At times
of uncertainty – how do you scale up your business?
It is hard
to make decisions at times of uncertainty when data is limited and when we have
a huge number of choices. This is a rather obvious statement. What does this
mean for us?
Irrespective
of the uncertainties we need some kind of hypothesis that we can work to so we
can test, re-test and firm up actions that work to either reduce the risk of
mistakes or optimize our decisions for success.
Management
theorists and practitioners have developed a huge range of tools for shaping
strategy and even for managing operations. Few of them connect in a coherent
way. One of the reasons for the
incoherence is that most management theories emanate from Business Schools,
which are arranged according to focused departments that, in-turn, align with academic
journals. So the faculty that want to progress in their careers need to remain
focused on their departmental affiliations.
As one
entrepreneur said to me many years ago…..”You have Departments – we have
problems to solve”.
Therefore a
typical growth strategy does not necessarily connect to manufacturing,
services, deployment of technology, the funding or the cash flow projections.
Often we see budget projections of growth that reflect some kind of hockey
stick sales line. But how does this connect to what we have to do to make it
happen? Gross profit margins are derived from assumptions or recent data but
not tied into something that is unseen in the general conversation – for
example cost of customer acquisition, development of distributors’ programmes
and so forth.
Actually
what we need once a growth strategy has been formulated, taking into account
the market spaces the firm operates in, its competition and the opportunities
and threats they perceive is a framework to help keep in step with the chosen
direction. This is described below.
Meanwhile
here are three steps that we can take to scaling up our businesses.
The first
is to recognize that there are possibly three very different timelines. One may
be for the type of business you have in mind. Is it for a lifestyle, where your
horizon is set for say 20+ years? Another is for capital gains using venture
funding. In this case your horizon may be much closer – say 7 years.
But there
is a third, which is rarely factored in and that is how long will it take for
our venture to reach its own level of maturity, i.e. when we have reached the
maximum potential of customer numbers.
This can vary hugely from about 5 – 7 years to 12 – 15 years depending
on whether we are in light touch “tech” or in highly regulated and complex
industrial projects. In summary – it is crucial to understand our customer
acquisition journey time.
The second
element is about gaining a deep understanding of our market space and the
implications that has on our value proposition, distribution and sales channels
and where we compete and with whom. This
is actually quite hard because of the challenges of securing a fine grain view
of markets, customers’ needs and how the overall distribution system works.
One of the
reasons for this difficulty is that markets are impacted by technology and
there is a convergence and it is at the intersections of these sources of
convergence that we find opportunity. Therefore the old fashioned ways of
segmenting according to industry classifications and geographies are
insufficient for the way markets are becoming spaces rather than remaining
static.
It can be
argued that because we are not able, fully, to understand our market spaces and
the resultant actions with our external world, we tend to throw money at the
problem by seeking venture funds, loans and grants. The typical metrics in firms are sales, cash
flow and these are managed through budgets as the core performance
measurements. These are of course crucial but we default to them because we can
rather than because they tell us what we need to know and use.
We do not,
for example, measure the rate of customer acquisition against the total
potential; we do not measure our deployment capability or review our IP
position vis a vis competing technologies and solutions. In order to properly deploy our scarce
resources into the most lucrative market spaces we need to bring about a
business and revenue model that ties together the journey; the nature of our
offer and how best to harness our value proposition to the customer bases we
have identified. It is the tying together of these rather operational sounding
activities that gives us our scale up strategy.
Finally,
sometimes, just sometimes, teams need a helping hand to pull all this together especially
when times and scenarios are uncertain and there are so many make or break
decisions to navigate. It is here we return to the idea of a framework that can
help navigate all the various vectors of growth. Understanding the outside world, deploying
resources to harness the changing opportunities and trading off one set of
resources against another to make the most of what we can through business and
revenue models that link back to strategy.
To get you
started with bringing coherence to your decisions in uncertain times please
take a look at https://www.thetriplechasm.com/
for helpful blogs, tools and thoughtful articles.