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Browne & Mohan
Board & CEO Advisors, Management Consultants
Scaling up business to next level…….
Dr TR Madan Mohan
Browne & Mohan
Board & CEO Advisors, Management Consultants
Introduction
Business like all living organisms scale and grow up
or die premature death. Some may scale up too
fast, if on steroid funds and then contract when
they find going tough. Companies in post start-up
phase require new layers of management to drive
operations and growth. For externally funded
startups scaling up is a business requirement
driven by valuation concerns. Despite loaded with
easy cash and high employee count many fail at
this step. Scaling up in a family business can have
different hues. It could be generational transition,
or induction of professionals or business
expansion. Scaling up is not just about increasing
the scale of production or entering more markets,
it is about continuing to move ahead (Sutton &
Rao, 2014). Scaling up like any change initiative is
risky and brings its own complexity. I had the good
fortune to work with companies that ae scaling up
and grow their capabilities and capacities to meet
new demands.
My engagements have centred about designing
and implementing right strategy, structure and
investments to serve the mission. I have learnt
what it takes to successfully plan and pursue a
scaling up strategy, just enough stay ahead in the
race and yet de-risk from overcapacity and
technology obsoleteness. Figure 1 presents the
broad process of scaling up in business
organization.
Figure 1: Scaling up a business
1. Evaluate your current business operations
Scaling up starts with evaluation of the basic
purpose, why the company must exist and how it
can exploit the “friction” in the market efficiently.
Evaluate current revenue streams, how many of
them are one time or multi-period. Analyse the
limitations of your current business, how it is run,
how it is managed and monitored. Identify gaps
that exist within the firm in the form of individual
talent, a second level of leadership, functional
expertise etc that need to be fortified. Gaps could
also be in the form of missing performance
management systems to professionally manage
the company, a weak sales and marketing
organization that is reactive in nature, an
unsuitable organization structure that hinders the
firm from responding effectively to the market, or
systems that are not facilitating share of
information for effectiveness. Benchmarking with
competition or a company at desired scale is
useful to identify these gaps and bridge them.
What is unique about the product and services,
how relevant are they for innovation (incremental
or radical), aggregation, fulfilment aspects of the
industry. How sustainable and de-risked is the
current position on the value chain, and what dis-
intermediation can occur. How would technology
disrupt the players?. How Identify evolution of
minimum efficient scale (MES) and what
capacities does your company command, and how
large players are exploiting outsourcing and
vendor management. Is your company
accumulating all the relevant subjective
knowledge in the system to benefit from
knowledge management?. Evaluate your
complete organization to the scale you want. Is
your sales organization efficiently managing
acquisition of new accounts and harvesting
existing accounts to reach your goals?. How
effective is the marketing function in building
brand and loyalist for the scale of operations?
How cost effective and purposeful are the
campaigns in reaching the customer numbers
required for the envisaged scale? If your current
scale of operations is around hundred evaluate
whether the functions can stretch and deliver for
say thousand. The company must run efficiently
and effectively for 100 from 1000. Identify the
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Board & CEO Advisors, Management Consultants
squeaky wheels and leak points with functions and
across functions.
2. New position: how do you want to scale up?
Scaling up can be in terms of products or services
or new geographies. Scaling up requires careful
assessment of options and plan for manageable
risks. Have a clear business plan and strategy for
at least 2 to 3 years on what the business has to
achieve. This is to show the road map, the growth
plan, investments required and vision for the
company. It helps clarify purpose. Clarity on the
type of capabilities that need to be built to reach a
certain goal is important. Detailed plans in other
functional areas will also help to show that much
of what is being done has been thought through
carefully. Plan for a short-term and long-term
goals to reach scale, define specific outputs at
each stage and what would be the outcome from
a scale perspective. Visualize how the outcome
would impact you reaching the scale and detail
broad tactical actions.
Scaling up must not only assess the scale of
operations, but also the non-linear inhibitors in
systems, process and skills that may hold back
outcome. For the desired scale of operations,
function-wise do a stretch map indicting how
flexible are the department’s resources (people,
infrastructure and process). Identify what
activities can be automated, what may be bundled
and or outsourced. If Knowing customer
intimately, understanding their latent needs and
serving them with delectable offerings is the
strength, scaling up by building on the customer
experience management is a sure way to
prosperity even in service business. Productize
the services and standardization of process would
yield scalable and sustainable platforms to grow.
This could be a scaling up option for service
oriented companies with somewhat common
process across customers.
