The Need for Scale
Once a start-up or an established company has proven that it has a new solution people want, it’s time to take that solution from early adopters to the main stream. With the market pressure that currently prevail, it’s not just a matter of growing this new business but growing it “exponentially”. Here starts the fixation on “scale”.
Growth versus Scale Up
First of all, it’s important to understand the fundamental differences between these two terms in order to not underestimated the implications of a scaling strategy.
Growing a business can be seen as a linear approach: the company adds new resources (capital, people, etc), and its revenue increases as a result.
The key difference with growth is that scale is achieved by increasing revenue without incurring significant costs. While adding customers and revenue exponentially, costs should only increase incrementally, if at all.
The Scale Up is a Critical Program
The scale up phase is a real and deep transformation of the company itself. It’s also a risky journey; literature is defining it as the “second valley of death”.
The challenges of scaling up a business vary depending on each company’s product or service, targeted market and existing organization. But in all cases, scaling up needs to be handled as a program: several domains of action, phases, planning, monitoring, etc. You need also to be prepared for constant reassessment and necessity to pivot the scaling program itself, your value proposition, your offering and/or your business model along the way.
Even if there’s no one standardized path to successful scaling, as any other program, the scale up phase needs to take in account some critical aspects I will describe bellow.
A scalable Business Model
“Is my Business Model really scalable?”, is the first question to ask yourself. Let’s take the example of a professional service company. It will always have a problem with scaling its businesses because it needs new personnel to do the work for each new client it services.
A second example can be a software company developing “client-server” solutions addressing complex industrial problems implying several experts conversations from both side among the sales process. Doubling the number of clients or expanding in a new geography will require to hire more people (sales reps obviously but also pre-sales to handle the demo, support team, maybe the need to set up local L1 support), to rent new offices, etc. Refunding the solutions with an UX-Democratization objective, moving to a cloud architecture, pivoting to a SaaS offering, etc could be the needed pivot to do in order to scale.
Another factor to take in account is the changing profile of your buyers / users. Reaching the product-market-fit in the start-up phase is an indispensable prerequisite. Scaling means going exponentially from Early Adopters to Mainstream market. Even if they are sitting in the same industry segment, these two profiles are completely different. As described by the technology adoption life cycle model, having the same uncovered need, Early Adopters and Mainstream users are not expecting the same kind of answers. You need to be aware and prepared to (potentially) iterate on the value proposition and the solution as well.
Build A-Team of experts
In the start-up phase, founders and a few members deployed multitask capabilities to achieve miracles. In a successful scale-up strategy, hiring experts having a scale-up DNA helps to improve and streamline processes. If sales and marketing sounds like the more obvious ones, all the areas of the company are impacted (product development, customer support, controlling, HR, etc).
These scale-up leaders act as “multipliers”. They onboard the numerous new hired people, provide their professionalism in the adaptation of the processes and guide their teams. Having the ability to structure an activity while being “on the field” as the first “Doers” are the main competences you need to look for in your scale-up leaders.
With the influx of new leaders and people, what was previously a local adventure with a restricted team, everyone siting in the same room, sharing the same goals become a larger organization. You need to be sure not to let this cohesive company culture hardly built among years slip away. Embedding company culture, core values, vision and passion is one of the main roles Founders and initial leaders play here. It’s vital for you to invest your time in communicating your aspiration to grow the business.
And as you have set up your A-Team it’s time now to delegate and divide responsibility among these experts (firing yourselves from the every and littles thinks you were used to manage).
Established Standardized Processes
You will not be able to scale your business unless you’ve established processes and procedures that facilitate streamlined operations. Indeed, the pragmatic, fast changing approaches deployed at the start-up phase aren’t designed to scale.
An obvious example is the leads and opportunities follow up and the customers support. You plan to grow fast and exponentially. You need to track sales expansion, conversion rate (is the sales training provided to the newcomers providing expected results?), pipeline view, etc. You will also absolutely need to maintain a high quality in your delivery and a high customer satisfaction.
