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ScaleUpDrivers

The Next Closet: Success Factors for Industry Disruption

The Next Closet: Success Factors for Industry Disruption

 

I would think about a girl or woman living in small town like Baarn where there is only one local second-hand store with a very limited selection,” explains co-founder Thalita van Ogtrop, describing the inspiration behind the luxury second-hand resale platform The Next Closet. “What we did was innovate a market which is now almost entirely run by brick and mortar thrift shops, all very nice but totally dispersed in terms of how they run and how they work. Accessibility and empowerment were really attractive concepts for us when thinking about retail.”

So began The Next Closet, an online platform dedicated to reselling second-hand luxury items. It started over a decade ago inside an Amsterdam design agency, where Thalita and co-founder Lieke Pijpers discovered a passion for sustainability practices in new developing business concepts, especially within corporates. One summer, a friend told them about how the resale retail market was booming in France and the US,and despite neither having a background in fashion, they were compelled by how it seemed to actively solve a large social challenge. Five years ago, together with a small team, they started up inside an anti-squatter’s building in Amsterdam-Oost to create the business model for what is now The Next Closet, one that continues to grow and feature elements of all the scaling success factors.

The Scaling Success Factors cover the intrinsic dynamics that create potential for growth in any enterprise. Our research on hundreds of fast-growing companies has given us an implicit understanding of which ones will go beyond the first valley of death, and which features are vital within each company to grow toward making outsized impact. Small and mighty, The Next Closet has created a business elements from each facet of our scale-up success factor model.

 

Great Business

Our ‘big hairy audacious goal’ is to make second-hand fashion the #1 choice,” Thalita tells us from their headquarters in the heart of Amsterdam Oud-West. “Fast-fashion is both trend-sensitive and of such bad quality, so what we created was a new alternative without having to go the activist route of preaching and scolding.” The platform is unique in that gives second-hand clothing a luxurious, appealing, and commercial quality. They also aspire to change consumer behavior in a way that informs them of making smarter purchasing choices – “what we aim for is that the young buyer will be deterred from buying the latest H&M t-shirt expressly because it has no resale value.”

 

Riding Waves

Fashion is currently the second most pollutant industry in the world. The numbers are staggering: the textile economy is projected to use two Earths’ worth of resources. Today, 87% of the 53 million tonnes of clothing produced are incinerated or dumped in landfills. While consumers are becoming more aware of the impact of their choices, they often struggle to balance style and sustainability. “We now have a little green leaf next to all the sustainable brands featured on our website, to inform buyers on what sustainable brands they are when they want to buy something new. We measure the impact of their choice by calculating how much you contributed to saving an X number of liters of water, or trees, or CO2. We’re improving it further by redesigning our sustainable mission with infographics and educating people in a positive way about their impact by buying quality new and reselling it later. This for us is storytelling,” Thalita explains. Not only do they empower consumers through positive nudges, they also are testing ways to directly collaborate with brands. “Together with the help of ScaleUpNation, we are piloting a retail partnership with brands where retailers can outsource their material, and we resell it so it becomes part of a healthy loop.”

Adherence to the cause abides by strict rules: the website allows no fur or exotic leather, nor can users sell fast-fashion brands. Instead, more environmentally effective fashion houses like Stella McCartney, Reformation, and Vivienne Westwood are promoted to create positive solutions for effective change.

Lean Ops

In the beginning, TNC only had a premium service offering, which meant users could send their items to the headquarters and the team would handle the entire process of cleaning, photographing, running authenticity checks, uploading, and shipping each piece. It was designed to test whether there was enough demand and need in the Dutch luxury market for such a business. With the flyaway success of the first trial run, they scaled their model as a Do-It-Yourself platform, allowing users to photograph and upload the items themselves. They also developed an ambassador program with 40 promoters who spoke out on the value of TNC and the resale industry, which they credit to successfully financing their first -and most vital- crowdfunding campaign. The full DIY model kicked off soon after.

Learning Velocity

Thalita comes from a background in business and marketing, and Lieke studied engineering at TU Delft, so both were exceptionally green to the retail industry. Lieke was able to take over the tech side and customer journey flows, while Thalita focused on the marketing and communications aspects. “We really experienced the learning by doing – we had no idea what an online marketplace would entail. So much was about logistics, providers, shipping, and about keeping lean and not having the means, so we really focused each decision on whether it was a key priority for scaling.” In true entrepreneurial spirit, they attribute a lot of their success to their inexperience, as well as being limited in resources and keeping exceptional focus on the most pressing matters. “At first, we met with a lot of founders and grilled them about metrics, platforms, must-knows, platform strategy, so many things. They were super insightful, but the real leaps began as we incorporated growth-hacking methodology. Doing rapid test sprints took us to a whole new level of increased learning. We look back every year and say to ourselves, ‘how could we have possibly not known then what we know now?’”

