Is your business ready for a scale up?
Successfully scaling your business operations.
Fire up the engine.
Scale within a strategic context
Evaluate initiatives to scale your business against your strategic plan and objectives. First, formulate a clear, concise statement of the scaling you are contemplating, and then ask how it fits into the strategic vision and direction of the company. If it doesn’t fit, either postpone scaling or revise your strategy.
Understand what core and noncore activities are
Any scaling initiative should focus on just two or three core activities. But sometimes it’s not entirely obvious which activities are core. Is manufacturing core? Are design, development, and distribution core? Take the time to define these. Noncore activities could be leveraged through partnerships or contracts, letting you focus resources on your true core activities.
Ensure processes are efficient and products are stable
Your processes and QA systems must be stable to be scalable. Consider the resources it would take to train new people if you scaled up quickly. Could you double your staff and have them be productive right away? Is your product “rock solid” and your QA system thoroughly established? If the answer to either is no, scaling will eat up your budget in training and support costs.
Identify your inflection points
Inflection points are turning points in your business that, if successfully capitalized on and well executed, can significantly drive growth. Would a new product line increase sales by a significant amount? Would global distribution? Focusing your investment on these inflection points can dramatically transform your business.
Leverage your business
Leveraging is stretching the limits of your capacity first and then adding resources as your business grows. Consider how you can leverage existing resources to support the growth enabled by focusing on your inflection points. Can you add another shift? Or outsource manufacturing to focus on product design and distribution? This is much less risky than investing in infrastructure up front.
Determine your measures of success
You’ve identified your core activities and inflection points and are ready to leverage your business for growth. Next, determine what you’ll measure to know whether you’re successful or not. When something isn’t working well, move quickly to change it or redirect your efforts. Success while scaling is a moving target; your key factors will change as you evolve from a small to mid-size to large business.
Chuck Gottschalk
Managing Partner, PDX
Make sure you have the right key performance indicators
A change in your business model requires KPIs that flow from the new strategic intent. Each manager in every part of the organization should have clear metrics in sufficient granularity for evaluating how they contribute to that strategic intent. As part of the continuous education and follow-up, ensure that managers understand how their departments directly affect overall goals and how they will be evaluated.
Ensure that leaders at all levels are aligned and incented
When leadership is aligned, managers work through issues using appropriate decision-making processes, come to decisions, and help their departments execute those decisions through teamwork. Combining significant incentives with appropriate oversight fosters ownership and alignment in leadership to perform under the new business model. And when alignment is good, your company can easily work through the challenges associated with this significant change.
Don’t let unintended consequences slow you down.
Your strategic plan
Does your scaling initiative fit within your vision and direction?
Your business activities
Do you know which are core and which are noncore?
Your processes and products
Are they efficient and stable enough to support growth?
Your inflection points
Can you identify which ones would significantly drive growth?
Your capacity
Can you stretch it to leverage growth before investing in infrastructure?
Your measures of success
How will you determine whether you’re scaling successfully?
Ready to fire up the jets?
A NEXTLEVEL CASE STUDY
We’ve been there, done that.
A global manufacturing company acquired a binational service bureau as a new division that supplied products to contract manufacturers. The division had $6 million in annual sales, but was losing $0.5 million per year. Manufacturing operations were poorly managed, the division could not produce the range of products required by the industry, and a single customer dominated the business. During a ramp-up for the major customer, the overseas
operations fell apart.
The company brought in a new Division Vice President/General Manager, now a NextLevel partner, to stabilize the division and grow it to profitability. The NextLevel partner first built up processes and quality procedures in each location to stabilize operations. He also identified inflection points that could drive growth within the company’s existing customer base.
The division added a second shift, until they had leveraged their resources completely. Then they were able to buy and quickly pay for more equipment and operators to start the process over again.
The NextLevel partner also helped identify the type of new customers the division wanted. By bringing in targeted new
customers slowly and nurturing them with quality products and customer service, the division was able to add more profitable product lines.
Sales increased from $6 million to $40 million in four years, and the division was the highest growth division in one of the NYSE Top 50 Growth Companies four years running. Profits rose from negative $0.5 million per year to $6.4 million per year, and return on assets (ROA) rose from the negatives to 30 percent.