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The Difference Between Growing and Scaling Companies

Growing and Scaling Company

Leaders must understand the difference between growing and scaling a company in order to be successful. These terms are often used synonymously when discussing the progress of a business, and while the difference may seem slight at first glance when thinking about these two concepts strategically, there must be a serious distinction. Growth simply means adding new resources, such as capital, employees, and technology. Scaling, on the other hand, isn’t just about adding, but about redoing, rethinking, and replanning. In some ways, scaling is the process by which growth is planned for strategically. Growth can happen intentionally, but you must put the building blocks in place at the very beginning of your business in order to allow for it. 

If you have exponential growth in customers, can you serve all of them as you do your current customer base? This is where scaling starts, and where many companies experience difficulty. There are several different approaches to growth—one being the hockey stick approach. A hockey stick has one direction of growth and then suddenly shoots up. This describes sudden or extremely rapid growth after a period of linear growth. This hockey-stick-style rapid growth is common with start-ups after they find their niche and begin connecting with their audience on a deeper level. Companies who leave this growth up to chance, saying “it just happens”, often can’t scale their services to meet customer needs, which leads to a loss of customers. 

This past Valentine’s day, I had flowers delivered to our home for my wife. When the bouquet arrived, it looked terrible. Clearly, this company was experiencing a huge amount of orders and was having issues with quality control. I contacted the company to file a complaint, but no one responded to my calls or emails. Ultimately, they lost me as a customer because they couldn’t scale their services to meet customer demand. Once you lose a customer, it is almost impossible to get them back. Then, the opposite of referral marketing happens—they tell people how bad your company is and deter potential new customers from interacting with your business. Companies must address how to scale their business to find and keep customers in order to be successful. 

That’s why it’s important to understand the difference between growth and scaling. Effective leaders know how to replicate and create processes in order to ensure future growth for their company. Scaling, by definition, means new processes which need new systems to power them and new people to understand them. If you are going to scale a business, it is almost impossible that the current resources and processes you have are sufficient. To scale, you must completely rethink how you execute your strategy. You need to map what you have with what you will need as you experience anticipated growth. This ushers in a completely different way to think about execution for your company. Scaling involves every aspect of the business and must be approached comprehensively.

The idea of leaders effectively “scaling” a company might seem like a buzzword, but it’s actually an essential part of any business. If you get this right, the benefits are obvious. Scaling a company is often associated with a revenue increase without a substantial increase in resources. If you really know how to scale and have the right systems in place, the benefit is that you grow the top line faster than you grow your overhead, which means you proportionally grow the bottom line faster than if you grew incrementally. 

How Instacart and Peloton Scaled Effectively and Won the Pandemic

Take Peloton for example. Before the pandemic, they were heavily criticized for some of their advertisements and were behind the competition, trying to win over gym members and those who used other at-home workout programs. They took on a new persona at the beginning of 2020, just in time for the impending pandemic and mandatory gym closures nationwide. Peloton used social media and built a global community of people who took classes and talked about fitness. They crafted different personas around each of their instructors and brought all of the liveliness and energy of a New York SoulCycle class into people’s homes. 

In order to deliver the same value proposition and create a scalable marketing plan, Peloton created online communities, spending less time and money on advertisements and more on getting communities online to talk about it. Whether intentional or not (and I assume it was very intentional) every Peloton instructor doubles as a fitness coach and, on some level, a salesperson for the company. Every video, class, and social media post doubled as both a call out to their “club” and a sales pitch to those not yet in the club. Think about how this has transformed their marketing in less than eighteen months—a company heavily scolded for sexist ads in 2019 dominates the fitness market the following year. Think about how different the company has to be today in order to deliver the same value proposition. 

Instacart is another great example of a company that put processes into place in order to exponentially grow during 2020 and beyond. In 2019, Instacart actually lost $300 million in revenue. But during March and April of 2020, Instacart was delivering more groceries than either Walmart or Amazon, and they turned a profit for the first time in their company’s history. Not only did this app make it easier for people to safely grocery shop, but it also provided employment opportunities for many during a difficult time. By July of 2020, the company was valued at almost $14 billion

Similar to Peloton, Instacart massively capitalized on social media, email, and referral marketing to inform people about their services. When the company began, they focused on the San Francisco area and slowly moved into other cities, collecting data on their most avid shoppers as they continued to grow. They were deliberate about which markets they entered, instead of trying to be everywhere. They developed processes for beginning to work in new cities across America and hyper-targeted their audience in order to create effective marketing strategies that would last. 

Creating Processes On A Mass Scale 

These types of processes and transformations can be done en masse without a lot of extra effort—which is how you know if something can truly scale. Leaders can put processes and systems in place that allow you to scale first, versus incremental growth that allows you to adjust and adapt your systems and processes over a period of time, but not a lot of companies really take the time to create, review and evaluate systems and processes when they are developing their business.

Constant growth takes a lot of time and resources. Financial growth can be achieved while experiencing loss. This juxtaposition can seem confusing at first, but the emphasis must be less linear (mapping growth to numbers at the moment) and more cyclical (mapping overall company health, replicable processes, employee satisfaction, and retention). Because of the cost and time associated with developing replicable processes, many companies avoid them. But they must be employed in order for a business to see real success.

The main takeaway here? Growth shouldn’t be left to chance. With the right strategies and systems in place, scaling a company for continued growth over time is the only way to ensure long-term results without exhausting your employees and even yourself as a leader. 

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