Capturing the learnings of the start-up phase in standardized processes and disseminating them to the new hired people are one of the main contributions of your A-Team of experts.
With the expansion, these new processes need to be manage at a new level now. Automation is the key to help a scale-up streamlines its operations so that its business model is truly scalable.
There are numerous systems that an entrepreneur adopts in order to enhance effectiveness: Customer Relationship Management to closely follow up sales and marketing campaigns’ impact, Accounting and Financing solutions (cash flow is often critical), Payroll, Digital Marketing tools (to handle several channels in several geographies) and so on.
But keep in mind that flexibility is the key. The scale-up needs more organization than a star-tup, but it still needs to remain highly adaptable; one of the key success factor in this phase is integrating the learnings coming with this huge expansion. The result is a dynamic structure. In one word, scale-up employees have the freedom to deviate from the playbook and improve it.
Access to Finance
This could sound sort of counter to our definition of scaling; “increasing revenue without increasing investment”, but definitively you need investment to be able to scale.
To build an international sales team, to structure and deploy marketing campaigns, to acquire solutions to automatize processes, etc you will need accessible cash. The point is that each investment will be envisioned on its capability to serve the exponential growth.
For that, the structure of the business model is a crucial point. It truly helps if the business model allows for positive working capital. At the time to revisit it before launching the scaling strategy, the economical equation of your business model is one of the main blocks to assess and question.
Going for new funding series (B or C from venture capitalists usually) it’s also an option (obvious prerequisite?). Earlier funding rounds help you to build a minimum viable product (MVP) and establish market fit, these new ones open the door for the quick expansion you are looking for.
Focus on increasing sales
The strategy to scale sales should be defined at the beginning of the start-up adventure. As above described Business Model and Value Proposition need to be scalable “by design”. If the focus on increasing revenue is obvious, the efficiency of sales process and organization is important too.
To begin with, the new VP Sales (the one you hired during you’re A Team set up) will be in charge here to translate your competitive edge into an effective sales plan. His.her seniority will help to set up a structure that will go from projects to solution and from first to recurring revenues.
Recruiting a team of “hunters” and organizing them with the objective of a high efficiency in following up leads and closing opportunities will be the first move. More broadly, the structure he.she will put in place needs to cover and drive sales from end to end. The domains addressed include (non-exhaustive list):
- The marketing strategy as the basement of the lead flow actions generating the desired number of leads,
- the marketing systems to track and manage leads,
- The sales strategy the sales crew will follow,
- The selling process they will replicate and amplify (including all the needed material),
- The systems to manage sales orders, solution shipping and billing, etc
As a matter of fact, without an effective sales strategy, it will be extremely hard to scale your business. It’s the foundation of your business. That’s why hiring a VP Sales is one of your priorities.
Keep Innovating
To scale up, you need now to convince Mainstream Market and expand internationally. As the buyers and/or users decision criteria will be different, your solution will need to be rethought integrating these feedbacks. Mastering process of R&D, quick experimentation and pivot is key for scale ups to jump over this chasm.
You also need to keep your competitive edge. Indeed, in parallel of getting more and more attention from your customers, you will have also more and more attention from your competitors. Other firms may be launching their own version of the solution, part of them could be established brands leveraging their own assets (like sales worldwide sales grid) to catch up and take the lion share of the market you work so hard to build. To stay ahead, the scale-up needs to maintain its lead, so keep innovating!
Conclusion
We have tried to describe in this article the main domains a business needs to prepare at the time to define its scaling strategy.
The Nort Star is clear: expand your business and expand it exponentially. The new hired VP Sales plays a strategical role in this phase. To support her.his actions all the nuts and bolts of the company need to be reviewed (enhanced sometimes) and retighten.
The company vision and culture must not be lost or forgotten along the way. Founders play here their main role adopting a new posture; going from one-(wo)man-band to Orchestra Conductors.
As each business being specific, there’s no clear-cut path to successful scaling. Envisioning this phase as a program as presented maximizes your chances to achieve a real success.