Access to Finance

TNC recently got funded which makes their total investment 3,5 million euros. Given that all scale-ups are going through investment rounds, we wanted to probe on what was most significant to achieve the funding: business model or triple bottom line? “We got money because of the business model itself. Having a sustainable mission was a nice-to-have addendum, but not the reason. One of our mentors that is deep in the fashion industry told us that having a social mission was not going to get us in the door – the product itself had to be sexy, commercial, and appealing. So, in the beginning, we were more about fashion and less on storytelling, just to get the attention of the crowd and our name out there. As we go into a redesign, we will emphasize our impact and mission much harder.” However, among a group of investors from the industries of e-commerce, and media, the one fund focusing on sustainability businesses in the Noord Holland, PDENH, doubled their last round. Maybe doing good does pay back.

Thalita closes our talk by sharing an inspiring anecdote from a conversation with Prins Constantijn van Oranje: “I was telling him how bad it is that people are not aware of their footprint and are not changing their behaviors enough, and his advice was, don’t to wait for behavior change. Just let technology make it easily accessible and guided toward your purpose, because people don’t want to go on holiday less, or sacrifice their lifestyle. They need to be aided toward the simplicity that technology can offer. That was quite eye-opening for me: just make it really easy.”

Read more about the State of Fashion in this report.

Learn more about ScaleUpNation and its programs here.

Photo credit: Anne Timmer

Storytelling for Impact

Storytelling for Impact

By Valeria Mecozzi

One of the strongest ways for humans to bond has always been through storytelling. Listening to each other tell our stories builds empathy, forges trust, and creates deeper connections. It is also a highly effective way to unite emotions with meaning and intention. Science supports this point: listening to a story actives parts in the brain that allow the listener to embody the story and their own ideas and creates neural coupling, where the brain activities sync up and release the feel-good hormone dopamine. Thanks to this, we feel closer to one another and the story becomes easier to remember with greater accuracy.

In tribal history, our ancestors listened to the chief elder’s stories on traditions and culture and to make sense of the world. In the tribal setting of an enterprise, storytelling shares the same goals: to tell stories that bring the company forward and closer together. Storytelling is not sitting around a campfire, or finding those perfect moments when the music starts to swell. Storytelling is serious business. It is the voice of a leader that impacts the audience through a story and toward the future.

A famous study by Jennifer Aaker tested the most effective storytelling methods among a class of students: one in ten made their pitch by weaving a story, while the rest used facts and figures to make their point. When the professor asked the class to write down everything they remembered about each pitch, 5 percent of students cited a statistic, while 63 percent remembered the story. Logic and reason only go so far. Stories, no matter their objective, bring together a loyalty and excitement that forges deeper bonds.

In the scale-up phase, the right story can have game-changing impact and empower your growing team. It’s all about timing – whereas startups begin with little more than their story, and larger enterprises replace stories with processes and silos, scale-ups step up from the initial phase and evolve into a serious company. A powerful repertoire of stories can be wielded to support the company’s founding principles and purpose, can bring the team closer based on shared values, and can tangibly demonstrate how they will contribute to a better future together.

In assembling a story, leaders are often driven by a need to be as explicit and clear as possible and will opt for direct messaging, stating that the future is attractive, or that business needs to work in such and such a way, that the company is founded on the following values. However, audiences don’t appreciate being told what to believe and what to do, will distrust the intent, won’t follow the logic, and will disagree with the conclusions. Storytelling always aims to get a message across, and has a higher return rate by being shared as story instead of delivered directly. This is how storytelling becomes much more effective than simply “because I said so.”

We elaborate on six fundamental elements that every leader needs when crafting a well-told story: audience, storyteller, objective, structure, content, and delivery.

Audience: the audience is the most important piece, and the first to consider before you begin to speak. Who are they? Why are they here together in this space? What do they need, what do you need, and how can these two needs be bridged? How will they relate to this story, and relate it to our value, mission and goals? Storytelling is understanding the audience better than it understands itself.

Storyteller: this is you, standing in front of a group. You have to infuse credibility and trust. Ask yourself, why are you telling the story? What do you bring to it that is unique? What about you needs to be featured in the story to bring the message across? By making these distinctions, you establish yourself as reliable and the right person to be standing in front of your audience.

