If you listen to many business advisers today, you’ll find they offer lots of advice about scaling a business which means to expand the business operations to handle increased capacity of sales. However, much of what they say no longer seems to produce the results you are looking for. In other words, what they are telling you doesn’t work like it used to work. Times have changed, and times will continue to change.
There was a time when the “standard advice” to follow was simply to get your operations running like clockwork, and then you could replicate the operation process on a larger scale. This is what McDonald’s did. And this is what Michael E. Gerber teaches in his widely read E-Myth books. While there are great lessons in the E-Myth books that still apply today, the business model today no longer consists of (1) perfecting your operations and then (2) scaling the operations. In fact, with the changes in the economy and technology, this approach to scaling a business has the potential for disaster.
In your authors’ opinions, there’s nothing wrong with scaling a business and building core business processes that can be replicated in multiple locations or in related industries. That advice still has merit–but only in some cases. In limited cases, a business owner who is devising an exit strategy will find that this approach to scaling is possible.
This type of business model works really well in a stable environment where things are relatively static. For a true scaling model to work, without substantial changes and adjustments to the model along the way, you have to be in a static environment. The problem is in today’s business economy. certainly, in the future, is not guaranteed, and the trends in many industries will not remain static. We are progressing into an environment of rapid change.
Kodak and Blockbuster are two common business examples which did not adapt to the changing market. You probably heard the story of both. Each business was a strong player in their respective industry and owned a large portion of market share. Each was comfortable with their products and their business operations model. Each had the ability to innovate. Kodak having an early version of the digital camera which it did not pursue because it had such a large revenue stream selling and developing camera film widely used by the everyday population. Promoting a digital camera would make their film products irrelevant. You know the end of the story. The people at Kodak did not see the inevitable change that was occurring and did not position the business to compete in the changing market.
Blockbuster experienced a similar fate. It rode the wave of consumer craze for video movies and established a method for renting the movies to the public who wanted to enjoy the latest flicks in the convenience of their homes. Again, technology continued to evolve and Netfix was born. Now consumers don’t even need to leave their homes to rent movies, they can choose the titles through their television. Do you know anyone who still uses a VCR? We would suggest that number would be few. The sad story for Blockbuster is that the owners were given the opportunity to purchase Netflix early in Netflix’s history. They simply did not have the vision to predict the change in consumer habits and in the technological changes. Neither of these businesses evolved. It’s OK for scaling a business if there is a continued demand for a product (think of the Mars Candy Company and the Milky Way candy bar) but it’s not an excuse for a lack of innovation.
We know that every business needs a growth plan which considers the changing trends of the future. This isn’t always easy and there is no crystal ball, but we do recommend that you pause and reflect on what the future might bring. We cannot look simply at what’s working now. We need to consider what adaptations need to be considered to remain relevant and competitive as the business grows. What’s working today is all well and good. But what’s working tomorrow is going to determine how to devise the owner’s exit plan.
So, what do we do in an environment where scaling is no longer the single approach to building your business? Consider what the famous professional hockey player, Wayne Gretzky, tells us to do. We need to skate to the puck–not where it is now but where it will be when it is batted from the opponent’s hockey stick. In a similar fashion, you need to build your business to where the consumer trends will be in the future. Position the business to that place so you are prepared to service that need. Software development companies are already doing that today. Check in with a software developer to learn about their predictions for the evolving processing power that will dramatically change the capabilities of mobile devices. They’re using those projections to determine what features to add to the next generation of software. They are moving to the future.
We are going to show you how to assume this mindset and use this strategy to build your business. We believe that effective business planning is two-pronged: addressing where you are now while preparing for where the markets are going to be — and adjusting the business to get there. In other words, strategies for scaling a business have changed.
Join us on this business building journey where we move from Entrepreneur to CEO. We’ll be examining how to get from simply making money to building a sustainable business in the following chapters. Look for our upcoming book, Entrepreneur to CEO. This article is a small portion of the content of the book being co-authored by The Our Shawn McBride and Ann Gatty.
About the Co-Author:
Shawn McBride, also known as The Our Shawn, works with successful, private business owners on ways to build companies to stand the test of time. He is all about empowering business owners, employees and others to live a life they love. He’ll work hard to make that happen for you and your audiences. The Our Shawn earned a J.D. from the University of Maryland School of Law and a CPA from Townson University. He is the host of the popular show, The Future Done Right.