journey, learn from your wins and losses and keep your eye on what it was that drove you to take the first step. By taking the time to set it up the right way for long term success your business will be something that you will enjoy rather than resent.
- Harvard Business Review – Midsize Companies Shouldn’t Confuse Growth with Scaling, Ron Carucci July 25, 2016
- How to Structure Companies for High Growth by Antonio Davila and George Foster