Objective: having a clear objective brings gravitas to your story. You are asking for time and attention from your audience, so be clear to yourself what you hope to achieve from this investment. What is the meaning and objective of the story? For maximum impact, a clear intention should be determined, after which you can select from your rich arsenal of stories.

There are several objectives to be told in any company story:

  1. Use storytelling in the reasoning process and in convincing others, especially when situations are complex: when you are presenting the company, the founding story, engaging customers and investors, or moving employees to action through an urgent call.
  2. Using storytelling to interpret the past and shape the future: when you want buy-in for the future, better understanding the world in terms of business, economics, organizational dynamics, etc., as well as teaching skills and ways of working.
  3. Use storytelling to resolve conflicts, address issues and face challenges: to better understanding ourselves, our values and the trust we have in each other.

Structure: stories won’t make an impact if they are told haphazardly. A structure will create a narrative sequence that is easy to follow and easy to remember. Many frameworks already exist already in the creative world, and all have a three-part structure of beginning, middle and end. In the first act, the main character and context are introduced; in the second, a challenge is presented, and the hero is tested; in the third, a revelation has come to surface and everything is now different. By working with this skeleton, all stories can be built and embellished for specific objectives.

Content: what makes an unforgettable story? For storytelling for impact, the adage “everything is copy” still holds true. Everything about your story is crucial to making it resonate: involve a cast of characters, who in this case are your customers and audience. Balance big picture and details, and include conversations to add flavor. Engage your listeners through the senses – appeal to their senses and take them on a journey with you. Talk about your failures, and celebrate the message in your mess. But most importantly, tell a truthful story. Be honest and transparent.

Delivery: it’s all in how you tell it. Grip the audience until they can’t tear themselves away until you’ve reached the end. Build tension and suspense toward a climax, and don’t rush through. You can be creative, and stay close to what suits your personality best. Maybe drop the audience right in the middle and into the action. Or start from the end. Use your voice, and your body, as an instrument to forge intimacy and trust. Keep the arc of tension high throughout, and make your point clear as you bring it to a strong end. And as any master will tell you, practice is the key. Practice, practice, practice.

*          *          *

In ancient times, storytelling was a true profession. Today, thanks to Hollywood and media advertising, storytelling has been further perfected and refined. But it is not as easy as it seems – it takes talent and the proverbial 10,000 hours to become a highly effective storyteller. As a business leader, storytelling must become part of your skillset and repertoire. Engaging in storytelling occasionally is not enough – you are not going to get it right and refined on the first try. The process of solidifying and polishing your story takes trial and error, and time. But the more you try it out, the better you will become.

The Future is Female Entrepreneurs

Join our Happy Hour March 7

 

When talking about  business growth, one often overlooked factor is diversity. But it makes a difference:

  • A recent NBER analysis shows that 25% of overall GDP growth in US over the past 50 years can be attributed solely to the impact of women and minorities entering and establishing leadership roles in highly skilled occupations.
  • Venture capital firms that increase their proportion of female partner hires by only 10% saw on average a 1.5% spike in overall fund returns.
  • A 2013 survey undertaken by think tank, Center for Talent Innovation, found that 48 per cent of companies in the US with more diversity at senior management level improved their market share the previous year, while only 33 per cent companies with less diverse management reported similar growth.

More women in leadership = more business growth, but how to make it happen? According to HBR, “it is far easier to build a diverse organization from the ground up than to diversify a large, complex, homogenous machine.” Getting it right from start-up to scale-up can make or break your venture’s success.

We’ve teamed up with Antler to celebrate the impact female leaders in the start-up and scale-up ecosystem here in Amsterdam, on the eve of International Women’s day. Come and join for a high-energy event and happy hour, please register here: https://www.meetup.com/Antler-Amsterdam/events/259263244/

Men and women are welcome.

PHYSEE’s Scale-up DNA

PHYSEE’s Scale-up DNA

As we gear up for the seventh class to join our Runway program this March, we take a deep dive into the ventures that have gone through the program and are on their way to mastering the art of scaling.

“We want to make sustainable windows, without compromise.” This is how Runway Class 6 alum and PHYSEE CEO Ferdinand Grapperhaus, Jr., explains the vision for the company he co-founded in 2014 with CFO Willem Kesteloo. What began at TU Delft as a master’s thesis project in physics on luminescent materials (the name PHYSEE is a combination of physics and seeing) has scaled into an award-winning, multi-product enterprise devoted a simple idea: solar-powered windows.

