How do we grow our idea beyond our initial success?
1. Your Scaling Checklist
We know it's time to grow and scale when:
Our solution is impactful at its current scale
Our solution is replicable
Our solution is scalable and we can identify some economies of scale
We've achieved product/market fit
Our organization is resourced to scale
2. What does scaling mean?
One way of approaching scaling is that it means increasing your organization’s impact. This could include increasing the size of your team, ramping up your budget/funds, acquiring more users, expanding to new locations, all of these or none of these. Different models have different ways of increasing their impact. Let us discuss some examples: -
B2C ed-tech for-profit SF based company that helps users to memorize key facts. Quizlet has scaled massively and now helps 150 million users from 130 countries - but contrary to popular belief, this was done with very little external funding (bootstrapped for many years) and with a small team focused on tech and product. What allowed them to scale was a great product, virality, savvy digital marketing and a small low-cost team.
India based non-profit that has helped 100 million children become literate and numerate. Pratham helps 6 million kids attain foundational skills with just a $30 million budget - it achieves this through a systems change model of partnering with and influencing governments, and making use of a vast network of community volunteers and teachers.
3. Year Up
US based social enterprise working on youth skills and livelihoods. Year Up has a yearly budget greater than $150MM, and a large team but realized that the number of youth they could support through their direct training model would always be limited because of the high-cost nature of training. So now they are focusing on policy and advocacy work to convince employers to hire and train young people from disadvantaged backgrounds.
As can be seen from the examples above, there are many ways to “scale”. But never forget the key purpose of scaling - to expand the impact of your organization on the world. Figure out the best way to increase this impact and then figure out what you need to make it happen - whether this is a bigger team, more funds, different geographies, more partnerships, online virality and digital customer acquisition, etc. Another aspect of impact is depth vs breadth - whether you want to deepen your impact with a particular set of users or if you want to spread your initial impact to more users. There are no hard and fast rules here - every founder should decide what appeals to them more and is a better fit to their model.
The other thing to remember is to ‘Nail it, then Scale it’. Expanding a model that doesn’t work isn’t effective scaling. First make sure you have product-market fit (explained in more detail later) and are creating impact - only then try to scale that impact. And, ideally, when you scale you've figured out some ways to create some economies of scale so that not all costs grow at the same rate with a greater footprint. This may push your thinking and get you to think about what must be done in person and how technology may play a role in scaling as well.
3. How will our organization structure change as we scale?
Useful concepts to think about: (1) Rule of Three (2) Span of control at different levels of your organisation (3) Culture change as you grow (4) Skills Fit of early employees as you scale (5) In-house vs Out-sourced functions (6) Fire when you have to
Rule of 3:
You’ll have to change your organizational structure and processes every time your employee force grows by 3.
3 -> 9 : Founders only to early employees; everyone reports to co-founders
9-> 27 : some hierarchy begins to emerge – functional heads come into the picture; Founders stop taking all the decisions; some functions still outsourced
27-> 81: Layers of hierarchies are developed; Founders less involved in day to day and more involved in big picture strategy, fundraising, “face of the company”; Many more functions start getting developed in-house; Regional structure may emerge.
This seems painful and it is – but it has to be done. Make sure you prepare your staff in advance that change to structure and roles will come and keep coming – if they expect it, they’ll react to it better.
Span of control
Everyone agrees that a manager can only manage so many people (that is the span of control), though there are different theories on what that number really is. A typical number is 8 employees reporting to every manager – less than that could be hard to get work done and more would stretch the manager. As soon as you go above that, make sure you create sub-managerial layers.
In the very early stages, startups are extremely flat in hierarchy and everyone in the team is doing a variety of things, and a combination of very meaningful stuff and very basic stuff. Things move fast, there are no processes, there is little support or guidance. As organizations scale, hierarchies and processes come in, people’s roles become very defined, there is more at stake, so progress becomes slower. It is important to watch out for what’s happening to culture.
Skill fit of early employees
This is among the most painful things about scaling. Your early employees – the people you relied on, trusted and who came through for you in your first years – may now have come into leadership roles and you may be seeing that they’re not ready or a good fit for these roles. It’s important to keep analyzing this, and acting quickly but very gently and with empathy when this happens. Good solutions can often be found in which both the individual and the organization are benefited.
In-house vs Outsourced functions
As you scale, functions which were earlier too small to be important and therefore outsourced (or not done) will become big enough to warrant a team. This could include finance and accounts (which may have been done by a founder to begin with), PR and Marketing (for which you might have hired an agency), HR (which probably had anyone), etc. Keep an eye out to spot when this is the case and act quickly.
Hire quickly and fire when you have to
Often firing is even more important than hiring. First-time founders often struggle to fire employees who are not fitting the organization or a role and may give them a lot of time and chances. This can suck energy and momentum from a team at a crucial time – take the call to fire if you have a reasonable hunch that things will not work out.
Questions to ask yourself:
Have we reached the stages of the Rule of Three?
How many people are we managing right now?
Is the organization culture what we wanted it to be?
Do we even know what it is?
Is any team member in a role for which we would not hire them if we were hiring now?
Are we spending time on functions that we were not in the beginning?
4. How do we approach growth?
The best way to think about how your venture is growing and where it will be heading is by using growth metric dashboards.
These dashboards will communicate essential metrics and key performance indicators for your venture progress. Ideally, this allows your own internal team to build awareness around the growth of your venture and also serve as a medium of communication to your board or potential investors.
The following link contains details around specific metrics that you can monitor throughout your progress: https://www.geckoboard.com/learn/kpi-examples/startup-kpis/, https://a16z.com/2015/08/21/16-metrics/ . You will obviously need to curate some metrics around what your venture delivers and based on its business model.
Another tip for growth in the education sector would be to assign “ambassadors” for your startup or venture in different institutions or communities. Much of education venture aim for social impact and having a strong team of ambassadors can help you further grow your target consumer base and foster partnerships in new locations.