Starting a Business is no longer difficult, Scaling is!
Once upon a time starting a business was the most difficult thing to do for most people. However, with the advent of technology and the vast amount of free information coupled with the amount of mentors who have passionately shared their success stories to ignite the burning desires within us, starting a business has become much easier.
Worldwide, over 100 million businesses are created every year but according to a Forbes’ 2021 report, 20% fail in year 1, 30% in year 2, 50% by year 5, and 70% beyond year 10. Among those that stay, most remain pretty much the same way they were created; same system , culture, number of employees, leadership style, level of profitability, products etc.
Why is this the case?
I am guessing you will say lack of finance. Whilst this might seem right on the surface, it is unfortunately not the primary reason. You might be for instance lucky to have an investor fund your idea but if you don’t have an appropriate system or the requisite mindset, it will disappear really fast and inhibit your growth.
So why then do businesses fail to scale?
Simply put, many were not designed with the intention to scale.
Business design otherwise known as Organisational Design (OD) is at the heart of all growth firms. The Chattered Institute of Personnel Development (CIPD) defines OD as:
“the review of what an organisation wants and needs, an analysis of the gap between its current state and where it wants to be in future, and the design of organisational practices that will bridge that gap”.
In other words, OD seeks to answer four main questions that should be frequently asked:
- What do we want to achieve?
- What’s our current state ?
- What’s the gap between our current and future state ?
- How can we bridge that gap?
Now, let’s take each in turn and briefly explain.
1. What do we want to achieve?
This is a question of vision. Organisations built to scale are driven by their vision. A vision is the future put into perspective. It is where you want to be as a business in the foreseeable future e.g 5 years from now. A clearly stated vision serves as both a motivator and discipline for all members of the organisation. A vision reminds you of why you do what you do when the going gets tough. An organisation’s vision is normally written in a form of a statement which speaks to the future. Some examples include:
Google’s vision is “to provide access to the world’s information in one click.”
Amazon’s vision is “to be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.”
Coca Cola’s vision is “to craft the brands and choice of drinks that people love, to refresh them in body spirit. And done in ways that create a more sustainable business and better shared future that makes a difference in people’s lives, communities and our planet.”
Dangote Group’s vision is “ to become the leading provider of essential needs in Food and Shelter in Sub-Saharan Africa.”
Pfizer’s vision is “ to Innovate to bring therapies to patients that significantly improve their lives.”
Implicit in all of the above visions is growth; they are simply saying, this is where we intend to go (from 0 to 1 and 1 to exponential growth). That vision is then communicated to all members of the organisation. The question therefore again is: what’s your vision? Where do you see your business 5,10, 20 years from now?
2. What’s our current state?
This question prompts you to look at your current situation as a business. You can do this by asking critical questions like: how are we doing? What’s our core competence? Are our customers and staff happy ? What’s the current sales figure? Who are they current and new entrant to the market? What is our current overheads?
To be more structured, you could use key strategic models like SWOT (Strength, Weakness and Opportunities), and McKinsey 7s to carry out your situation analysis.
For example, SWOT could be used to ask key questions like: what are my Strengths(S), Weaknesses (W), Opportunities (O) and Threats (T)?
The McKinsey 7s which was developed by the US based consulting firm, McKinsey, allows you to review the effectiveness of your business by looking at the interrelationship between your Strategy, Systems, Staff, Style, Skills, Structure and Shared-value.
3. What’s the gap between our current and future state?
This question allows you to reflect on the where you are now as a company (situation analysis) and where you want to be (vision). Knowing the distance to your destination gives you hope and time to think of how fast and efficiently you can get there.
4. How can we bridge that gap?
This question allows you to strategically determine your road map towards the vision of your company. Your road map is the bedrock upon which all other components of of your business sits on. The more clearer and precise it is, the more easily you can sail towards your vision.
To strategise, companies normally use key models like Ansoff Matrix and Porter’s Generic Strategy.
Ansoff’s matrix was developed by Igor Ansoff and was first published in the Harvard Business Review in 1957, in an article titled “Strategies for Diversification.”
The model has been widely used by small-medium as well as large companies to expand their operations and maximise their bottomline. The model identified four main strategies: market penetration, product development, market development and diversification.
A market penetration strategy is when a company decides to sell or produce more of its existing products to its existing market. You do this because you know that the product works and that there are very few surprises in the market.
Product development strategies is when a company decides to produce and sell their new products to their existing market.
On the other hand, market development strategies is when a company decides to sell their existing products to a new market whereas diversification strategies seek to sell new products to an entirely new market.
Porter’s generic competitive strategy was developed by Michael Porter in 1978. Porter stated that a business can compete in three main ways: cost (being the lowest producer), differentiation (offering products that are unique to the market) and focus (focusing on a specific niche).
In summary, starting a business is easier today than it was decades ago. The most difficult part however, is growing it and this is so because most organisations were not design with the intention to grow. Organisational Design (OD) is a strategic and wide reaching process that continually seeks to answer critical questions like: where you want to be? what is your current situation? what is the gap between your current situation and where you want to be? how do you get there?
The OD process therefore, helps you to have a holistic view of the strategies, culture, leadership style, systems, people, customers, sales, profits, overheads, policies and procedures and how they are set up to achieve your desired outcome: SCALE.
