We have recently launched the ScaleUpScan, a data-based diagnostic tool that pinpoints in great detail where ventures are on their scaling journey. During the pilot project, conducted in partnership with Techleap, we interviewed and surveyed several ventures about their scaling challenges. These conversations, informed and guided by the results of the ScaleUpScan, proved thought provoking and triggered insightful discussions – both when the management team’s perceptions were validated, and more importantly, when they were challenged.
We have outlined the common themes that surfaced among the scale-ups we assessed, which reflect some of the most common gaps in the scale-up ecosystem.
What are scale-ups doing wrong?
Founders need a vision that is more than “becoming a leading player”. An unclear vision was often directly correlated to weaknesses around articulating the strategy and product roadmap.
Oftentimes, ventures are unable to articulate the “return on investment” of their product in customer terms, and therefore are not able to adopt a value-based pricing model. Ventures with multi-sided value propositions particularly struggle on this front. . Refining the value proposition is key to acquiring high-value customers that are the most likely to benefit from the product or service.
Many founders are still trying to lock down a model they can learn to run, rather than aiming for a working model that can “run faster”. As a result, they are also still mostly opportunity-oriented instead of fully performance-oriented.
Most ventures have started as a product-oriented start-up, rather than a commercially-oriented start-up. As one founder put it, ‘we throw things at the wall at see what sticks.’ They now need to become much, much more customer oriented.
Founders and founding teams tend to have greater affinity with “Architecting” (building smart and scalable systems and processes), and much less so with “Directing” (direction setting, thoughtful risk taking and managing tight execution). Founders either develop quickly or should step aside, to create room for a real CEO to join the MT.
Most leadership teams have a common background and style. They enjoy creative debate and being critical to each other, but are not necessarily exposed to different perspectives. That can often lead to groupthink on steroids and decision-making absent of real critical evaluation. A diverse and complementary leadership team becomes an even more critical success factor for ventures that are on the cusp of scaling; grappling with the transition from start-up to scale-up.
Most ventures react to the crisis by leaning towards a superficial assessment of the changes in market/industry dynamics. In almost all cases, the Corona crisis creates real structural opportunities for new business, but ventures are not catching that wave.
Ventures gather data on product usage, but don’t use it to its full potential. It’s being used to improve software and customer acquisition, rather than to build a deeper understanding of customer needs and create more opportunities to upsell, cross-sell and better serve them. Successful scale-ups understand the value of data for operational decision-making.
Many ventures on the cusp of scaling either bump into sales leads abroad, or go international based on a generic market prioritization. The ‘logical next step’ is often an expansion to neighboring geographies, without the necessary analysis into those choices from a strategic, commercial or scalability perspective.