What changes when you start scaling?
The two big shifts to anticipate when scaling a new venture in an incumbent company
For intrapreneurs, scaling could mean turning potential into real business value. And no matter how many hurdles they overcame in their innovation journey to come to a validated business model, there will be no rest for leaders of scale-ups at incumbent organisations as the scaling phase is sure to send its lot of curve balls. In this blogpost I want to highlight how leaders of scale-ups should get ready for and adapt to two key changes in the scaling phase:
Shifting their business model focus from design & testing to identifying the best pathway to scale each validated building block,
Managing execution risk by adapting and strengthening the operating model of the scale-up.
New Business Model Focus
When the scaling phase starts, leaders of a scale-up might have de-risked its business model thanks to all the design & testing work in previous phases, but the new business is nowhere near ready to handle high volume. In the last few months they’ve looked at the business model with a testing mindset, asking the question “what needs to be true for my business idea to work?” Now the perspective needs to shift as they zoom in on every building block of the business model and ask themselves “what is the best option to scale?
There are different options available for each building block. They could either:
Build: They can decide to create or continue to build the required business model building block within the team. Example: developing a minimum viable product into a full production version.
Acquire: They could acquire the required building blocks from startups or more mature companies and integrate them into the business model. Example: buying a company to access critical data they own, a library of patents, etc.
Partner: They can work with strategic partners to co-develop and/or provision those building blocks in a way that is mutually beneficial. Example: partnering with a technology company to provide IT infrastructure, or a technology platform rather than building it themselves.
Moreover, as they are part of a large organisation they have one more card up their sleeve that start-ups don’t have:
Leverage: They can leverage the available assets of the core business and use them to scale. Example: using existing channels such as physical or online stores to access customers, leveraging the brand rather than investing in building a new one.
At this stage it’s critical to acknowledge that what got the leaders of the scale-up here won’t get them there. It’s likely that in earlier phases of the innovation journey they found all possible ways to avoid the mothership. But now they need access to its customer base, brand and other key resources to scale. To be successful in the scaling phase they’ll need to overcome the challenge of how best to leverage the mothership to turbo boost growth. And that starts by changing how they relate to it.
Rethinking the Operating Model
In the scaling phase, the scale-up leaders will have to manage lots of new activities such as recruiting staff members, managing payrolls, procuring office supplies, etc. That means they no longer have to only manage business model risks but also execution risks and a large volume of new activities that will lead them to rethink the scale-up operating model.
Depending on context, areas of the operating model to re-work first might vary. That being said, priority areas often include:
Processes How to manage customer-facing processes? Back-office processes (such as procurement, payroll, etc.)? As mentioned earlier, volume will stress the importance of well-managed processes. For back-office, leveraging the existing organisation might be enough. But there might be critical processes – e.g. talent management – that need to be managed differently in the new venture.
Governance processes might change as well. Who will make decisions and how will they be made in that phase? With scaling come heavier investments that might call for a revised governance.
Org structure Where will the scale-up be? In what structure? As the idea turns into a real business, it needs a “home”. Depending on the specificities of the new business, this home could be in an existing business unit, in a newly created business unit, or in a fully separate company.
People How many additional staff will be needed to scale? What key skills will the scale-up need? What will trigger hiring campaigns? How will leaders onboard new employees efficiently?
Early in my career, I was involved in a fast-scaling environment as we were launching a new mobile operator in the Netherlands. When I joined the project in the summer of 1998, the company had just secured a GSM licence for the Netherlands, and I joined a team of 10 people above a garage in the suburbs of The Hague. By early 1999 when the company was launched and started operating, the headcount was closer to 600 employees in their new office in The Hague. As you can imagine, onboarding an average of 100 employees a month while building and scaling a business doesn’t happen without proper workforce planning and execution.
Again, what got the team here won’t get them there. It’s likely that in earlier phases of the innovation journey they were not overly focused on process or planning and that was ok then. Where they flew by the seat of their pants, now they’ll need to be more planned and considered… especially if they have to recruit and onboard 100 people a month like we had to in my fast-growth example.
This shift of focus towards the operating model is critical if the scale-up is to manage efficiently the new execution risks that come with scaling.
In conclusion, scaling is both a continuation of previous phases, and a rupture as focus shifts towards execution. To be successful with this transition, leaders of a scale-up in an incumbent organisation will need to:
Identify the best pathway to put in place the different building blocks of their business model, whether it is by building, partnering, acquiring or leveraging the assets of the mothership,
Implement a new operating model that mitigates the execution risks created by fast-pace and high-volume operations.