STEP SEVEN: LEVERAGE
Growing organically is important for establishing a robust business. but once you have created a solid core business. it's time to think about the future. All organisations must have the ability for continuous renewal.
Renewal means growth - an organisation that does not grow does not stay the same. it shrinks: there will always be some turnover of customers due to changing demographics. tastes or trends; costs will increase. sometimes faster than the market will bear price rises; and legal. economic and political environments impact the viability of certain industries and business practices.
Scaling up
Growth requires the ability to scale. that is. a structure that allows you to do more of the same otherwise the pressure of demands of growth will eventually lead to the organisation to break down. Think of scale as an elastic band; at first it goes easily around the items. then stretches as you gradually add more. All physical resources: your buiLdings. your IT network. your line of credit. your website. even your time need to be set up to have this ability to extend or it will not be long before that elastic band snaps.
Scale has traditionally been the way organisations grow. They use what I call the addition/multiplication approach. 'Addition' meaning they add more resources to increase the volume output: another machine. another site. another brand. another person. and so on. At the same time they are multiplying the amount of business that can be conducted for small or no increases in cost. for example. their marketing is now covering two sites instead of one. or their accountant is working on more revenue streams (also called 'economies of scale'). As the cost of doing business reduces as a proportion of sales the organisation can add more resources to increase scale again. and so on.
Scaling. as important as it is. is risky if it is your only strategy for growth. For instance. just because you can produce more. does not mean the market can bear more - you can simply find that there are not enough customers to support the volume increase. It can also turn your product - or the perception of it - from unique. interesting or specialised to ubiquitous (has the market for frozen yoghurt been saturated?) or homogenous.
When scale fails to work. businesses usually respond with the 'subtraction/division' mentality. basically. cost-cutting. They subtract as much as they can from the whole. such as shutting outlets. reducing variety. cutting service. implementing redundancies. while expecting existing resources to be spread further, particularly staff that are suddenly expected to divide their time between additional roles. Subtraction/ division actions are usually reactionary and while they may be vital for immediate survival. it is not a viable strategy for the long term success of your business.
There are also cost/investment issues to consider. Some industries need to consider that the cost of resources is increasing beyond what is a feasible investment. Other industries are at risk of sudden unexpected devaluation. Current taxi licence holders. for example. are at risk of the value of taxi licences for which they could have paid as much as $500.000 being slashed if proposed changes to the taxi industry are adopted.
The term 'marketing myopia' was used by Theodore Levitt. an American economist and professor at Harvard Business School in 1960. to describe the risk of businesses becoming obsolete if they defin