Scale and Growth are two of the most challenging stages of any business. While scalability and growth are often used interchangeably they are in fact two very different measurements. Growth implies that a company is adding resources and revenue at the same rate. While scalability implies that a company is adding revenue exponentially and resources incrementally.
The sweet spot for both growth and scale has given rise to what many in the startup world consider to be Unicorns, Narwhals, or Decacorns. These terms are used to emphasize the fact that scale and growth are oftentimes statistical anomalies. That’s not to say that every company achieving a balance of scale and growth will become the next Uber or Airbnb however, they are certainly good models to observe when considering how to grow and scale your company.
In this article, we’ll explore some of the impediments that prevent companies from achieving scale and growth. So without further adieu let’s delve into some of the obstacles you may be facing.
Seven Impediments to Growth and Scale
The internal team you put together was the right team to get you to this point. However, they may not actually be the right fit to grow and scale a company. Sujan Patel, founder of Web profits shares, “It’s easy to simply accept the help and staff that come along naturally, without thinking about how they fit into your bigger plan.” Oftentimes, the structure and skillset required for scale and growth are quite different from ground zero. For example, even from a founder to CEO perspective, not every founder is fit to be a C-Level executive. In fact, the “Jeff Bezos” and “Bill Gates” of the world are quite uncommon characters. Statistically speaking, only 25% of founders remain CEO as their companies approach IPO.
The key to overcoming this impediment is to have a vivid understanding of the company’s current stage of growth and procure or hire talent that will help you get to the next level. Half the battle is knowing how it’s done. This is something that can only be acquired by either committing to go through those pains yourself or finding people who have done it before.
The process of growing and scaling a company should never rely on a whim or economic demand. When examining unicorns you’ll see that oftentimes tech-based companies make up a majority of this pool. According to CB Insights, of the world’s 390+ unicorn population some of the largest categories include Fintech, e-commerce, SaaS, and AI. This is no accident, the infrastructure of technology is built on the idea of scalability. Answers to questions like:
- How fast can you deploy an environment?
- How quickly can you change, remove, or update an asset?
are well within reach. Under normal circumstances they usually require quick modifications to code, launching another server, or cloning an environment. The technology infrastructure is incredibly flexible making it a great base for scale. The key to remember here is that you must employ a flexible infrastructure for economies of scale. If an infrastructure is inflexible this results in major detriments to growth and scale including issues like:
- the inability to accept or serve more clients
- reliance on software or services; like payment gateways (which may prevent you from accepting payments)
- tied to specific locations means also tied to local regulatory requirements and / or legislation
There are many different ways to promote a flexible infrastructure. However, these decisions will largely depend on your market, resources, and processes. In short, preparing for growth and scale means your company should have a plan B, C, and D. On top of planning you should also ensure there are viable means to cross that bridge when necessary.
Lack of marketing authority
Often times during growth stages marketing and sales functions become quite arbitrary. You may find that a company is either focused primarily on sales while marketing becomes a supporting factor. Or a company is highly focused on marketing while the sales team is excluded from the mix. The question of whether marketing is different or separate from sales is an age-old debate. However, at minimum marketing and sales should work interchangeably to ensure marketing assets activities are attracting and recruiting the right customers and employees. In contrast, sales objectives should also be in alignment with marketing activities.
Poor internal sponsorship
OK, if you built growth and/or scale into your strategy but didn’t assign sponsorship and responsibility, it’s not going to work. That’s because internal sponsorship is more than simply seeing to it that a member of the executive team has his or her name assigned to the project or projects. According to executive search firm Korn Ferry, appropriate internal sponsorship ensures that the initiative is driven at multiple levels inside the company and that people at all levels are held responsible. It gets the job done at the enterprise level.
Getting the timing right does not mean you must be clairvoyant. However, there is a great deal of smart intuition that must be superimposed on any company when making timing decisions. From a micro perspective, some timing errors are a result of sequencing failures. For example, your company may want to add a satellite customer support division for a new release. In which case the sequence to effectively activate this new division must seamlessly coincide with release dates.
Another example of a timing error is deciding to grow too quickly. From a macro perspective, your company may have an opportunity to take on 100 new customers. However, you are well of existing processes that fail or you haven’t completely resolved platform bugs. Launching before these issues are fixed is a huge misstep as it will only result in gaps in customer service or platform integrity.
Timing errors are a huge factor in growth and scalability. Apart from diving deep into the industry landscape understanding proper timing is a mix of both mastery and precision.
Implementing processes rather than depending on people
We are certainly fans of process and systemization. Everyone should have a process and system to the extent that inputs also consider the people involved. After all, a process is only as good as the people implementing it. Oftentimes, leadership teams neglect to consider dependencies involved in executing a process successfully. Some of these dependencies include:
- The skillset of the individuals
- turn around time
- communication methodologies
- management / leadership styles
- tools or software used in the process
A process that operates on theory as opposed to application is impractical and will cause some serious impediments to growth and scale.
Adhering to a short-term view
It’s well documented that public companies and the public equities markets have become far too focused on short-term jolts to stimulate quarterly results and increased valuation. Clearly, this type of behavior stimulates neither growth nor scaling. “Short-termism often results in ‘earnings management’ rather than building the long-term value of the company,” writes Jacek Kędzior and Marek Rozkrut of EY. “There are different channels through which short-termism may adversely affect companies and the economy as a whole. These are shortened CEO tenure, the neglect of investment activity and the neglect of human capital.”
There are numerous mistakes you can make when growing and or scaling your company. However, being conscious of these 7 impediments will aid in overcoming well-documented obstacles.