In the previous piece, we saw how growth and scaling are significantly different business goals. In this article, we’ll explore the imperatives for profitable scaling.
What makes scaling an exciting journey for any entrepreneur is the exactness of the outcome. With no room for ambiguity, scaling as an exercise is impossible without proper plans and structures in place. At its core are three transformations - business, operations and people. Let’s look at each of these:
1. Business transformation - To achieve this goal, it is vital for the business leader to set a clear path toward profitability with targets, and have the skin in the game to stick to the plan, even if it means saying ‘no’ to demanding customers. This is because rather than catering to individual needs, scaling is mainly about building universality of experience, where every customer gets the same treatment.
This does not mean that you ignore the customer - in fact, on the contrary, it means that you articulate your offerings and review your competencies based on customer needs and expectations. When you are scaling, you are not focusing on one or few customers but many, who approach you because they have the same needs. Your responsibility, therefore, increases and it is up to you to lead solutions to solve problems and offer solutions on a large scale. Customer centricity should be the hallmark of your business transformation.
2. Operations transformation - Time and again we read about how small businesses, despite their ability to be nimble, are notoriously anti-process in their way of functioning. When you decide to scale, you have to streamline efficiencies to such an extent, that your entire business becomes process dependent rather than people dependent.
By clearly identifying systems and functions at every stage of the product life cycle, delegating responsibilities to trained teams rather than individuals and planning for emergencies through feedback loops, you are ensuring no room for errors and providing yourself the opportunity to anticipate challenges. Something as simple as implementing a process to check on delayed payments can make a huge difference to working-capital dependent MSMEs.
Another key aspect is fiscal discipline. Since scaling is a focused approach, it is crucial to have an eye on both cash flow and cash stack, so that there are no leaks or shortages.
3. People transformation - Once a company starts doing well, the immediate impulse is to hire. From a scaling point of view, hiring indiscriminately is not helpful. Remember, the focus is the customer, and orienting processes to meet customer needs. The talent, including the leadership, are not the star of the show. Processes are.
As your business functions expand and become more complex, it’s important to have the right people to steer. As difficult as it is to let go of control, it is crucial that the top leadership does not micromanage - rather, it is crucial to gather inputs from hires who have expertise you do not. Their insights can alter the trajectory of your company.
Finally, as we’ve seen earlier, scaling is all about driving economies of scale. This is not possible without leveraging your network circle - be it with suppliers, service partners, channel partners and even your customers - an often-ignored ecosystem partner in collaborations. When you are able to increase your bargaining power, it is your profit margin that sings, which is what scaling is ultimately about!