Scaling success and failure: A conversation and infographic

How to scale up?

When to scale up?

Every ambitious business owner and entrepreneur asks these four-word questions. But coming up with the right answers isn’t nearly as easy or simple as asking the questions.

First, you need to have a business that lends itself to scaling, and that’s a topic I’ve discussed in other articles. Even with a scalable business, there are plenty of ways your scaling strategy can go bad.

Today I want to share an infographic I recently received from Matt Zajechowski over at Digital Third Coast. It’s a project he pulled together with Alligatortek, a company that specializes in building custom enterprise applications for the web and mobile devices.

Usually we publish these infographics as a guest post with a short introduction. However, this content intrigued me and prompted me to launch an “email conversation” with Matt to dig a little deeper on what they learned about scaling successes and failures.

Ultimately, I don’t think we found any magic formula that will guarantee the success of every scaling strategy, but there are certainly a number of good lessons you can get by considering the examples in the infographic and in our conversation. First, I want to give you the “back and forth” I had with Matt. Then I’m going to make a quick observation or two and finally I encourage you to study the infographic and see what strikes you as notable.

The Q&A

The infographic uses Kodak as a scaling failure and Slack as a success. Here’s what I asked Matt:

Question: I don’t think you can say that Kodak, which was a hugely successful company for nearly 100 years, scaled up too quickly, or wrongly. Do you think Slack will survive as long as Kodak did, especially given the fact that it hasn’t yet made any money?

Answer: From 1962 – 1966 Kodak’s sales went from $1 Billion to $4 Billion. They certainly scaled fast in periods of time, especially when they focused on personal camera use in the 60s. I personally can’t say that Slack, or any tech company will be around as long as Kodak given the technology industry’s light-speed pace of advancements. The camera/film industry was a slow-paced behemoth, and Kodak was privy to having time to innovate.

Question: I don’t see how “scaling” is the problem very often, isn’t “having a clear plan on how to make money” the issue, and ultimately whether or not there is a market for the product or service?

Answer: Scaling is an issue many businesses face, including smaller businesses that are looking to expand to make more money. The plan for one operation, office, truck, etc. isn’t often a great plan when you want to expand given that many aspects become twice as complicated.  I think the stat that 74 percent of startups fail because of premature scaling is one that speaks volumes to how many businesses struggle with scaling.

The infographic, as you will see, also uses Blockbuster as an example of a scaling failure. This prompted my last question for Matt.

Question: Didn’t Blockbuster perform wonderfully until it allowed itself to get passed by others who understood how to leverage new technology better? When it was aggressively adding stores, it was doing quite well.

Answer: The point for including Blockbuster wasn’t that they scaled quickly and failed immediately, it’s that even if you scale well you can still fail.

In his final answer, I think Matt is really getting to an important point and it applies not only to Blockbuster, but to Kodak: Even business that successfully scale aren’t immune to failure. If you successfully scale to meet the demand of today’s marketplace, it doesn’t mean you’ll be properly scaled to meet the demand of tomorrow’s marketplace.

This reveals a critical question business leaders need to ask: Are the systems I have in place that allowed me to scale my business today the same systems that will allow me to achieve scale tomorrow?

Kodak and Blockbuster were able to scale very nicely in an analog marketplace, but when the digital marketplace gained prominence, they didn’t have the systems in place required for success.

Unlike Blockbuster, Netflix has had the right systems in place. Establishing online relationships with its customers during its early DVDs-through-the-mail days allowed it to pivot into streaming because it had already created the necessary online relationships.

One more thing occurred to me. Business leaders need to be clear on why they are scaling up. Is it to grow, grab more market share, and increase profits? Or, is it to make the company look more appealing to prospective investors? These are important distinctions and will influence scaling strategies in different ways.

That’s enough commentary. Check out the examples on the Infographic (you’ll find the original on the Alligatortek site) and see what observations pop out at you.