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The Difference Between Growing and Scaling: Does It Matter?
Scaling is the difference-maker.
From the perspective of a middle-market company, the main difference between scaling and growth is that the former promotes sustainable growth, while the latter is little more than a short-sighted attempt to ride an ongoing wave of success. Scaling optimizes processes, freeing up resources for creativity. Growth ties up resources in the service of short-term success.
Growth can be treacherous for a mid-sized company as it entails challenges the organization may not have developed the tools to handle. The leadership brass of such organizations may fail to recognize the importance of scaling as their companies expand.
Growth is NOT Scaling
Some may even mistake growth for scaling. The difference between growth and scaling is straightforward, however.
- Growth requires the addition of financial and human resources to achieve a directly proportional increase in revenues.
- Through scaling, organizations generate a disproportionally higher amount of revenues compared to the resources they invest.
Growth Without Scaling Means Trouble
By relying on growth without scaling, organizations sign up for a future rife with annoying and debilitating growth mismanagement symptoms. They experience organizational issues and company-wide conflict that renders the operation untenable. Leaders will be stuck working on the day-to-day operations, unable to step away and find ways to get off the hamster wheel.
Without a leader plotting a purposeful course focused on scaling and aligned with a long-term vision, organizations risk fizzling out and losing their market positions.
The Temptations of Counterfeit Strategies
One of the obvious upsides of scaling is that it allows leaders to identify the market positioning of their organization relative to its competitors and define a real market identity based on this information. Having accurately defined the market identity of their company, leaders can proceed to improve their organization by:
- Analyzing opportunities and risks
- Defining priorities
- Understanding the unique strengths of their organization and devising strategies and priorities with these assets in mind
- Devising investments to protect their unique strengths and the advantages they confer
Without guidance and a thorough understanding of what scaling means, many leaders mistake various smaller-scale strategies and plans for scaling. “Counterfeit” strategies that can mislead and blind leaders include:
- Financial plans and forecasts
- Customer segmentation documents
- Mission definitions and value statements
- Long-term organizational visions
Such plans and strategies are necessary, but leaders should never mistake them for a compelling scaling strategy.
The Importance of Creating a Scaling Capacity
The successful replication of success does not translate to sustainable growth. Many middle-market organizations commit the mistake of adopting a “rinse and repeat” approach to growth after finding a formula that works. With their leadership caught up in the day-to-day operation of the business, no one can design an organizational structure focused on sustaining growth.
Successful growth management requires scaling up. An organization committed to sustaining growth won’t find it futile to explore various scenarios that may or may not occur, and that may or may not present the company with new opportunities and challenges. By exploring such theoretical scenarios, organizations can ready themselves to make the most of opportunities when they arise while minimizing the associated risks.
Successful growth management depends on scaling.
Creating a capacity to explore more or less likely theoretical scenarios is the equivalent of creating a capacity to scale.
The Need for Standardized Processes
Scaling requires process standardization to simplify operation and free up resources. While some middle-marketing executives believe that such standardization stunts creativity, in reality, it stimulates it.
Standardization is an inevitable part of scaling. It automates repeatable work, eliminating the need to re-invent approaches every time frequent problems arise. Smart standardization values and promotes creative freedom while eliminating the wasting of resources. It creates an enduring organizational maturity that is antithetic to the confusion, cost overruns, and redundancies of a chaotically growing middle-market organization.
How Scaling Translates to Leadership Development
Scaling translates well to every aspect and operational element of an organization, including leadership development and succession. With leadership development, scaling addresses a set of relatively well-defined challenges.
- The money- and time-wise investment leadership development requires
- Providing quality education to large volumes of high-potential employees
- Producing quantifiable results on a short notice
- Successfully reaching across generational and cultural divides
Organizations that scale are more successful than those that don’t. Focusing on growth alone is an irresponsible approach from the perspective of the long-term future of the organization. Focusing on sustainable growth is not a luxury reserved for large-market organizations. It is a must for middle-market companies that intend to be relevant in the future.
Pick up my books to learn more about how scaling impacts leadership development.