Written by Angelo Agresti, Edited by Ben Nagel
A Google search suggests there are about 100 million answers!
Nothing under the sun is new and this includes the scale-up concept. Whether it be existing businesses or startups; entrepreneurs and authors may rebadge established management theory but the principles remain the same.
Scaling up a business means executing a set of actions that help a company to grow revenue and market share. It means solving problems that block the ability to realise improved productivity and profitability. It’s a continuous cycle that needs the right combination of rules, tools, people and a little help from partners.
The condensed idea: four attributes for scaling-up a business
In the beginning
Peter Drucker is recognised as one of the most widely influential thinkers on the subject of business management theory. His theories were developed as the result of consulting work with General Motors that started in 1942 and made public in 1946 when Concept of the Corporation was published.
One of his key ideas was decentralization and simplification. Drucker dismissed the command and control model of scientific management theory and argued that companies work best when staff function as self-managed teams. He claimed businesses typically produce too many products, employ staff they don’t really need (when outsourcing would be a better option), and expand into economic sectors that they should avoid.
He was thoughtful of potentially profound effects created by the introduction of the world wide web and developed a keen interest in the behaviour of people within organisations. His work focused on understanding the increasing impact of what he called the “knowledge worker”; people who worked with their minds instead of their hands.
The key message: If an organisation struggles to scale up, it is likely due to outdated thinking, narrow perception of problems, and/or internal misunderstandings. This still applies today.
In Search of Excellence
Similar to Drucker’s breakthrough publication, this book, published in 1982, was the result of consulting work. It was summarised in 1979, in a presentation to corporate leaders, that ultimately formed the book’s chapters and, in 1980, became the McKinsey 7S framework. A framework where four of the seven principles focus on the people within a business. Part 2 of the book is a critique of the “rationalist” management approach and suggests that one of the things it doesn’t highlight is “that ‘good managers make meaning for people, as well as money.”
Scaling up Excellence
A popular 2014 publication, Scaling up Excellence suggests a challenge faced by every leader and organisation (wanting to build a customer focused business) is spreading excellence, a mindset based on constructive beliefs and behaviours, from the few to the many.
It thoughtfully points out:
- there are no easy to understand and good-to-go answers or tools to use, and
- it’s more like a marathon across unfamiliar ground, along unknown paths, to a vaguely understood destination.
For a start-up, the founders are that pocket of excellence and the challenge is how to spread that behaviour to more people in more business locations.
For an existing business, pockets of excellence usually exist and can be found but the challenge is how to make that become ‘normal behaviour’ so the business can grow.
In both situations, leaders must create the right environment; where employees feel like they own and work for the business AND the business owns and works for them. They must balance time, quality and cost performance.
A contemporary interpretation
The following timeline gives historical context to the evolution of management theories from around 1900 to the current day. The attributes required to scale up a business are not new.
Management theory evolved from thinking established in the 1940s and was characterised during the 1980s as more:
- “social” than “rational”, meaning that business goals and activities were driven by real human motivations
- “open” than “closed,” meaning that the evolution of structure and organisation within a company is shaped by outside forces such as market pressures
Companies became aware of and shifted focus to continuous improvement, and the role of culture in sustaining and influencing it. Promoting leadership over management, where leaders communicate priorities and goals to achieve staff buy-in and help the business scale up.
There are four attributes to scaling-up a business that form a continuous cycle:
- Discovery – understand your business needs and workflow problems.
- Agile Design – critically examine each process and aim high when designing solutions.
- Implementation – execution is critical even if the solution isn’t perfect. Optimal results are delivered by taking a people first, technology second approach.
- Impact Analysis – use of automation tools to understand real time performance trends, the impact of improvement efforts, and opportunities for the next scale-up effort.
Current technology advances have created a new set of possibilities. This gives an easily available and accurate picture of real time performance that helps managers develop understanding more quickly to identify and resolve the root causes of inefficiencies or other problems, point to potential opportunities, and suggest priorities.
Companies that use available technologies and provide staff with real-time coaching expose a stack of accurate detail essential for routine problem analysis and productivity improvement. This approach starts a powerful reinforcing cycle of continuous improvement that business teams can drive to scale-up performance. We call this the Business Scale-Up Cycle.
This cycle has always existed but has become more critical in the last few years. Digital technology has improved dramatically with new technologies being introduced making it faster and more applicable to a broader range of businesses and processes.
Most businesses understand this but only a small group are able to translate these changes and take appropriate action. Action that delivers not only a significant positive impact on their business, but can disrupt their industry sector. Not taking action means risking your business being disrupted by the actions of others and becoming obsolete.
Not all businesses are awake to the Business Scale-Up Cycle. Some business sectors are more progressive or have already felt the pain of not moving soon enough. This is both ominous and encouraging, for businesses in the Hunter region.
Scaling-up is not something you can buy as a plug and play package nor is it a one-shot silver bullet.
Starting and sustaining the Business Scale-Up Cycle is not easy. If it was, every business would not only be doing it but already know how to do it. From our experience, the major problems for small or medium business in the Hunter region are:
- staff are typically flat out with business as usual and never find the time to make needed improvement
- it’s most likely that no one knows where to start, or how to implement without some outside expertise – we are that expertise
Ready to scale up? Use this link to book an obligation free meeting to discuss the Business Scale-Up Cycle and decide how to get started.