Scaling signals

"Is it time to scale?"

Every innovation team, if successful, will eventually scale. But scaling too early is extremely risk and can bring down the whole venture due to additional expenses and focusing on unvalidated assumptions.

Corporate innovation teams are at most risk because they are usually pushed to scale as quickly as possible. To that, I want to stress that the quality of work preceding the scaling phase has significant impact on both overall success and profitability of venture in question.

I've seen it happen again and again—a shortcut here and there, "we'll fix it when we get to it," "research said," so on and so forth—which postpones critical insight work to later phases. Insight that makes teams make suboptimal decisions, which later cause delays and expenses and frustrations.

While every company is different, and every innovation team is unique, here is a simple five item checklist that can be used to assess if it is the right time to scale:

• Market opportunity validated. We can articulate the customer's profile, including their need (as problem, desired outcome, or job); we can address the need (product and service mix); the market size matches our ambitions; and we have a mix of qualitative and quantitative evidence for all of the aforementioned.
• Good grasp of industry challenges. We can articulate key trends impacting the customers at macro and micro level, on both supply and demand side (e.g. industry GPS chart, value curve with leading suppliers, etc.); we know how they impact the customer (e.g. we can rank them); and we are aware of what might (or is) driving change in the industry.
• Customers buying product for known reason. We know, with high level of confidence, how and why customers buy our product: we know the buying trigger, the decision making process, different people involved in process (e.g. if there is a user, technical buyer, economic buyer), and their decision making criteria.
• Customer demand bigger than supply. When demand outpaces supply, then we know we have a very strong signal that we might have reached the product/market fit, especially if we have validated the market opportunity and know why customers buy. And yes, it is quite possible that even a large enterprise is unable to meet the demand early on. Remember, innovation teams rarely have the resources of the whole enterprise behind them—meaning they are constrained in how much they can provide. That is a not a bad thing.
• Functioning business model with known levers. We can articulate the (i) value proposition for the customer, (ii) resources and processes required to create and deliver it, and (iii) profit formula to achieve and attractive return. In other words, we know the key drivers in our value model, operating model, and profit model. Additionally, we know which growth engine (sticky, viral, paid) works best with our business model, and we have identified best traction channels.

How many items do you need checked off before you commit to scaling?

All of them if you want to grow profitably.

What if the demand is not bigger than the supply?

Then you must have a feasible, evidence-backed, demand creation plan.

Why is it all about customers? What about internal procedures, legal, IT, procurement, etc.?

Great majority of innovation initiatives fail because they fail to meet the customers' needs. By deeply understanding them, we can create value for them. If we can't, then nothing else really matters.

We are almost there, we plan to scale any day now.

The least expensive time to fix mistakes is early. By investing a little bit of time and resources now, we are significantly increasing our odds of success whilst reducing the investment risk as well. Think of it as paying for an option to invest. If it is promising, then, and only then, we invest in scaling. If not, then we spent the money and time to confirm this isn't worth further investment.

Win-win.