This article appeared in Entrepreneur Magazine on the 10th of April https://www.entrepreneur.com/article/329100
Scaling a business from 100 to 200 employees is never easy. Taking a business from ten employees to 50 is near impossible. Why? Having the correct growth strategy is important, but executing it while exponentially growing your staff and adding complexity to your organisation is what separates the exceptional from the ordinary.
Could you handle 100% year on year growth?
It sounds like a dream, but what would you do if your workload and turnover suddenly doubled? Would your customers still receive the service levels they are accustomed to? Would you be able to deliver on all those additional orders? Scale is impossible without the right structures and processes in place.
As start-ups, most SMEs run instinctively, rather than strategically. It’s a critical element of their success. The ability of founders and their teams to see opportunities and pursue them gives SMEs the agility to take shape and grow.
But this also means that the business is responding to stimuli in the economy and through networks, rather than shaping its own strategy. Every successful SME reaches a point where a more systematised approach to business must be implemented, or the company will stumble at the growth phase.
In other words, the ability to scale requires a strategy. This is hardly a ground-breaking revelation. Where many businesses fail however, is in the execution of that strategy.
“Strategy is only as good as a management team’s capacity to execute it,” confirms Hasnayn Ebrahim, Executive Director at Africa International Advisors (AIA), and an ex-consultant at a top-tier international firm.
“Strategy alone is fantasy. You need to capacitate your organisation to be able to implement and achieve your strategy. Unless you do that, you will always be a victim of circumstance, instead of riding the wave of opportunity.
“Execution begins with your people, from employees right through to management and your executive level. Businesses succeed and fail with their people.”
Here are the five rules of strategic growth, based on Hasnayn’s years of experience in management consulting, and building AIA and its subsidiaries.
What sets you apart from the competition? How will you compete in the market? How big is the market? Unless there are clearly defined opportunities to pursue in a highly competitive industry, what is your ability to scale?
“Not every business is geared to scale,” explains Hasnayn, “which is why you need to begin with these questions. In many cases, a business is actually better off not scaling, at least in its current form.
“Either the market won’t support them, or short-term contracts that require capacity can actually hurt the business in the long run, when the project is over and you’ve got more staff and higher overheads than your customer base can support.
“Growth must be rooted. You can’t lose sight of your present reality. That doesn’t mean your aim shouldn’t be to scale — it just means you need to be very strategic about where your opportunities lie, and how to pursue them.”
Have you critically and strategically evaluated your market? Is there room for growth in your present market? “It’s important to understand your core when you’re answering this question,” says Hasnayn.
“Your core isn’t necessarily a product. It could be your customers. Who are they, and what else do they need, that you could deliver? What is adjacent to your core that you can pivot to?
“As AIA, we developed a consulting solution for clients in the public sector, and then realised they lacked the capacity to deliver our solutions. This led to a training division for us. Between 2006 and 2011, 5 000 mid-to senior-level managers went through our five-day training and consulting programmes.
“Our software division began in the same way. We realised our clients were trying to execute sophisticated strategies with outdated performance management solutions, and so we developed a product to help them.
“It’s created annuity income for us, and it delivers on a need for our clients. The subsequent acquisition of a training company has also allowed us to integrate our system with a learning platform, extending our solutions even further, but still within our core competencies and market.”
So, where do you begin? “If there is a market, you need to determine how you can compete,” says Hasnayn. “What are the specific market opportunities, and what is your unique value proposition and competitive advantage?
“We all want to play in a space where there’s no competition. That might take three different ideas, and bringing them together is what gives you your advantage.
“You need to understand the market, your competitors and the best way to compete based on the resources available to you — what do you have? Where are your gaps? What do you need to do to fill, close and enhance those gaps?”
As the founder of your organisation, you need to be the first person to grow. The first gap to fill is yours. This could be through business and executive courses, through a coach, a mentor or joining an entrepreneurial organisation — whatever it takes to grow and develop yourself for the good of your organisation.
“Founders have such a vital role to play in the success of organisations,” says Hasnayn. “The best performing companies globally are founder-led. Just consider Amazon, Facebook, Google and Tesla, or locally, Discovery. In each case the founder plays a critical role.
“But an organisation is also not a single individual. It’s a group of people who have banded together. Sustainable growth is achieved when all parties are nurtured and grow. “You have to ensure you get the right people for the right jobs, keep them by your side and capacitate them — and then as their leader you need to grow, evolve, change and adapt as well — if you don’t, you’ll miss opportunities too.
