The scaleup mindset: time to think bigger
Shifting from startup to scaleup is neither simple nor quick, says Joe Haslam, but it is fundamental for any fast-growing business. Sustainable growth-oriented management skills can help the process go more smoothly.
Scaling up should be the true raison d’être of the startup movement. Globalization and the tech-driven elimination of border barriers have given a new opportunity to today’s entrepreneurs. It’s time for them to think big and truly expand their projects. The scaling-up process is not terribly different from the internationalization processes already underway at many companies.
Now is the time to take risks, as many of today’s scaleups have already done. For such an endeavor to succeed, the entire team must share a common vision of risk. Likewise, the company must abandon the short-term thinking typical of a startup and embrace long-term management: scaling up is a marathon, not a sprint.
Although it may fashionable to be a start-up entrepreneur, the true essence of business ownership has always been survival rather than experimentation with short-lived ideas. Consider that the average scaleup grows by 20% annually in terms of both revenue and staff size over a three-year period.
Many startups last only a short time and die before achieving their aims. Their vision of growth looks no further than gaining access to new rounds of financing.
If the capacity and mindset for scaling up are lacking, the money and resources initially invested often comes to naught. So companies need specialists who can identify market opportunities.
Talent and courage
The scaleup process is not easy, but those willing to take the plunge have a key fact in their favor: becoming an entrepreneur is easier and more affordable today than it was a few decades ago. So much comes down to mindset. There’s more than enough talent in the entrepreneurial ecosystem, but many entrepreneurs lack the courage to convert their projects into scaleups.
To acquire the scaleup mindset, you must leave your comfort zone and climb out of your bunker to discover what customers really want. A successful scaleup is deeply engaged with its consumers—in other words, it adapts its products to the market. To do this, the company must abandon everything that doesn’t work and double down on what does work.
From founder to CEO
During the transition from startup to scaleup, the company must confront the question of whether the founder is the right leader to spearhead this process. The CEO of a scaleup must possess three essential characteristics: comprehensive knowledge, moral authority, and total commitment to the long term.
This leadership role obviously requires management skills that help to foster growth. The CEO overseeing the transition must surround him or herself with specialists and make crucial decisions that can sometimes pose major challenges—for example, replacing certain team members with professionals acting in an advisory capacity. Another major challenge for the CEO is to build a corporate culture that cultivates certain values and has a positive impact on teams. The transition from founder to CEO is neither simple nor quick but is fruitful in the long run.
Growth v sustainability
Of course, scaling up is a longer and more complex process than starting a business. It takes a decade or more for a new project to deliver consistent profits. Patience is essential. In many cases, financial returns are not achieved until a very advanced stage, as certain online business models have demonstrated. Despite a long track record in the market, the real value of some companies—PayPal, for example—has never been calculated. In the case of Google, the company made its stock market debut in 2004 with a share price of $85. After a decade’s worth of nearly 130% average annual growth, Google’s shares had risen 1,000%.
Excessively rapid growth can, however, be destructive. Online taxi company Uber based its customer growth exclusively on price —in some markets, customers pay just 41% of the real cost of a journey—while neglecting many obvious variables such as profit.
Looking at the entire process, we could define a scaleup as a company that has achieved product/market fit as well as business model fit—in other words, a company whose client base is growing while its costs are falling. At this point, the business may not yet be profitable, but it will have a clearer idea of its cost structure.
Five keys to scaleup culture
Common mindsets. Scaleups begin and end with individuals. All team members must have the same mindset as the leaders; this reinforces a sense of belonging.
Find varied examples to emulate. Google, Netflix, and Facebook shouldn’t always be your point of reference. There is life beyond Silicon Valley. Sustainable growth is the goal.
Change the value proposition. Proposing products and services with a differential value is useful when resizing a company.
You can have it all. It’s possible to be good, fast and cheap—there’s no need to choose just two.
Re-invent management. Scaleups have a smaller margin of error, but in getting beyond mere survival mode, they can usurp traditional management methods.