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.