Pains of Scaling Up — Where Scale-ups Go Wrong and Get Scarred

Published on
November 3, 2022
Ian Bell
Chief Innovation Officer, Partner
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Why do scale-ups fail? It is not solely because of the lack of investment capital.

Scaling up is an exciting time for any business. Scale-ups, by nature, are spectacularly fast-growing, innovative new enterprises that came out nowhere and significantly disrupted entire industries with fresh business models.

The scale-ups of today — such as Facebook, Google, and Uber — came into the scene with revolutionary ideas and overthrew well-established industry giants, all the while acquiring massive fortunes for their founders.

Creating a product that their customers will love, no doubt, is a gargantuan achievement. However, that is only the early beginnings of success as well as battles yet to be fought.

Most leaders make the false assumption that the only hurdle to overcome in growing their company further is raising capital, only to be faced with one rude awakening: the process of scaling in and of itself is the hardest part of building a business.

As scale-ups sit on top of consistently rising revenue and growing users, the more their goals and day-to-day priorities change — leading to more problems along the way.

If they are not careful, these problems lead to devastating mistakes that will cause their enterprise to crash and burn. Here are three of these problems.

Scale-Up Problem #1: Lack of Industry-Relevant Expertise

Contrary to the university-drop-out-turned-billion-dollar-start-up-founder trope, successful scale-ups are led by seasoned entrepreneurs. Quantitative research done by Deloitte reports that more than half of all scale-ups in their database were NOT single-handedly founded by individual innovators with a penchant for global disruption but by teams all rich in start-up or corporate expertise, multi-cultural backgrounds, extensive travel opportunities, and diverse education.

Menno van Dijk, Co-founder and Managing Director of international leadership organisation THNK explains, “Founding an enterprise requires a combination of having the needed experience and right mentality. Also, determination and the capacity to inspire others are important qualities. These qualities are developed through years of corporate or entrepreneurial experience. This explains why scale-up founders are often in their late thirties or early forties.”

Additionally, 61% of scale-up leaders argue that they would have reached target growth quicker had highly skilled specialists been more readily available. This is backed by an Employer Skills Survey which reports that scale-ups create positions three times more than that of FTSE100 companies, creating significant challenges considering 25% of these vacancies go unfilled due to a scarcity of adequately skilled applicants.

Scale-Up Problem #2: No Clear Understanding of the Business

When it comes to scale-ups, there are two schools of thought: the one that understands technology and the one that understands business. It is when scale-ups merely rely on the innovation of their products and ideas that they start to suffer. For rapid, continuous, and long-lasting growth, you need people who understand both.

There is a reason why 85% of all unicorn enterprises like SpaceX thrive and even outperform and outsmart the incumbents in their chosen fields — at least one of their founding team members have a clear-cut understanding of their target market and customer base before setting forth on a grander quest for success.

Putting energy into training and education in both the tech and business sides is crucial to keeping not just the innovation tap flowing, but also the know-how for successfully and sustainably scaling up.

Scale-Up Problem #3: Inability to Successfully Transcend Small Markets

Another one of the core scale-up issues is that growth momentum can get a lot trickier to maintain when faced with a relatively small market. To drive growth and amplify market saturation and competitiveness, scale-ups have to cross borders relatively quickly.

On top of all this, scale-ups must ensure that their home market expands to generate more favourable financial outcomes locally — all of which builds on problem #1, driving the importance of insights from a team of highly discerning experts.

There is also the issue of whether or not a scale-up is taking on too much too soon. Most scale-ups say YES to all project offers because they need to drive revenue and keep investors happy. But, in doing so, they lose their focus on their main objectives and miss the opportunity to appeal to their real audience, compromising sales in the process.

Many new, fast-growing enterprises face much of the same challenges other older, more established companies face, regardless of their size and reach. However, when it comes to scale-ups, the problems come hard, fast, and all at once. With some planning and preparation, devising a strategic approach to setting your fundamentals straight can be the key to unlocking sustainable, continuous growth for years to come.

This article is the first instalment to our “Pains of Scaling Up” series. In the coming weeks, we are going to tackle ways on how scale-ups can successfully grow out of their start-up mentality to address the problems mentioned above and continually thrive.

As scale-up specialists, we at BeingIconic have expertly pointed out the gaps in young business models and addressed these issues to get them to the next stage of growth. Partner with us today to find out how we can do the same for you.