Platt Perspective on Business and Technology

Moving past early stage and the challenge of scalability 18: taking on and accepting the risk of scaling up

Posted in startups by Timothy Platt on February 9, 2013

This is my eighteenth 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 1-17.) I began this series with a focus on the issues of business models and scalability of operations and strategy. I have looked into scalability from the perspective of the marketplace and how market reach has to scale up too if business expansion is to succeed. And for both: looking at this from within the organization and when looking at it from outside the business and at its context, I have held to one basic assumption that I have not explicitly stated but that I seek to examine here – risk and benefits assessments and the willingness to grow and expand a business, and past its linear growth limits and into new forms, visions and challenges.

I have recently been posting to a series: Re-Visioning Leadership (see Business Strategy and Operations – 2, postings 345 and scattered following) in which I have cited the fact of linear growth and its limitations, and how scalability per se and if sufficiently pursued always brings a business to a transition point where further growth would be in new directions. Here, and in the context of discussing scalability per se I seek to explain something of what that means.

Think of a business as being comprised of:

• An organizational structure as formally laid out by its table of organization and as functionally realized by actual patterns of day to day communications and practice,
• Overall and department by department operational planning and execution,
• Overall and department by department strategic planning and its performance monitoring, as it is and is not reflected in actually executed operational terms,
• And corporate culture, and the social networking that collectively creates and conveys a sense of the business as an organized, goals-directed community.

Growth that simply expands on the scale of these foundation elements as expressed, but without requiring any real qualitative changes in their fundamental forms can be thought of as linear growth. Growth that crosses fundamental thresholds for scale or complexity where the fundamental nature of one or more of these foundation elements has to be changed is nonlinear, and involves disruptive change. And as noted previously and repeated above, any business that scales up enough eventually reaches transition points in its growth where that happens and for one or more of these core elements.

Fundamental change in the underlying pattern for any of the above four business elements as noted in bullet pointed list form, faces resistance. Picking up on table or organization and organizational structure as a working example here, and citing heavily silo-partitioned organizations where managers seek to develop their own personal power and authority structures and fiefdoms as a case in point, any fundamental changes in how a business is organized and in the patterns of who reports to who would be met with resistance. This would be seen as a direct and even personal threat to managers who perceive their role as being in some way diminished. Depending on the organization and its business model and its history up to now, disruptively nonlinear change in any of the core foundation elements would generate at least some resistance.

And challenge to the current corporate culture, at least in my experience seems to generate the most resistance and the most wide-spread at that. So if anything is kept as is, and regardless of growth and expansion and of change elsewhere in the system, if a business is to keep one area intact, it tends to be its original driving corporate culture and the sense of shared values that this represents and expresses. Even when everything else seemingly changes, when for example a business goes from small and community-based local to being multinational and global – underlying core corporate culture can remain the same as an ongoing source of historically connecting continuity.

This brings me to consider the issues of will and willingness to change, as cited in the title of this posting. Scaling up a business, and certainly to and through those nonlinear, disruptive transition points, carries opportunity but this involves stepping out into the new and unknown too, and changing a formula that has worked well up to now. So this carries risk and a sense of risk too, and a need for willingness to take that step into what has to be increased uncertainty and certainly until new can be vetted and validated.

With that point I turn to and cite a short series I posted about 10 months ago: Management and Strategy by Prototype (see its Part 1 and Part 2.) Disruptively new and novel can in many cases be tested out locally within parts of a business and its organizational systems before being globally rolled out and implemented – and proof of principle and efficiency testing, review, refinement and further testing can help a business and its leadership arrive at its own right best practices approaches for moving forward through a transition point, and can help validate best practices arrived at. This testing and validation can also allay concerns and help develop buy-in too. Consider that a growth-enabling due diligence methodology. And I stress here that when proposed change can be tested and validated first, that reduces uncertainty and risk – even if local testing can never make risk or uncertainty entirely go away or even necessarily drop to normative baseline levels already in place.

I am going to continue this discussion in a next installment, where I will delve in more detail into the issues of prototyping for scalability and growth and in ways that enhance business effectiveness and competitiveness. 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.

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