Some time to scale up, companies may need to
scale down. Scaling requires companies to
consciously contain low EBIT offerings and if
required cut the arm completely. Scaling up
requires concentration of efforts and energies and
they can be disbursed across several options.
Large family groups have to rationalize the
products across various plants and locations, may
have to let go some of the products and
concentrate on investing in few high opportunity
products to scale up. Closure or downscaling can
be painful and bring lots of emotional baggage.
Revisit requirements and outcomes, align them
better for improved productivity and cost
advantage. Scaling up requires quality and
delivery are competitive and company must find
ways to address these. Addressing production-
sales integration issues through lean
manufacturing and supply chain improvements is
an integral part of scaling up.
3. Scale up capacities, competencies and
capabilities
Key to scaling up is working on the business.
Scaling up a business is all about increasing
the current capacities, offerings and
capabilities. To scale up, keep sales as the
priority. Rather than trying to acquire too
many new things direct attention to the core
customers that you serve. Evaluate the
appropriateness of referral or loyalty program,
to encourage repeat business. Scaling up may
require more aggressive sales and marketing,
or more thorough follow through with
deliveries. Scaling up may require more
investments in resources and working more
harder and smarter with the available
resources. Scaling up may require incumbent
CEO stepping aside to bring new talent. CEO’s
considering scaling up must seek out external
talent that would complement their skills.
Companies can also pursue subsidiary strategy
to scale up capacities and as a new entity to
bring in new CEO without displacing the
existing management. Scaling up may require
automation of repetitive tasks within a
function and outsourcing of low value added
activities within a function. Scaling up may
also mean a complete refurbishment of
competencies in a team. For example, for an
R&D team that is largely focusing on
application support with drafting skills may
have to be completely retooled with
engineering skillset to undertake application
engineering and solution design. Scaling
required hiring new resources to complement
gaps in capabilities and building an effective
Browne & Mohan
Board & CEO Advisors, Management Consultants
knowledge transfer mechanism so that skills
set remain even in times of attrition. Scaling
up may require hiring of expertise from
market and cultivate internal talent in parallel.
Incumbents may be pursued to own newer
platforms to extend and stretch their
capabilities.
4. Power of integration: structure, process,
ownership
Scaling up can be achieved only when all
functions work in a tandem. Create newer
organizations structure to bring more focus
and market alignment, create space for newer
leadership to emerge to own and direct
growth and importantly, de-risk the company
from vagaries of markets and offerings.
Create sub-divisions for increased focus and
align shared services to contain cost. Key
tenet of scaling up is not just bringing new
talent at key roles, but the incumbent
leadership progressively stepping back so that
the new leaders own and manage their areas
of operations. Build systems and process that
promote data driven decision making,
ownership of tasks and outcomes. Choose
process and procedures must be chosen for
their effectiveness and ease of working.
Integration in terms of common parts,
processes, and people offers great economies
of scope advantages. Pursue integration of
production or delivery process, conversion of
“implicit knowledge to explicit knowledge”,
common parts and competencies approach to
gain from alignment and improved valuation.
Look for Processes or activities which can be
automated. This reduces the time taken to
perform, manpower cost and manual errors
leading to re-work. Consolidation is an integral
part of the strategy as it reduces duplication
of work and aggregates activities/resources
with similar tasks thus reducing the cost and
time. Try and eliminate all the activities that
prove to be adding least or no value to the
company. Modifying the structure, process
and incentives of an organisation to support
the objectives and revive the existing function
yields better results.
Scaling up is a significant and organizational
wide transformation process. This requires
involvement of all stakeholders (both internal
and external) and attention to details.
Resources and adoption require continuous
steering, not just following up a plan that
been written long back and endorsed. Scaling
up required a collaborative leadership team
that has committed staff who can work
together and can handle issues that pop up at
various stages.
5. Measures: outcome and impact
Many reports assert that scaling up efforts fail.
The reasons for failure could be many. Many
senior managers acknowledge that inappropriate
balancing of expected results with resources at
hand or inappropriate alignment of resources and
the activities are most common reasons for
failure. Aligning the individual’s role and
responsibilities, ownership and accountability with
the intended change or outcomes is a tough task.
Measurement that improves managerial
effectiveness, ownership and accountability in
achieving results is needed to drive a scaling up
program. Largely used in Not-for-profit sector,
RBM adopts a life-cycle approach to integrating
strategy, resources, process, people and results.
