Reasons Why Organisations Fail: Premature Scaling

Today I’m continuing my series exploring the reasons why small businesses most often fail in their first three years of operating with a focus on is the mistakes in scaling the scope of the organisation. I know, it’s tempting to try and realise your plans for world domination in as short a timeframe as possible, however, we’ve seen it time and time again being an organisation’s undoing.

So, it’s time to learn from their mistakes without any detriment to your organisation. The reality of the situation is that while you might be tracking along nicely, if you undergo a profound period of change, it’s likely that you’ll need time to properly assess your situation. Will your stakeholders be willing to afford you this luxury of time? More often than not, they won’t. Time and time again I’ve said that the one thing you want to avoid is making your customers feel violated from a transaction with your organisation, and premature scaling is often one of the best ways to upset them as it raises a number of problems for you to overcome.

What’s the point in scaling your operations if you can’t keep up with the valuable promises you NEED to deliver upon as is?

Expand or consolidate?

Something that I’m often asking leaders of organisations is whether or not it’s in the organisation’s best interests to expand… particularly those that want this expansion to take place rapidly. While it might seem like an attractive prospect to double your organisation’s revenue with a rapid expansion plan, you need to assure this isn’t at the expense of your current operations in delivering exceptional service to existing clients.

This is something that Doug Tatum explores in his book “No Man’s Land”, which should be a bible for organisations in that relatively awkward time of expansion; when you’re too big to be classified as a small business, but too small to be lumped in with large organisations. Tatum elaborates on this with two options: you can either scale up your operations, or consolidate them. He cites numerous examples of organisations making the call to become what he calls ‘small giants’ that might be modest in their size, but over-deliver when it comes to the delivery of their product or service.

Rather than paying a disproportionate amount of your time and resources on the idea of expanding the organisation, perhaps consolidating the things you’re doing well is a more effective solution? Funnily enough, I wrote a recent article on the topic of affirmative theory which ties in quite closely with the latter; that in order to improve your organisation as a whole, you should start by looking at the things you’re doing well; you can read it here.

Expansion may well be the natural progression for your organisation, but often it’s not as simple as that. I believe that prioritising your existing clientele rather than executing your plan for world domination is the most effective way in improving your organisation. Word of mouth, as you may well know is the most powerful form of marketing that your organisation could receive, and if you’re getting spectacular reviews and referrals from serving your clients as a small giant, you’re better served in your respective expansion plans anyway.

It’s only a matter of time before you see your numbers growing without even putting an expansion plan in the first place.

As always, thanks for your time.

Kobi Simmat.

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