4 things startups cannot ignore as they expand
Lessons in balancing the speed and quality of expansion
As a strategy consultant, I get exposed to a wide variety of organizational problems. Over time, I observed a trend in problems that startups face due to rapid expansion into multiple geographies/markets.
The hiring engine fires on all cylinders to match the rambunctious top-line targets, resulting in unprecedented attrition due to hiring misfits and mass firing when push comes to shove. Lack of collation and implementation of best practices across productivity, product mix, pricing, systems and processes often means that top-line growth comes at the expense of profitability and a lack of standardization begins to create multiple distinct business units. Lastly, customer experience severely suffers due to the inability to maintain quality while expanding rapidly.
As a result, the complexity of dealing with distinct business units, the pressure on the bottom-line, the backlash from customers and the dissatisfaction of investors begins to show.
Ironically, the decision to avoid spending time upfront in meticulous planning and in setting up systems and processes that the founders consider a bureaucratic hurdle to their go-getter, agile attitude comes back to haunt them.
Therefore, I decided to share what startups, ready to expand into new markets , should keep in mind.
Dope for entrepreneurs who are looking to expand into new markets
While there are numerous things to take care of, I have chosen to focus on 3 things that entrepreneurs often sideline but which can unlock tremendous value.
- Automation and productivity improvements: As startups expand, they must make sure that they do more with less flab. Manual processes such as call center operations should be automated vs. engaging in rampant hiring for such roles. Similarly, automating any manual activities done by the existing work force can free up their bandwidth to do more.
- Invest time in collating and implementing best practices: Initially, it may seem that such time investment is antithetical to your ‘get shit done attitude’, however investing time upfront to collate best practices across technology, systems and processes actually saves time and money since efficient solutions to a lot of repeatable problems already exist. Implementing these best practices from the get-go frees up bandwidth to focus on more unforeseen challenges.
- Develop data dashboards to monitor progress in real time: The adrenaline rush of expansion often leads to ignorance towards the quality of expansion. To avoid this situation, follow the following steps-
a) Set targets against critical business metrics: E.g.set weekly/monthly targets for revenue, revenue growth, margins, customer satisfaction, etc.
b) Develop dashboards with various cuts: Develop templates to track the business metrics vs. targets. Don’t just track overall performance, but also look at the business metrics by region/city, product type, etc. to identify exactly where the gaps are.
c) Assign ownership of the dashboards: Assign owners who will be responsible for publishing the dashboard at defined intervals such as daily/weekly/fortnightly in easily accessible platforms such as Whatsapp/Slack groups.
d) Define cadence for discussion: Define intervals at which the dashboard will be discussed to understand reasons behind the metrics which are off-track, and to brainstorm suitable interventions.
4. Maintain a fine balance between localization and centralization: While it is important to customize the business for local tastes and preferences, ways of working, it is extremely challenging to operate completely distinct business units. Therefore, to ensure that each market does not start operating in its own desired way, the broad contours of the business model, ways of operating must be standardized with scope for local customization. What must be standardized and to what degree there is scope for local customization must be decided from the get-go.
Closing thoughts
If an entrepreneur is able to crack these four things, scaling profitably into a new market will be a lot more achievable. Planning ahead can save a lot of fire fighting later!