Co-founders Ferdinand Grapperhaus Jr. and Willem Kesteloo

Over the years, Grapperhaus and Kesteloo perfected the PowerWindow, a normal looking sheet of glass that can generate electricity from the sun. They joined our Runway program during their third year of existence, as they became a company deep in the scaling phase. Hungry to learn and excited to grow, they stand out for devotion to their product and its benefactors, as well as their expanding team. During Runway, they were engaged and devoted to learning from the ScaleUpNation sessions. The ScaleUpNation team was equally taken with their potential to grow, recognizing in them the essential qualities of ScaleUpDNA.

The ScaleUpDNA is made up of the intrinsic qualities that provide scale-up potential. Our research on hundreds of fast-growing companies has given us an implicit understanding of which ones will go beyond the first valley of death thanks to five fundamental elements that make up the company at its inception: a compelling vision, a great business, a scalable model, competitive edge, delighted customers.

Compelling vision

By 2050, 70% of the population will live in urban areas and spend large portions of their days indoors, from home to work, in buildings that have shown to contribute to 40% of global energy consumption. The urgency for sustainable living solutions motivates PHYSEE at its core. Their design absorbs all sunlight thanks to special coating on the outside windowpane that transports it to the edges, and converts it thanks to solar cell strips bordering the window frame. Their vision is to change the perspective of glass into one of living skin, working with real-estate developers to not have to trade traditional glass windows or rooftop designs for solar panels. “We want to become the norm,” they tell us.

Their passion for happiness is equally felt within the organization, whom they devote as much attention toward improvement. In conversation, both co-founders emphasized how important it is for the team to grow together with the company. They have set out to prove that each team member can scale as the company scales, and have created a business beat within their company and its internal teams.

Great Business

PHYSEE plays in the field with a unique, but very active market – real estate development. “The scaling challenge we face is that we are still small compared the big players of global commercial real estate. We come in and have to show how important it is for buildings to be energy neutral,” says Willem. They now invest in developing relationships within the conservative environment of commercial real estate, and their dedication is showing results. In 2016, they won the Postcode Lottery Green Challenge and were awarded 500.000 euro and the window provider of the Goede Doelen building in Amsterdam Zuid (image), which opened late 2017 and whose façade now features over 100m2 of PowerWindows. The residents of the upcoming BOLD Tower in Amsterdam Noord will be the first in the world to have a transparent electricity-generating windows; the Binck Kade in The Hague is soon to come. They predict their impact will be to make buildings 20% more economical.

Scalable Model

A quick look at their website’s product page shows how much scaling potential is found between sunlight and windows. “Glass is huge, trend-wise, all over the world,” Willem tells us, “and so are energy efficient buildings.” Riding the wave, they developed their first product, the PowerWindow to feature a double-pane (like an airplane window) that transports the sunlight into a solar cell strip that line the frame. The following product, the SmartWindow, is added to optimize climate control for each room based in individual preferences and geographical layout, and consumers can add smart thermostats, smart blinds, and ventilation pockets to further optimize their preferences. They envision the possibility to expand into car windows, greenhouses, even reading glasses.

Within the team, scale is also a pressing matter. The team has grown considerably in the last two years and the challenge this poses to young first-time founders can be daunting, but they are optimists. “We invest heavily in developing our team, and put quite some money into their learning goals. The people we hire always come to mean so much more to us than we would think beforehand,” Ferdinand says.

Competitive Edge

Our ScaleUpDNA research found that 85% of scale-ups have their own intellectual property, and PHYSEE boasts two: both their windows are patented. They also run two labs in their Delft, one on Research in collaboration with TU Delft, and a Living Lab, which allows for short rounds of testing and manufacturing, faster than any competitor out there. “Currently a lot of solutions are developed to go around or on top of the building, but none are found within the shell or frame, which makes us unique in our niche,” Willem explains. Being so heavily involved in your product creates an extremely tight margin for error, but they believe knowledge is at the heart of it. “The market needs to be educated, but we have the opportunity to get builders to think about improving energy sustainability in a building’s shell, too, which we can help them with. By 2020, we aim to be the no-brainer solution for developers around the world.”

Delighted Users

The passion is not only about windows and construction – user happiness is at the heart of their product. The comfort and happiness of its residents will do its part in creating a better world. “Happy people are 10-20% more productive,” Ferdinand explains. The Happiness Mode is inspired for people living and working indoors for large parts of our days, as it self-regulates light and warmth to personal preferences. It will keep track of what you do at certain times, and learn to do it for you automatically.  “I think the days of single-purpose materials are gone,” says Willem. They are doing their part in scaling a company that will take the world beyond its dependence on carbon, and into the light of the future.