RBM focus is on integrating measurements that
can improve decision making, transparency of the
case and effect, and accountability at various
levels. RBM uses a logical relationship between
inputs, activities, outputs, outcomes and impact.
Inputs could be financial, manpower, plant,
partnerships, etc. that are required to conduct
various business activities. The activities would be
promotional programs, creation of new sales
teams, partner program structures or marketing
events which are expected to deliver certain
short-term results. These short term results in
RBM parlance are termed outputs. Outcomes are
mid-term results that indicate the direction and
scale of achievement. Impact is what the company
wants to achieve by undertaking the change. The
outcome measure reflects the causal effect
between resources marshalled and activities
pursued to reach certain objectives. The output
indicates the results in short-term. Mid-period
review using output and outcome measures are
useful indicators of what is working and what is
not working. The company can quickly calibrate
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Board & CEO Advisors, Management Consultants
alignment between activities, resources and
outputs to see the returns are on expected line.
Bibliography
Chesbrough, H. "Why companies should have
open business models." MIT Sloan management
review 48.2 (2012).
Lyon, Fergus, and Heather Fernandez. "Strategies
for scaling up social enterprise: lessons from early
years providers." Social Enterprise Journal 8.1
(2012): 63-77.
Menasce, D. (2000). Scaling for e-business. In
Modeling, Analysis and Simulation of Computer
and Telecommunication Systems, 2000.
Proceedings. 8th International Symposium on (pp.
511-513). IEEE.
Mezias, S.J. and Glynn, M.A. (1993). The three
faces of corporate renewal: institution, revolution,
and evolution, Strategic Management Journal,
Vol.14, pp. 77-101.
Robert I Sutton and Huggy Rao, 2014, Scaling Up
Excellence, Crown Business.
Sosna, Marc, Rosa Nelly Trevinyo-Rodríguez, and
S. Ramakrishna Velamuri. "Business model
innovation through trial-and-error learning: The
Naturhouse case." Long range planning 43.2
(2010): 383-407
Spulber DF. (1998) The Market Makers, How
Leading Companies Create and Win Markets,
McGraw-Hill: New York.
Verne, Harnish, 2014, Scaling up: why some
companies make it…why the rest do no, Gazelles.
Ward, John L. "Growing the family business:
Special challenges and best practices." Family
Business Review 10.4 (1997): 323-337.
Browne & Mohan white papers are for information and
knowledge update purpose only. Neither Browne & Mohan
nor its affiliates, officers, directors, employees, owners,
representatives nor any of its data or content providers shall
be liable for any errors or for any actions taken in reliance
thereon.
.
© Browne & Mohan, 2016. All rights reserved
Printed in India

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Scale Business Next Level Management Consultants

  • 1. Browne & Mohan Board & CEO Advisors, Management Consultants Scaling up business to next level……. Dr TR Madan Mohan
  • 2. Browne & Mohan Board & CEO Advisors, Management Consultants Introduction Business like all living organisms scale and grow up or die premature death. Some may scale up too fast, if on steroid funds and then contract when they find going tough. Companies in post start-up phase require new layers of management to drive operations and growth. For externally funded startups scaling up is a business requirement driven by valuation concerns. Despite loaded with easy cash and high employee count many fail at this step. Scaling up in a family business can have different hues. It could be generational transition, or induction of professionals or business expansion. Scaling up is not just about increasing the scale of production or entering more markets, it is about continuing to move ahead (Sutton & Rao, 2014). Scaling up like any change initiative is risky and brings its own complexity. I had the good fortune to work with companies that ae scaling up and grow their capabilities and capacities to meet new demands. My engagements have centred about designing and implementing right strategy, structure and investments to serve the mission. I have learnt what it takes to successfully plan and pursue a scaling up strategy, just enough stay ahead in the race and yet de-risk from overcapacity and technology obsoleteness. Figure 1 presents the broad process of scaling up in business organization. Figure 1: Scaling up a business 1. Evaluate your current business operations Scaling up starts with evaluation of the basic purpose, why the company must exist and how it can exploit the “friction” in the market efficiently. Evaluate current revenue streams, how many of them are one time or multi-period. Analyse the limitations of your current business, how it is run, how it is managed and monitored. Identify gaps that exist within the firm in the form of individual talent, a second level of leadership, functional expertise etc that need to be fortified. Gaps could also be in the form of missing performance management systems to professionally manage the company, a weak sales and marketing organization that is reactive in nature, an unsuitable organization structure that hinders the firm from responding effectively to the market, or systems that are not facilitating share of information for effectiveness. Benchmarking with competition or a company at desired scale is useful to identify these gaps and bridge them. What is unique about the product and services, how relevant are they for innovation (incremental or radical), aggregation, fulfilment aspects of the industry. How