What exactly drives scaling success?
Scaling is a “dark code” that needs to be cracked.
Welcome to The Lab.
We bring together scale-ups and the world’s best researchers to crack the code of scale-up success.
These are some of our perspectives (links to docs):
- Are you the scale-up board member that propels not protects?
- Scale-up DNA – summary report
- ScaleUp The Experience Game
- The laws of scale of companies
Click here if you are interested in working with us cracking the code.
And please find some further selected insights below:
Bite size insights
It is an experience game
Your first company may in fact be your learner company. It provides you with the experience and insight to now build a company that scales. However, if you are a first timer, it makes a lot of sense to complement the leadership team with at least one experienced entrepreneur.
By the way, corporate experience, while it will teach you many things and can look great on your resume, is not teaching you the right skills. Note that in young Dutch companies that are not scaling, 65% of the founders have a corporate background. Corporate experience is just about as useful as studying Spanish to prepare you for a trip to China.
Select your industry well
Scale-ups are typically active in attractive industries. “Attractive industry” we define as as having an average net profit margin above 20 percent. When you think about it, it makes sense. An industry with a higher profit margin has less competitive pressure and more room for differentiation. If you are innovating in a commodity market, you will find the competitive pressure to be very high.
It takes a scalable business model to scale the business
To scale your company needs a scalable business model from the start. A scalable business model means that your product becomes more valuable as more customers buy it, that the products improves with use and has low variable costs. In these cases volume attracts more volume. You product becomes more and more profitable. And your competitive edge becomes larger as you grow.
To keep growing you need to keep innovating
Some call this ambidexterity: the ability to manage tight operations for your first product line while at the same time developing and launching your next product, stepping into a new market and/or changing your business model. Notice that scaling-up is not about just doing more of the same, but instead is about constant renewal, a series of calculated bets, product innovation after product innovation.
Hit your numbers while you keep experimenting
The CFO and the COO become critical persons when it comes to scaling. They need to build the operating system that creates the “business beat”for the entire organisation – setting goals, allocating resources, focusing energy, executing and delivering. The operating system needs to deliver reliable outcomes and at the same time allow for experiment, failure, learning and adaptation. Think of a combination of “Rockefeller habits” and “Agile scrum”. Almost all successful scale-ups have metrics installed to measure the speed of progress in improving product/service performance.
From development team to vibrant organisation
Start-ups are created by small, closely knit teams. There is no organisational structure, everyone is doing everything and everyone is close to the founders. In a scale-up the organisation becomes much larger, specialists are brought on board, processes are introduced, management become necessary. This professionalisation leads to a major step-up in productivity.
People trying to change the world also need a Board
We all know that entrepreneurs like to do their own thing – this is one of the (many) reasons that they start their own company. But boards can really help young companies grow. At least if you have a board consisting of individuals with the experience, mindset and capabilities to propel you, not protect you.