Successful scaling of a business is not luck, nor is it just good management, it is way more than both.
It is having the leadership capacity that enable all those in the business to consistently and willingly take action that collectively, over time, compounds into growth greater than that available from just doing what you are doing now a bit better every day.
It takes leadership, because this stuff is hard.
Good managers manage, leaders define what it is that needs to be managed, when, and how.
Over 40 years of working with this challenge, it seems to me there are some common traits amongst those businesses that successfully scale, all originating with the leadership.
None of the following can be taken in isolation. as they all contribute to each other. There is a synergy you need to find that is necessary for scaling, as distinct to improvement.
To scale, you need to change what is done, and how it gets done, rather than just improve the way in which things get done. There is a quantum leap in this seemingly minor semantic difference.
Have a genuinely stretch goal
Scaling a business requires change, which is uncomfortable, so there must be a very good, well communicated reason for the discomfort to be imposed, with a specific outcome. Often this is now called a ‘BEHAG’ a term coined by Jim Collins in his book ‘Built to Last”. In it absence, nothing will change. The most obvious example is President Kennedy’s 1962 commitment to land a man on the moon by the end of 1969. You have to find, communicate and commit to your metaphorical ‘man on the moon’ goal.
Underneath the BEHAG there must be a strategic plan, broken down progressively into its tactical components in order to deliver the goal.
Alignment.
A much used and abused word, but absolutely necessary. Every person, and every persons activity has to contribute meaningfully to the strategies in place to deliver the objectives, irrespective of the time frame of those objectives. Without some sort of overriding objective towards which every person and activity can be looking, the outcomes will be suboptimal.
The metaphor I always use to describe alignment is that of a rowing eight, training towards a major championship, for example the Olympics. Every training session, every activity of each of the eight who will be in the shell, as well as their support staff, needs to be looking towards that goal of winning that medal. Everything that is done needs to be judged by the simple criteria of ‘will this add to winning that medal’?
Strategic Ambidexterity.
Let me explain this idea of strategic ambidexterity. Every small action taken has to be a part of a larger action that builds into the scaled outcome. Any individual is easily distracted in their daily lives by the urgent but not important things that arise. Allowing those distractions to consume time takes away from the objective of scaling. Therefore, the focus of every person has to be on the one thing today, tomorrow, this week, month, quarter, and so on that has to be achieved in order to achieve the scaled target.
If you were to set out to run a marathon under 4 hours, you would not just start trying to run the 42km from day one, you would fail. You would break your training down into pieces, each one building on the last towards the objective. You would have a range of daily sessions, building into weekly and monthly targets that would eventually result in the successful completion of the marathon. It takes time, dedication, and a dual focus in getting every small step completed sequentially, while recognising that each one builds progressively towards the objective.
Engaging your supply chain partners and customers in the process adds to the power of the process. It is like having specialised trainers and suppliers of equipment contributing to your overall program. As success builds, you will find that they want to come on board, as everyone wants to be part of a winning team, which further builds momentum.
Operational rhythm.
Every activity and set of activities can be managed to have some sort of operating rhythm. In most cases it is unrecognised and unmanaged, so is not optimised. The most obvious example is the annual budget setting process most businesses go through. This normally happens in some sort of regular order and manner, to some sort of timetable. It is also in most cases I have observed, an addition to the routine set of activities, and is therefore an imposition rather than being a key part of the business management and development process. Similarly, the process to turn an order into product will follow some sort of routine that follows roughly the same set of steps every time. However, in every case, without an explicit and transparent process that has performance measures and associated management in place, the process will inevitably ‘wander’ being subject to change for many reasons. Process stability, noted below is essential for a predictable and consistent operational rhythm.
Accountability.
Ensuring clarity of accountability for an activity, item, and process is essential to performance that can be measured and improved. Without accountability, a problem will always be someone else’s problem. Accountability, responsibility and authority often become entangled in ways that leave the improvement and scaling of any set of activities challenging.
Accountability means that someone is specifically held accountable for the activity or set of activities. That person is accountable to track the progress of the activity, process, function, whatever it may be, and give it a ‘voice’. If you cannot nominate one person who is specifically accountable, it will fall through the cracks. Responsibility falls on anyone who has the ability and opportunity to respond to proactively support an activity or process. Anyone who ‘touches’ a process has some responsibility. Authority belongs to the person with the final veto power.
