What is Scalability?
We define scalability roughly as a way to transform your business for profitable growth. It should not be confused with economies of scale which result in lower unit costs as you increase the quantity of units produced or purchased. Economies of scale alone do not guarantee that your operating margins improve as revenues increase, whereas scalability does.
Scalability is about Processes, People and Technology. To effectively scale a business four key elements must be in place:
- A Strong Management Team
- Well-defined Business Processes
- An Integrated Business System
- Fully-Documented Operating Procedures
Creating a business model that incorporates the capabilities to address increased demand will result in increased profit margins. Top line growth is important, but equally, if not more, important is the bottom line growth.
For more details on the four elements, watch our short Rudi/Tuesday Video on Scalability.
In order to fully optimize this transformation, it is vital to consider each of the above points. Difficult to achieve? Not if you have a plan in place and set your priorities and timelines. What is important is that you address all four areas on a continuous basis to fully realize scalability.
As a start, begin by looking at the following in your organization:
- Flow of Work Performed
- Current Approach and Methods
- Timeframe for completion of each process
Examine the flow of work performed and how information is delivered in Finance, HR, IT, Legal and Sales. Identify and review current written procedures and determine what is adequate and appropriate and what is no longer relevant. Look for lack of coordination and departmental silos and use the cross-functional approach that goes across your business disciplines. This is where you will gain higher savings and broader benefits. Consider how best to shorten each process to reduce time to market.
Key levers such as business systems, processes, talent, organizational structure and governance need to be addressed. Be broad in your approach. Many of these activities can be centralized. Always ask yourself “Do we still need this and why? Is it still necessary?” Engage your employees to determine why they are performing certain functions and procedures. A scalable administrative infrastructure by centralizing G&A will eliminate redundant activities.
Another area to consider is reducing your fixed costs as much as possible. You want to have as much Operational and Workforce Agility as possible. High fixed costs force you to move like an ocean liner rather than a speed boat, essential in today’s economy. Variable costs you can control as they are directly related to sales.
Companies that embrace scalability, efficiencies and effectiveness are generally more focused on market opportunities and outward looking.
A scalable business model increases the value of your business so it is well worth the investment of your time and resources. Most important is to understand that you want to change from a Founder-driven organization, working IN the business in charge of it all, to a Process-driven organization, working ON the business and establishing a strong management team to support you. Growth is a desire and Scalability is a capability to fully take advantage of sustained growth.
Join us for the upcoming CEO Workshop on Thursday, 29 October at 11am and listen to three exceptional Executives who have taken their business to the next stage by scaling. Click HERE for more information and to register. We are in a small but intimate setting, so secure your place by signing up now!
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