“Your most important role is to cultivate a willingness to change, which will allow you to see opportunities as they arise, and to be able to make the hard decisions that will be required to change your organisation and align it for growth.”
What do you need to do to achieve your vision? What resources do you need, and how should they be deployed? These are key questions to ask, but understand that you cannot execute even the best strategy without your people.
They are the drivers of your organisation. Success comes down to the right staff, in the right positions, adding the right value. “Is your early staff right for growth? You need to look at this objectively from the view of the organisation.
“Know yourself — critically understand the strengths and weaknesses of yourself and your staff,” says Hasnayn. “Where are the opportunities to close gaps through training and capacity building?
“Not all gaps can be resolved, but many can be. If you’re completely transparent about the process, your team will trust you, and everyone will work towards the same goal: The growth of the organisation.
“It’s important to evaluate and understand who is the best fit for each role though. For example, engineers are excellent product developers, but that doesn’t mean they can take what they’ve built to market, or manage teams.
“If you have an upfront conversation about what the organisation needs, individuals can determine whether they’d like to work at closing specific gaps or not. You can’t have those conversations if you don’t understand your skills base and competencies though.”
In Hasnayn’s experience, transparency throughout the process of scaling an organisation is key. “If you don’t understand what you need, or you’re unwilling to communicate effectively with your staff, whatever change you’re aiming for is more than likely going to fail,” he warns.
“Be as transparent as possible, and give internal staff the opportunity to develop — but understand that marketing and sales is a fundamentally different skill set to tech consulting. If the inclination and willingness is there to adapt and grow, support it.
“New skills can be learnt, as long as a particular threshold is passed in terms of natural ability. But if an employee is resistant to change, or doesn’t believe the changes are right for them, respect that as well.
“It is possible to part ways on good terms if the right conversations have been held at the right times. It starts with clear and transparent communication though, and a willingness to invest in your employees.
“Remember, the DNA and culture of your organisation are a key factor of your success. As you scale and need to add employees, your culture is effectively under threat.
“Upskilling people who are part of the fabric of your SME is a good way to ensure the longevity of your culture, rather than simply replacing everyone with more experienced or skilled staff, who don’t necessarily suit the culture you’ve created.”
“When you really start to scale, you often experience 100% year-on-year growth. Your turnover is doubling, your staff complement is doubling or even tripling — if you don’t have systems in place to manage this growth, you will stumble and fall,” says Hasnayn.
“You cannot not have structures in an organisation expecting to scale. You need to recognise this and invest in it.
“There are a number of tools that can assist you to be more organised and structured, and most importantly, to assist you in managing the new complexities that are being added to your organisation on a daily basis.
“Our central view is that you have to ensure you transition from a purely instinctive entity to a more holistic organisation that has a degree of structure. Too much structure is also bad — both can prevent you from growing — but you do need a foundation of structure and processes to handle the changing nature of your business.
“The problem is that there is always significant resistance to change at first, which is why it’s so important to communicate the reasons why you are doing something. If you don’t, you’ll quickly create a disconnect between your executives and the rest of your staff. You need to manage and bridge those gaps or destroy value.”
The success of your strategy lies in one key area: Your ability to deliver on it. If your organisation can’t gather momentum in this regard, you’re doomed to fail.
“Remember, you formulated your strategy for a specific reason,” says Hasnayn. “Either you wanted to grow, or your market was under threat. You considered all your options and formulated a strategy.
“The problem is in the follow-through. We’ve seen it on numerous occasions — an organisation formulates a plan, and the moment something happens, they’re forced back into their comfort zone and the strategy is forgotten. Maintaining momentum is therefore critical.
“There’s often a lot of talk around strategy — ‘this is what we’re going to do, this is how and this is why.’ If you don’t translate that strategy into tangible measures though, and put a mechanism in place to track them, it remains just talk.
“This creates an expectation within your organisation that you’re good at talking, but not following through on real change, and you lose the key executors of your strategy — your staff. To counter this, you need a performance management framework that is aligned to your strategy.
“You should have a monthly process that tracks how you’re doing against it. Have you developed your new product? Have you entered your new market? You need to align your strategy and action, and then communicate these results regularly. That’s how you close the strategy execution gap.
“The beauty of it is that once people are part of the momentum they will keep it up. There will always be initial resistance to change — that’s why it’s so important to track and measure what you’re doing.
“Tangible results engage employees. They become a part of the process and the wins — and then they become your strategy’s champions. And that’s when real success and scale is achieved.”
Copyright: Entrepreneur South Africa Magazine, 2018