This is an excerpt from an interview with Alex Brueckmann that was first published by Authority Magazine – read the full interview here.
In order to make sure that we are all on the same page, let’s begin with a simple definition. What does Operational Scalability mean to you?
At its core, operational scalability is the ability of a business to handle changes in demands and workload without sacrificing performance, reliability, or quality of service. It involves designing and managing systems, processes, and resources in a way that allows them to seamlessly handle volume changes, for example in their user base, data volume, or transaction frequency.
Which types of business can most benefit from investing in Operational Scalability?
Obviously, any business that runs on a technology backbone, from e-commerce to SaaS, banking, EdTech, etc. Industrial manufacturing is a prime example as well, where scalability is a challenge both in times of growth and shrinking demand.
Why is it so important for a business to invest time, energy, and resources into Operational Scalability?
In recent years we’ve seen various events that triggered chances and disruptions for several industries. During and after the Covid-19 pandemic we experienced an uptick in e-commerce, supply chain disruptions, retail store closures, and more. Due to a scalable operational model, e-tailers were able to harvest profits triggered by changes in shopping patterns. Retail stores on the other hand have a different model. Especially in downtown areas, many struggled to remain profitable when a rise in remote work led to reduced customer traffic. The current downtown San Francisco retail exodus is partly triggered by the limits of operational scalability of the retail business model.
In contrast, what happens to a business that does not invest time, energy, and resources into Operational Scalability?
In simple terms, if a business does not have scalable operations, it will struggle to react to changes in customer demands without potentially existential threats to its business model. Take the banking sector for example: banks handle vast transaction volumes. The operational scalability of their systems ensures that they can handle growing transaction volumes without operational bottlenecks, increased costs, and potential service disruptions. Banks that fail to build secure and scalable systems suffer from inefficiencies that reduce their profitability, which will impact their ability to grow their business, meet evolving regulations, and maintain competitiveness. For other industries, similar chains of events apply.
Can you please share a story from your experience about how a business grew dramatically when they worked on their Operational Scalability?
An Inc5000 company I work with has identified the scalability of its core product as the biggest growth enabler, both nationally and for its international expansion. During a recent refresh of their business strategy, the executive team decided to dedicate major resources to ironing out any bottlenecks that could impede the customer experience. They expect to 10x their business in the coming three years as a result of preparing their operations for scale.
Here is the primary question of our discussion. Based on your experience and success, what are the “Five Most Important Things A Business Leader Should Do To Set Up Systems, Procedures, And People To Prepare A Business To Scale”? If you can, please share a story or an example for each.
Make operational scalability a strategic priority:
Ensure that scaling operations is not just a reactive response to growth but a proactive and integral part of the business strategy. Amazon, for instance, made scalability a fundamental aspect of its business model. From the early stages, Jeff Bezos emphasized scalability to handle the rapid growth and demands of an expanding online retail market. Amazon’s focus on scalable infrastructure and systems allowed them to accommodate exponential growth and diversify into sectors beyond e-commerce.
Build a strong leadership team:
As the business grows, having a capable leadership team in place is crucial. Select individuals who not only have the right expertise and experience but also align with the company’s values and vision. Among other factors, Facebook’s early success can partly be attributed to Mark Zuckerberg’s ability to build a strong leadership team that drove the company’s growth.
Empower and enable employees:
Provide training and resources to employees to enhance their skills and capabilities. This empowers them to take on different responsibilities as the business grows. The Inc5000 business I mentioned earlier made employee and leadership development a core facet of their strategy. They are preparing everyone in the business for the changes and challenges that will come their way as the business grows.
Focus on operational excellence:
Streamline operations and eliminate inefficiencies to maximize productivity and output. Use applicable methodologies to identify and eliminate waste in your processes to avoid waste growth with your scale. Toyota is a pioneer in operational excellence and continuously refines its manufacturing processes to improve efficiency and quality.
Cultivate a culture of innovation:
Encourage creativity and innovation within your organization. Reward and recognize employees for innovative ideas that can improve products, processes, or customer experiences. 3M is known for its innovative products, and encourages a culture of innovation through their “15% Culture.” This initiative allows employees to use up to 15% of their work time to pursue projects of their choice outside their regular responsibilities. One of the most famous outcomes of this policy is the invention of Post-it Notes, which has become a globally recognized and widely used product.
What are some common misconceptions businesses have about scaling? Can you please explain?
Scalability goes two ways. Operational scalability done right enables a business to grow massively. When times are tough, it also helps a business to contract without damaging the customer experience. Also, scale as such is not necessarily the most relevant metric. For many businesses, profitability is more important than scale. Of course, they often go hand in hand, where operational scalability drives profits (the famous economies of scale). As Dr. Herman Simon famously said, no company ever went broke turning a profit. But many companies went bust pursuing scale at all costs. That’s why in the end profit is king, not scale.
How do you keep your team motivated during periods of rapid growth or change?
As they say: dig the well before you are thirsty. Preparing employees for change needs to happen before the change actually occurs. When they know how to react and cope with rapid growth or transformational change, the likelihood of them sticking with you is way higher.
Main Image by Didssph