There are two significant hurdles face by entrepreneurial ventures, the first is validation & verification of the business proposition i.e. confirming that there is a recognised value proposition for the market and the venture itself, in the offering, signalled by successful and growing sales. The second hurdle is scaling the business to the potential available in the global marketplace. Leaders often do not consider the capability to scale until late in the process and, often they may have to have a costly re-engineering of their business or worst case exit the business after time as scaling cannot be adequately resourced. There are two aspects to scaling capability 1. Structural Scaling capability, 2. Asset scaling capability and they are both intertwined in many ways.
- Structural scaling capability is related to how the business is designed, organised and operated.
- Asset scaling capability is about the available additional resources (Underpinned by finance) to create additional scale
Structural scaling capability is in the control of the leadership and management of the business , it’s about executing the business in a way that can maximise the ROI from any investment up to a point in time. This is a key area that should be addressed before additional scaling resources are added for Asset scaling, because if the structural scaling capability is not optimised then the marginal scaling rate that can be achieved from additional investment will not deliver the best possible return for a scaling investment.
This is of particular interest to venture capitalists and early stage investors, because often their motivation to invest is that you have passed the technical and commercial risk threshold as regards where you have arrived at , however having a clear understanding and plan to scale the business that demonstrates you understand the structural changes that are required before you add capacity and replication will demonstrate the scaling capability can be adjusted to achieve the full market potential and deliver the maximum available ROI and certainly above average ROI.
The Advantage scaling capability model provides a tool to leaders for planning and executing a successful scaling strategy. Read the paper on the pyramid-spire scaling capability model. (capability of a business to scale)