Three strategies for business scalability
By Victoria Cobos
Not so long ago a fully defined operating model was more a privilege than a need for an emerging business; the times when investments arguably were granted on the basis of unique sell proposition, growth potential and founder charisma are behind us; since the economic contraction following COVID, that has led VC capital to dry, not having a robust proposition to operationalise the strategy has become a competitive disadvantage.
Investors will seek to know that there is a clear path to take the venture forward without overspending and providing enough opportunity to retrieve their investment.
To refer to scalability is to be able to answer clearly how will the business reach its potential making the best use of resources? Below are three key features to consider to make sure your proposal hits the mark:
(1) Repeatable Models
For products and services, your processes should guarantee for it to be reproduced with consistent quality when and if demand increases without having to immediately invest; the ability to replicate the Unique Selling Proposition (USP) is critical to support the growth of the organisation and not to hamper it. There will be always limitations related to structural barriers (equipment capacity, material availability, system bandwidth, development time) that should be addressed through scenario planning so action plans can be ready to apply if necessary; however, strategic barriers such as: selling, on-boarding, invoicing and other key processes should be fit for purpose and not limited by people, software or hardware constraints.
(2) Operational redundancies
Quite frequently the operating model is thought through with tunnel vision, single suppliers, either near shoring or offshoring, but more often than not outsourcing tends to be the strategy of choice; nothing wrong with that, however in times where supply chains are vulnerable, understanding how your business is dependant on key vendors is critical to manage risk and secure business continuity. Understand single points of failure, set tracking mechanisms for such risks, identify alternatives to mitigate and finally set triggers to action the mitigation plans.
(3) Modular design
More relevant to product-based offerings, a key element to guarantee scalability is how easily the components of your product can be sourced. While there is undenied power in having bespoke elements that will reduce the risk of imitation, it is important to have enough off-shelf components with dual sourcing possibilities as well as a replicable model to manufacture. Another side of modularity is compatibility, most products and services are meant to work within an ecosystem, said ecosystem can be an enabler for business growth or a barrier. For example, software that does not function in all operating systems (apple, windows, etc) will naturally miss on key market share; even iconic innovations have depended on established components. For example, the Mac 128k used a Motorola 68000 processor. In the current day and age versatility will provide further avenues for revenue streams and be a competitive advantage.
Overall scalability therefore depends on key design decisions about the product and the operating model, as well as to proactively addressing threats to business continuity. Being prepared to include this thinking within the pitch will provide investors with confidence about the potential of the venture.