For example, in a previous life as GM of a large organisation, I had authority over the expenditure of marketing budgets, product managers had accountability for the specific activities that took place in their brand portfolios, and we all had responsibility to ensure that the customers who bought our products were serviced in a manner that had them coming back for more.
The question ‘how can I be held responsible without the authority’ is often asked. The answer is that ‘it depends’. Everyone has the responsibility to manage their own activities on a daily basis, and be held accountable for the outcomes, but as you move up a corporate ladder, it becomes increasingly challenging to maintain the link. The more senior you are the more you will be held accountable for things over which you have less and less direct control. That direct control is held at lower levels in the organisation.
The key to making this all work is to thoughtfully and consistently delegate. This requires that you pinpoint the job to be done, have a system of interlinking KPI’s, and that there is explicit and transparent performance feedback and management of both the process and those held accountable for the components of the process.
Stakeholder engagement.
All stakeholders, and most critically, employees need to be ‘engaged’ in the objective of scaling a business. To go back to the metaphor of the rowing eight, if one oarsman is not concentrating, and is therefore slightly out of rhythm, the performance of the eight will be critically compromised. That out of rhythm may be created by the training regime of the individual, the maintenance of the oar, and many other specific sources that together add up to the sub optimum performance of the eight when engaged in the race.
Clear, unambiguous and valuable personal purpose.
Again to refer to the rowing eight. Every member of the crew and support staff know the purpose is to compete in the Olympics, and to do everything possible to win. To every person, the goal of winning is a personal one, as well as one that motivates and directs the team, and to every person, the goal provides a deeply personal objective upon which they can focus all their efforts and emotion.
It is no different setting out to scale a business. If the employees see the objective of scaling as being one that will enrich the proprietors and shareholders without anything in it for them, why bother. The purpose has to be one with a ‘higher calling’ that delivers something very personal for everyone.
Performance transparency.
No improvement project, let alone one that requires scaling can be successful without a roadmap provided by performance measures to show progress, identify weak spots, and offer alternative perspectives. The greater the level of transparency the better able will the whole team be able to buy into the program.
Performance transparency has a number of faces. It covers individual, team, and corporate performance measures, from the perspective of both the internal KPI’s and the external ones that will impact on the manner in which the enterprise competes. These external KPI’s are those factors that impact performance, but over which the enterprise has no control other than being aware and able to accommodate and when possible leverage them.
Process Scalability.
It is a fact that as enterprises become bigger, the degree of complexity increases as the number of people, teams, functions that require co-ordination and alignment grows. With size comes complexity. The essence of a scalable management infrastructure is simplicity and conquering complexity is a challenge of leadership as well as the management of the processes themselves.
The tool that works best in my experience is to document all processes. This enables the process to be applied consistently irrespective of the person working it, and is the basis for improvement, without a starting point that is stable, no process can be improved.
Marketing.
Everyone is in marketing. From the CEO to the lowest level support staff, everyone has a responsibility to be an apostle for the business. Word of mouth, personal recommendation, whether it be by clients referring you to prospects, or your employees telling their friends what a great place it is to work, remains the most effective form of marketing. All that comes after is in one way or another a scaled version of that first person marketing.
Scaling marketing is not a matter of posting some cat photos on Facebook. It is a disciplined process of communicating your value proposition progressively to those most likely to be future customers, and retaining those you already have. It is very easy to blow huge resources under the banner of ‘marketing,’ but like all things worth doing, it is not as easy as it sometimes seems, requiring clarity of the value proposition, an ideal customer persona to be served, and a product and service mix that is both differentiated and valuable to customers.
As marketing is exercised externally, the potential for misdirection and complication is significant, so focussing attention on the productivity of marketing expenditures is a key to being able to successfully scale.
Cash.
Growth, let alone scaled growth, are voracious consumers of cash. Proactively managing your cash resources is essential. From time to time borrowing may be necessary, but when it becomes necessary to keep the day to day activities going, you have over-reached, and quick remedial action s necessary.
Without wishing to belabour the point made in the intro, the absolutely essential ingredient is leadership, without which scaling will not be possible.
