Scaling up or not scaling up

Many start ups go through a phase when eventually they will be seeking investors to fuel growth and scale up their business.

A frequent consequence of scaling up is the dilution of the brand essence and its more blurry positioning. Indeed, the scaling up process can sometimes lead a business model to being multiplied geographically to reach a wider target audience and fast. This usually means a big boost in hiring key leaders and support staff to cope with the increase of clients and workload.

The big challenge is for a start up to avoid the dilution of its brand and what made it successful in the first place. This is a concern that for example Linda Hazi, the CEO of Fontenille Collection – a small chain of French luxury hotels that is growing fast – was recently highlighting. In some industries, scaling up once the business model has been tested makes sense. Especially for the ones who will rely on an app that is available on your smart phone. Because they can replicate the business model in various countries without changing their core offering. We can all think of tech companies like Uber, Facebook, Tik Tok and many others. Scaling up fast to reach a cost leadership strategy model can make sense for some businesses.

However, for some industries, scaling up is the wrong approach to growing their business. Sometimes, it is better to improve your existing positioning and value offering to create better customers rather than increasing the number of customers by selling to everyone or every business.

This is why working on strategy can be really critical so that businesses avoid the risks linked to scaling up to bow to investors’ demand for fast growth. Sometimes it makes more sense to create better customers even if expanding geographically is part of the growth plan. Equally important is being very clear and tight on your business model so that it can be replicated in other geographies without diluting the essence of your core offer. Scaling up or not scaling up? Start by checking and testing your strategy and business model.

Hervé helps CEOs of Small and Medium Size Companies unlock their full business potential through a mix of business coaching and strategy consulting/advising.