What is Growth?
According to tradition, a business grows by increasing its resources in proportion to its income. Expanding the workforce, enlarging capacity, opening new offices and factories; these were all taken for granted as engines of revenue growth. When they worked, businesses enjoyed commensurate success, but there were inherent risks.
Increased investment could damage cashflow or give rise to exposure which, if not consistently matched by improved profitability, could endanger the company’s future. If this kind of growth proved sustainable it didn’t alter the ratio between costs and revenue, it simply increased each side of the equation by the same multiplier.
What is Scaling?
The fundamental philosophy of scalability is a new business model, largely enabled by technological advances, which makes it possible to achieve revenue growth without a major expansion of resources. In other words, profits increase exponentially while resources grow merely incrementally. A company which scales successfully enjoys rapidly increasing margins.
You only have to consider companies like Google and eBay to see this in action. The workforce of the search engine giant is about 150,000 worldwide. That sounds a lot until you compare it with Amazon, with nearly 10 times that number. Elon Musk employs just 110,000 people across all his companies, whilst eBay has about 13,500. The idea that the profit to resources ratio is sacrosanct has been utterly discredited.
How to Scale
Traditional business efficiencies are usually focused on doing more with less. A company seeking to scale is aiming to do more with the same. That means identifying those elements of your business where capacity can be increased by replication or, more likely, automation. In a personal service industry such as law, it is much harder for a firm to scale because each new client requires the same level of service as existing ones, which necessitates hiring new lawyers to allow for growth.
If your business is one in which labour-intensive tasks can be handed over to automated solutions, the work will be carried out at a fraction of the cost, more quickly and almost certainly more accurately. In a customer-facing business, this efficiency will make a world of difference to the experience of consumers.
Of course, automation is merely a tool and it would be wrong to see it as the magic bullet of scalability. It is also essential to have a lean, energetic, creative and motivated workforce. This should be in your tech teams, who develop new products and services as well as upgrading internal systems, or in your sales and marketing operation, where analogue and digital strategies are employed in productive harmony. Equally, your financial department is essential where keen-eyed super accountants ensure cashflow is optimised and funds are always available for the inevitable unexpected.
Why is scalability desirable?
The simple answer is that it is one of the fastest ways to increase profits; however, it can also protect a company’s position in relation to competitors and predators. If you settle for leisurely incremental growth, then the chances are you could be left behind in today’s rapidly evolving commercial environment. Those profit margins will only expand as fast as you let them. Ultimately, if you don’t scale then any number of your competitors might.
Scaling will not happen by chance. Planning is key. That means creating the right kind of diverse, inclusive, inspirational culture, communicating a shared, motivating vision, and surrounding yourself with people who have the exceptional talent and ideas to run their areas of operation more effectively than you could do yourself.
If you see scaling as your next step then talk to the experts at Tekna Search. Our market knowledge, expert consultancy and data-led acquisition can help you scale your tech teams to meet the infinitely rewarding challenges of scalability.
Our extensive catalogue of hypergrowth clients choose to work exclusively with us because we understand the DNA that delivers a successful team structure – from experience and technical skills down to cultural ﬁt. As your talent partner, our processes are designed to execute results.