sustainable and de-risked is the current position on the value chain, and what dis- intermediation can occur. How would technology disrupt the players?. How Identify evolution of minimum efficient scale (MES) and what capacities does your company command, and how large players are exploiting outsourcing and vendor management. Is your company accumulating all the relevant subjective knowledge in the system to benefit from knowledge management?. Evaluate your complete organization to the scale you want. Is your sales organization efficiently managing acquisition of new accounts and harvesting existing accounts to reach your goals?. How effective is the marketing function in building brand and loyalist for the scale of operations? How cost effective and purposeful are the campaigns in reaching the customer numbers required for the envisaged scale? If your current scale of operations is around hundred evaluate whether the functions can stretch and deliver for say thousand. The company must run efficiently and effectively for 100 from 1000. Identify the
  • 3. Browne & Mohan Board & CEO Advisors, Management Consultants squeaky wheels and leak points with functions and across functions. 2. New position: how do you want to scale up? Scaling up can be in terms of products or services or new geographies. Scaling up requires careful assessment of options and plan for manageable risks. Have a clear business plan and strategy for at least 2 to 3 years on what the business has to achieve. This is to show the road map, the growth plan, investments required and vision for the company. It helps clarify purpose. Clarity on the type of capabilities that need to be built to reach a certain goal is important. Detailed plans in other functional areas will also help to show that much of what is being done has been thought through carefully. Plan for a short-term and long-term goals to reach scale, define specific outputs at each stage and what would be the outcome from a scale perspective. Visualize how the outcome would impact you reaching the scale and detail broad tactical actions. Scaling up must not only assess the scale of operations, but also the non-linear inhibitors in systems, process and skills that may hold back outcome. For the desired scale of operations, function-wise do a stretch map indicting how flexible are the department’s resources (people, infrastructure and process). Identify what activities can be automated, what may be bundled and or outsourced. If Knowing customer intimately, understanding their latent needs and serving them with delectable offerings is the strength, scaling up by building on the customer experience management is a sure way to prosperity even in service business. Productize the services and standardization of process would yield scalable and sustainable platforms to grow. This could be a scaling up option for service oriented companies with somewhat common process across customers. Some time to scale up, companies may need to scale down. Scaling requires companies to consciously contain low EBIT offerings and if required cut the arm completely. Scaling up requires concentration of efforts and energies and they can be disbursed across several options. Large family groups have to rationalize the products across various plants and locations, may have to let go some of the products and concentrate on investing in few high opportunity products to scale up. Closure or downscaling can be painful and bring lots of emotional baggage. Revisit requirements and outcomes, align them better for improved productivity and cost advantage. Scaling up requires quality and delivery are competitive and company must find ways to address these. Addressing production- sales integration issues through lean manufacturing and supply chain improvements is an integral part of scaling up. 3. Scale up capacities, competencies and capabilities Key to scaling up is working on the business. Scaling up a business is all about increasing the current capacities, offerings and capabilities. To scale up, keep sales as the priority. Rather than trying to acquire too many new things direct attention to the core customers that you serve. Evaluate the appropriateness of referral or loyalty program, to encourage repeat business. Scaling up may require more aggressive sales and marketing, or more thorough follow through with deliveries. Scaling up may require more investments in resources and working more harder and smarter with the available resources. Scaling up may require incumbent CEO stepping aside to bring new talent. CEO’s considering scaling up must seek out external talent that would complement their skills. Companies can also pursue subsidiary strategy to scale up capacities and as a new entity to bring in new CEO without displacing the existing management. Scaling up may require automation of repetitive tasks within a function and outsourcing of low value added activities within a function. Scaling up may also mean a complete refurbishment of competencies in a team. For example, for an R&D team that is largely focusing on application support with drafting skills may have to be completely retooled with engineering skillset to undertake application engineering and solution design. Scaling required hiring new resources to complement gaps in capabilities and building an effective