Interested in learning more about Scale-up DNA? Apply to our ScaleUpNation Runway Program. More information here.

See you at the AOM Scale-up Conference

Academy of Management Conference

This week at ScaleUpNation we’ve been busy preparing for the Academy of Management Specialized Conference in Tel Aviv next week. The theme “From Start-up to Scale-up Strategies: Coping with Organizational Challenges in a Volatile Business Environment” is timely and relevant as we develop further insights and tools that we can immediately put into practice for the scale-ups in our programs.

ScaleUpNation is joining this conference to learn from the impressive slate of participants, including those whose thinking has been instrumental in our research and product development. We’re especially looking forward to:

Workshops

In addition to learning through conversations and attending lectures, we’re also hosting two interactive workshops on Monday December 17. This is also the moment we begin to share our Lab’s first academic papers and new thesis on “The Art of Scaling.”

The workshops are interactive: designed to leverage the wisdom of the crowd to both learn more from true experts on scaling topics and leverage these experts to help real (in the flesh!) scale-up founders facing immediate challenges. We’re looking forward to our sessions:

Into the Black Box of Scaling

In the workshop, we invite participants to engage in a researcher-practitioner discussion on two questions:

  1. Which scale-up success factors are insufficiently understood or implemented by scale-up management teams, so warrant better awareness and implementation?
  2. Which scale-up success factors are insufficiently clear or ambivalent and need further research to avoid simplistic actions by scale-up management teams?

We, as researchers and practitioners will share what we know and want to get across and as importantly what we don’t and need to find out. This is an ideal opportunity for practitioners and researchersto collaborate based on shared passion and purpose.

Acting as a Scale-up Board Member

In this session, we invite participants to engage in acting as a board member. CEOs from Tel Aviv-based scale-ups will participate in this session and ask you to engage in a board meeting. We will ask you to  reflect on the dynamics and effectiveness, with regard to the following:

  1. What is required to be a scale-up board member?
  2. What is the difference between investing, advising and coaching?
  3. What inhibits you to be most effective?

As Board membership is an experience game, we especially welcome to this session those participants who, like ourselves, already fulfill board roles in young innovative firms.

This is a chance for practitioners and researchers to define the key challenges of scale-up board membership, to share the best practices from research and articulate what we still need to find out. Moreover, we aim to give you direct connections to the vibrant Tel Aviv scale-up community.

Looking forward to seeing you at AOM next week!

ScaleUpNation

Social challenges are also entrepreneurial opportunities. Many innovative new businesses are started but only very few are able to scale.

And only those that scale really moves the needle in terms of social impact, economic value creation and new employment.

Over the last years, we worked intensively with a portfolio of about 100 scale-ups in the Netherlands to understand the factors that increase the probability of scaling success. We work on strategy/firm factors, business practices, organizational/HRM practices, as well as leadership development. We combine practice with research.

In our work, we find that scaling is an art, not a mechanistic formula. Scale-ups operate in a volatile, uncertain, complex, ambiguous world, so a lot is outside their control. Scale-ups are entrepreneurial by nature; they engage in risk taking and therefore depend on good fortune. Their success is path dependent. And finally, scaling is organic, interconnected, symbiotic. Still, we strongly believe that practices can be distilled that significantly increase probability of scale-up success.

Attending AOM:

Hayat Chedid, has a corporate background with a range of managerial positions in industrial innovation settings, followed by a second career in leadership coaching. She supports a portfolio of scale-ups in leadership development and culture building. She will lead the introduction sessions and group facilitation.

Menno van Dijk, has a consulting background as senior partner at McKinsey company, leader of its European Media practice, and founder of its first software business. Menno founded THNK, the School for Creative Leadership, and ScaleUpNation which blends research on scale-up success factors and support to impact oriented scale-ups. He will lead the storytelling session, the setting the scene session, facilitate in the topic break-out and will participate as scale-up CEO.

Jorgen Sandig (Netherlands), is an IT expert with focus on CRM and embedded intelligence. He is the founder/CEO of Scyfer, a Dutch AI scale-up which he sold to Qualcomm. Since he is leading ScaleUpNation’s research efforts. He will facilitate in the topic break-outs and participate as scale-up CEO.

Afroditi Terzi (Greece) is a senior researcher at ScaleUpNation. She leads our research in comparing scale-ups to those that stall, across firm factors, business practices, organizational concepts and leadership traits. In addition, she orchestrates our scientific literature research. She will facilitate in the topic break-outs.

Noam Gressel is a Tel Aviv based serial entrepreneur an investor. He will orchestrate the participation of scale-up CEOs in the Board session.