Want Business Scalability? Understand These Cores
- BY Jaspreet Kaur
Feature Writer, BusinessEx
- Aug 13,2020
- 17 Mins Read
Scaling up is an integral part of every business that seeks to sustain in the long run. If the businesses do not scale, they will fatigue and eventually vanish. This is what is happening in the current scenario.
There are several companies that have scaled up their business in a short span. One such business is OYO Rooms that has become a global hospitality company now. According to financial reports of OYO Rooms, the company's profit increased from INR 21 crore in (FY 14-15) to INR 496 crore (in FY 15-16) to INR 325 crore in (FY16-17). Meanwhile, it ventured into the foreign market and increased its business. Its value run rate increased from $0.4 billion in December 2017 to $1.8 billion in December 2018 with a growth of 4.3 times on year-on-year basis. Its economic improvement is 54.3 per cent in FY17-18 to 48.7 per cent FY 18-19.
Similarly, Lenskart initiated in India and eventually, expanded across the globe. The growth of the cited companies state the intrinsic nature of the business scalability. In order to scale up, companies have to get talent on board and fix operational issues. Various other partnerships and business complexities also need to be handled. Companies have further raise capital periodically.
According to Statista's report, there are some common factors that prevent retailers from achieving business scalability in India. These factors are talent, which is available at 40 per cent, capital accessibility, which is available at 50 per cent, real estate, which is available at 75 per cent, and partnership opportunities at 20 per cent.
This shows that businesses do not have access to important factors like talent and partnership opportunities in the market.
What's Scaling Up?
Before understanding the business scalability, it is important to understand the core word ‘SCALE'.
Strategy needs to have a two-sided approach. An opportunist approach should preferably be taken by the entrepreneurs. Companies also need time for scaling up as no business can grow by hundred times over the night.
It is important to understand core customers of the business. For that, companies have to dive deeper into the market in order to comprehend their target audience.
2. Culture, Competitive Advantage and Core Competence
Focusing on M&A, companies basically do not integrate in this activity. Integration of two companies does not work as they work differently. The companies have to introspect these questions:
- How do companies integrate culture for scaling up?
- Do companies have competitive advantage over scaling up?
- Are core competencies deviating?
3. Actionable Plan and Accountability
Strategies that companies formulate relating to business scalability, unless they do not have an actionable plan will not work. There needs to be strong accountability into the business that comes from the business owners.
Business scalability is essentially a continuous process. As a company grows bigger, the more capital it requires. An ideal company focusing on scalability should create cycles to fill up its tanks. To estimate the right time for refueling, a company requires predictability and the right timing.
The execution of strategies has to be seamless. It needs to create a consistent impact on the business as well as an entrepreneur. The right execution help achieve desired outcomes.
Challenges in Business Scalability
After understanding cruxes of scalability, it is time to know challenges that emerged when a business grows. There are basically three challenges that are as follows:
1. People Management
It is crucial for companies to get their core teams aligned. Companies, along with their employees, need to have collective goals and achievements. If there is strong alignment, then overall performance of employees will increase exponentially.
Scalability is a multiplier effect. As a result, companies have to fix various things at different markets and spaces. This, in turn, becomes challenging unless companies convert it into a deep down process. The companies have to assign ownership in the process so as to run processes seamlessly.
It is crucial to institute a performance management system into the business. Performance management is further divided into five parts that are, planning, monitoring, developing, rating, and rewarding.
Companies seeking growth have to address these challenges and ascertain the right approach to grow persistently.
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