Platt Perspective on Business and Technology

Moving past early stage and the challenge of scalability 17: business scalability, business model scalability and evolution

Posted in social networking and business, startups by Timothy Platt on February 2, 2013

This is my seventeenth installment in a series on building a business for scalability and long-term success (see Startups and Early Stage Businesses, postings 96 and scattered following for Parts 1-16.)

When I first started this series I focused on the capacity of the underlying business model to scale up and to support expansion (e.g. see Part 2: what needs to scale? for a general introduction of this point.) And for a more detailed discussion of the issues that arise from there see my sub-series: Business Model Analytical Tools (at Startups and Early Stage Businesses as postings 100-103.) I went on to explicitly discuss two business models of emerging importance in this context: web 2.0 business models and supply chain-ready business models and I have elaborated on this overall discussion from there. But up to now I have left a significant gap in my overall discussion. I have written about business scalability within the defining strategic confines and constraints of a single set business model, and I have discussed business model adaptability to the linear and nonlinear changes that significant business expansion brings within the terms of that. But I have not explicitly discussed change in the basic business model itself, that is in place.

My goal here is to discuss the adaptive evolution of the underlying business model and both for keeping a business relevant and competitively so in its marketplaces and to help keep it competitive as new markets open and old and established ones change. In this, business scaling and expansion can take place over extended periods of time and over the course of that timeframe, customer bases and perceived and expressed customer needs and preferences can change. And overall markets can change and evolve and even morph in entirely new and initially unanticipated directions. So business scalability is not just about meeting the terms of growth requirements internal to the organization, but of meeting and continuing to meet the ever-changing realities of its marketplace context as well. And that can call for change and even fundamental change in the underlying business model itself. As a working example, consider an initially pre-internet business that finds need to evolve its operational and strategy processes to meet web 1.0 oriented consumer demands and opportunity, and that with time faces pressures to adapt to a web 2.0 business model to remain competitive.

• Long-term effective business scalability and expansion call for continuity and growth of business effectiveness within the organization and for its internal operational and strategic processes.
• But this calls for a corresponding scaling and expansion of its marketplace reach too – and even as its markets evolve and even as its customer base looks for new types of products and services and new ways of connecting with the businesses that provide them.
• And in practice, these two seemingly distinct perspectives have to fit together as different but complementary views of the same business and its developmental processes and needs.

There are several ways to approach this congruence, but one of the more effective is in how communications and information flow and processing develop and evolve.

• When I wrote Part 15: developing and scaling up a business past a Dunbar’s limit headcount and Part 16: Dunbar’s limit and operational systems scalability to this series I focused on internal communications and knowledge development and sharing, and the need for this to remain competitively effective through business growth and expansion.
• Here I write of a corresponding need for continuity of competitively effective communication and knowledge development and sharing with the marketplace, and how these two realms of communication: internally and externally facing have to fit together seamlessly.
• Operationally and as a matter of scalability best practices this mean looking for and proactively seeking to identify and prevent communications and information sharing bottlenecks and I begin discussion of that with consideration of what most charitably would be considered self-inflicted wounds in how the business reaches out and connects with its customers and potential customers online and through telecommunications and other direct connection mechanisms.
• Effective business models define and facilitate operational best practices that keep the organization effectively connected internally as it connects outward too. Business models and processes of business model execution that create breaks and disconnects in communication cumulatively stifle business effectiveness and limit or prevent its viable scalability too.

To take this out of the abstract I cite as a working example an experience my wife went through today as a customer. She has been having problems with a purchase order, and in seeking to resolve that called the retail company customer service help line. The representative she spoke with could not resolve her problem with the information resources she had immediately available. But she did take my wife’s phone number so she or a colleague could get back to her with a more effective response, which is good. And this morning my wife was called back which is even better, but when she answered the phone she was immediately put into a helpline queue waiting to speak with a live representative. And she ended up hanging up after something over ten minutes of wait time – just listening to music and automated messages about how important her call was. That was bad; she was called by the company and only to be put on what is practice was an unending wait. It is likely that this type of disconnect in that business’ customer support capability and likelihood of this type of problem arising in it, developed as its business volume and organizational size scaled up beyond its marketplace-facing communications systems capacity to provide real customer support. That reflects a fundamental scalability failure in its marketplace and customer facing operational systems. And a failure to identify and prioritize addressing that, raises questions about how this business’ basic business model has or has not evolved to keep pace with its operational and strategic organizing needs.

Likelihood of disconnects can develop and problems like this can occur in any consumer-facing communications channel: online, through phone systems or in more face to face interactions. Picking up on the later and face to face interactions, that can particularly occur when customer-facing staff cannot readily access the information resources that they would need to address and resolve problems or to answer questions according to systematized processes and practices and when they have to come up with their own ad hoc attempted resolutions to questions or problems instead.

• Business models need to change and adapt to increase the likelihood that effective best practices can be and are in place for meeting customer needs, and for conveying the message that this is how the business operates.

I am going to post next to this series with an installment on risk and benefits in business growth, and how meshing business model to context can skew the risk/benefits balance in the business’ favor. Meanwhile, you can find this and related postings at Startups and Early Stage Businesses. You can also find related material at Business Strategy and Operations and at its continuation page: Business Strategy and Operations – 2. And for the specific relevance of this series installment to the issues of business social networking, you can also find it at Social Networking and Business.

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