Business Today|July 31, 2016

How to Scale your Business.

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Why do so many start-ups that seem to have it all – customers, cash, a promising outlook – run off the rails? Ask a venture capitalist, and you’ll probably hear that they have trouble “scaling”.

What does that mean, though? VCs typically describe it as a need to “professionalise the organisation” and “bring in grown-ups”. But those are simplistic fixes – poor substitutes for the substantive changes that need to occur. Start-ups these days grow so rapidly that it’s difficult for them to correct course once they recognize missteps. They can improve their prospects by understanding the mechanics of effective scaling before they reach that moment of truth.

Venture capitalist Ben Horowitz compares scaling to a “black art”. He and others have proposed useful ideas for demystifying it, but start-ups still lack a cogent framework for transitioning to mature firms. That’s what this article provides. Drawing on our extensive case studies of fast-growing companies and on 75 years of organizational research, we have identified four critical activities for successfully scaling a venture. Firms must hire functional experts to take the enterprise to the next level, add management structures to accommodate increased headcount while maintaining informal ties across the organization, build planning and forecasting capabilities, and spell out and reinforce the cultural values that will sustain the business.

It’s easy to misconstrue these activities as replication – as merely increasing the capacity and efficiency of what you’re already doing. But they’re also about handling greater market and organizational complexity as you seek different avenues for growth. That can mean developing new products or services, entering new markets, or engaging in other forms of innovation.

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