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The Path To Scale: Execution is about Mastering Reliable Value Delivery

The hallmark of a successful business is flawless Execution, but to talk about Execution we first have to understand Scale.

Scale is the capability to reliably duplicate or multiply the delivery of value as volume or demand increases. The easier it is to duplicate or multiply the value you provide, the more scalable your business.

Reliability means being able to count on delivery of the value without error or delay.

Duplication is essentially reproducing a unit of value. If you make a product then it’s making another one. Starbucks knows how to make 1 cup of coffee. Duplication is a barista reliably making 500 cups of coffee a day.

Multiplication is like duplication but for an entire process or system. There are 32,000 Starbucks locations worldwide. That’s multiplication, and reliability makes it successful.

So at the heart of “scaling up” is increasing the reliability of your value delivery as you duplicate and multiply so that things don’t break and more customers get your great product or service. Codifying that so that it can be done repeatedly with minimal variation is Execution.

Specifically what you must codify is knowledge in the form of processes so that they can be repeated and improved upon. If you cannot describe what you are doing as a process, you don’t know what you’re doing and you cannot scale. Even if you are getting positive results, if you don’t know how then you cannot reliably repeat it. If you have 1 person who can make great coffee but they do not know how they do it, then you are stuck with 1 person that makes coffee and you cannot scale. So in order to scale we must be able to codify knowledge into a process.

So what is a process? A process is a sequence of steps or activities that transform inputs into outputs to achieve a specific goal or objective. Processes are the “how” – the detailed steps and actions that are taken to deliver value to customers (or to create an input for another process, connecting processes to one another).

When you connect processes and make them repeatable you have a system. Systems are the “what” – the methodical way that an organisation provides goods or services to customers. In essence a business is a system, hopefully a system for creating money for you and value for your customers.

The primary benefit of creating a system is that you can examine the processes and make improvements. Scalable systems are built by making small changes and learning from the impact. I say small changes because systems amplify the results of small changes. Small changes to Scalable systems can produce massive results, both positive and negative. John D. Rockefeller, upon learning that each oil barrel lid was sealed with 40 drops of solder, asked, “Have you ever tried 38?” It turned out that when 38 drops were applied, a small percentage of the cans leaked. None leaked with 39, though. That one drop of solder saved $2,500 the first year.

You can make frequent changes but changes should always be small otherwise you cannot determine which change produced which results. Complex systems begin as simple systems because systems must grow with learning from their environment. Tesla developed an insanely complicated manufacturing process which took years to debug. ASML equipment takes months to calibrate and longer to reach optimal capacity. And Starbucks, who didn’t explode their number of locations for more than 20 years, were learning and refining the system.

Now you all have both the “how” (processes, perhaps a bit rusty) and the “what” (a system or business) but you are most likely lacking the explicitness, the clarity and also the setup for learning and iteration which are imperative if you want growth. There are 2 ingredients used to solve this; processes and data. With processes and data you can learn and make decisions to improve your system. You make those decisions in meetings and you drive the changes through priorities; short term tactical initiatives. So we are only going to focus on 4 things today because these 4 things are what drive better execution which prepares you for scale: processes, data, meetings and priorities.

But processes are just one way to grow your business so it’s worth touching briefly on all 6 ways to grow your business, for there are only 6 ways to grow a business. At the start I said that Scale is the capability to reliably duplicate or multiply the delivery of value as volume or demand increases. So how do we increase volume or demand? There are only 6 ways.

The first is Features. Adding features to existing products or services. In theory feature addition increases appeal and value for the customer. Often this is incrementalism, keeping pace with competitors, for example each generation of iPhone. We naturally want to provide as many features as possible believing more is better but adding features can be both a distraction and a trap as it can weaken your focus, increase your costs and over time dilute your offer. Adding new features is both challenging and costly for small businesses if not done strategically so if you add more features don’t base your approach on that of mass market products. 

The second way to grow your business is new offerings, either new products or services or new combinations of them, for example by bundling and unbundling which can include external services from third parties. New offerings can be something in your wheelhouse or entirely new offerings you believe existing customers will value. I recently worked with a warehouse software company that offered a complete solution including the required WiFi, even though a third party was contracted for the WiFi element it radically improved their offering. 

The third way to grow your business is through processes. Processes are interesting because they are both integral to facilitate successful scaling and can be a driver of growth too. Better processes can drive efficiencies giving you a cost advantage delivering higher margins which you can either invest elsewhere or pass on as cost savings to customers to increase sales. But process improvements can also increase output volume directly or deliver more value to customers giving you a competitive advantage.

The fourth way to grow your business is through new experiences. Starbucks is an evolution in experience. To Italians coffee is something you drink as a shot standing at a bar. Today in the West we see coffee as a long drink you enjoy on a sofa with your laptop enjoying free WiFi and jazz music in the background. You pay 5 times the price for the experience. And if you desired to drink your coffee in St Mark’s square in Venice it will cost you considerably more, as much as 15 euros. If you only wanted the caffeine you could take a Pro Plus and have more time for sightseeing. Build a Bear is my favourite example of a product transformed into an experience. For 30 to 60 minutes your children can delight in the experience of creating a bespoke teddy bear with just the right plushness, a waistcoat and spectacles. But the greatest success story of growth driven by experiences is the Apple store. For 25 years Apple didn’t have retail stores and arguably did not require them to sell their products but the Apple store is an experience that has grown the appeal and sales of Apple considerably. Today Apple stores are hands down the most profitable retail space per square metre in the world.

The fifth way to grow your business is with new models, i.e. new ways of generating revenue with new value chains either on the supply side, distribution side or both. Often new models are disruptive, e.g. AirBnB or Uber. Think SaaS vs. older software licensing models or cloud servers vs. on-site. Also iTunes and now the App Store are new models for what is traditionally a physical product business. New models are often thought of as the domain of disruptive startups but there are just as many examples from established players.

The sixth and final way to grow your business is gaining new customers. This is what everyone wants but remember if you don’t have the right features, right offering, solid processes, a desirable experience and a viable model then more customers is either impossible or will kill you because the customers will not be satisfied. That’s the bad news. The good news is that there are 20 ways to get customers. Now the interesting thing about getting new customers is you can probably come up with a few by yourself and perhaps with a group this size collectively you could come up with a dozen but not all 20. Also you have a bias towards the few methods that have worked in the past and what you see your competitors doing. But the growth opportunity lies in what is off your radar that you haven’t considered, in what others are not doing.

Sadly, evaluating all 20 is out of the scope of this blog post. Get in touch if you want to find out more.