  • 4. Browne & Mohan Board & CEO Advisors, Management Consultants knowledge transfer mechanism so that skills set remain even in times of attrition. Scaling up may require hiring of expertise from market and cultivate internal talent in parallel. Incumbents may be pursued to own newer platforms to extend and stretch their capabilities. 4. Power of integration: structure, process, ownership Scaling up can be achieved only when all functions work in a tandem. Create newer organizations structure to bring more focus and market alignment, create space for newer leadership to emerge to own and direct growth and importantly, de-risk the company from vagaries of markets and offerings. Create sub-divisions for increased focus and align shared services to contain cost. Key tenet of scaling up is not just bringing new talent at key roles, but the incumbent leadership progressively stepping back so that the new leaders own and manage their areas of operations. Build systems and process that promote data driven decision making, ownership of tasks and outcomes. Choose process and procedures must be chosen for their effectiveness and ease of working. Integration in terms of common parts, processes, and people offers great economies of scope advantages. Pursue integration of production or delivery process, conversion of “implicit knowledge to explicit knowledge”, common parts and competencies approach to gain from alignment and improved valuation. Look for Processes or activities which can be automated. This reduces the time taken to perform, manpower cost and manual errors leading to re-work. Consolidation is an integral part of the strategy as it reduces duplication of work and aggregates activities/resources with similar tasks thus reducing the cost and time. Try and eliminate all the activities that prove to be adding least or no value to the company. Modifying the structure, process and incentives of an organisation to support the objectives and revive the existing function yields better results. Scaling up is a significant and organizational wide transformation process. This requires involvement of all stakeholders (both internal and external) and attention to details. Resources and adoption require continuous steering, not just following up a plan that been written long back and endorsed. Scaling up required a collaborative leadership team that has committed staff who can work together and can handle issues that pop up at various stages. 5. Measures: outcome and impact Many reports assert that scaling up efforts fail. The reasons for failure could be many. Many senior managers acknowledge that inappropriate balancing of expected results with resources at hand or inappropriate alignment of resources and the activities are most common reasons for failure. Aligning the individual’s role and responsibilities, ownership and accountability with the intended change or outcomes is a tough task. Measurement that improves managerial effectiveness, ownership and accountability in achieving results is needed to drive a scaling up program. Largely used in Not-for-profit sector, RBM adopts a life-cycle approach to integrating strategy, resources, process, people and results. RBM focus is on integrating measurements that can improve decision making, transparency of the case and effect, and accountability at various levels. RBM uses a logical relationship between inputs, activities, outputs, outcomes and impact. Inputs could be financial, manpower, plant, partnerships, etc. that are required to conduct various business activities. The activities would be promotional programs, creation of new sales teams, partner program structures or marketing events which are expected to deliver certain short-term results. These short term results in RBM parlance are termed outputs. Outcomes are mid-term results that indicate the direction and scale of achievement. Impact is what the company wants to achieve by undertaking the change. The outcome measure reflects the causal effect between resources marshalled and activities pursued to reach certain objectives. The output indicates the results in short-term. Mid-period review using output and outcome measures are useful indicators of what is working and what is not working. The company can quickly calibrate
  • 5. Browne & Mohan Board & CEO Advisors, Management Consultants alignment between activities, resources and outputs to see the returns are on expected line. Bibliography Chesbrough, H. "Why companies should have open business models." MIT Sloan management review 48.2 (2012). Lyon, Fergus, and Heather Fernandez. "Strategies for scaling up social enterprise: lessons from early years providers." Social Enterprise Journal 8.1 (2012): 63-77. Menasce, D. (2000). Scaling for e-business. In Modeling, Analysis and Simulation of Computer and Telecommunication Systems, 2000. Proceedings. 8th International Symposium on (pp. 511-513). IEEE. Mezias, S.J. and Glynn, M.A. (1993). The three faces of corporate renewal: institution, revolution, and evolution, Strategic Management Journal, Vol.14, pp. 77-101. Robert I Sutton and Huggy Rao, 2014, Scaling Up Excellence, Crown Business. Sosna, Marc, Rosa Nelly Trevinyo-Rodríguez, and S. Ramakrishna Velamuri. "Business model innovation through trial-and-error learning: The Naturhouse case." Long range planning 43.2 (2010): 383-407 Spulber DF. (1998) The Market Makers, How Leading Companies Create and Win Markets, McGraw-Hill: New York. Verne, Harnish, 2014, Scaling up: why some companies make it…why the rest do no, Gazelles. Ward, John L. "Growing the family business: Special challenges and best practices." Family Business Review 10.4 (1997): 323-337. Browne & Mohan white papers are for information and knowledge update purpose only. Neither Browne & Mohan nor its affiliates, officers, directors, employees, owners, representatives nor any of its data or content providers shall be liable for any errors or for any actions taken in reliance thereon. . © Browne & Mohan, 2016. All rights reserved Printed in India