Explosive vs Sustainable Business Growth


Handling business growth is one of the most complicated processes in any venture. A careful balance between needs and resource management has to be struck. Too often businesses seek explosive growth without having laid the proper foundation for it.

In some cases, intentionally limiting certain aspects of development can lead to more sustainable use of resources. These cases are especially dire when companies receive large influxes of investment. Often it seems that pursuing pure growth, mostly through hiring practices, is the best course of action.

Unfortunately, there might not be enough opportunities to go around. There might not be enough scalability. Growth for the sake of growth leads only to wasted resources and difficulties down the road.

Scalability

Before any growth goals are pursued, a clear understanding of the scalability of business processes and services should be acquired. Several key factors that determine overall scalability:

  • Market openness and clarity of focus. Ideal customer profiles (ICP) have to be developed either through existing data or by acquiring it. Market evaluations should then be performed to gain insight into possible avenues of expansion.
  • Standardization of solutions. Only highly standardized and repeatable solutions are scalable. Each client might need some slight modifications; nevertheless, these should be the exception and not the rule.
  • Space for expansion. Operations and products should have enough business opportunities that would entice a business to keep increasing their teams. There’s always more work to be done. However, ROI on some activities can run into quick diminishing returns.

These three factors are essential to any scalability and, in turn, growth. After some time, it often becomes obvious that some of these do not improve as quickly as some would like to believe. Hiring can often be done much quicker than these factors improve.

Space for expansion, for example, is reliant on the ability to acquire new clients and capture new markets. These factors are highly influenced by marketing and sales performance but are not directly correlated to the number of employees working in these departments.

As such, ensuring scalability and proper foundations are in place is the first step before pursuing growth, explosive or sustainable. The former, however, is often an erroneous approach as the factors do not scale as well as explosive growth would ideally have it be.

Clarity of purpose

A key determinant in whether resources are and will be used effectively is clarity of purpose. In other words, all resources should have clearly predefined goals. These should be outlined as early as possible.

One area where I think a lot of businesses make a mistake is the hiring process. While it has gotten significantly better over the years, some businesses still opt to go for “hire first, decide later”. These issues are especially pressing when newer companies with strong financial backing enter the market.

Going by the previous analysis, these businesses often have little room for expansion, yet pursue growth through hiring processes. In turn, they run into diminishing returns while acquiring a high level of expertise. But that expertise has limited applicability.

Often, it is partly an issue of the overarching strategy not aligning with the smaller objectives, be they quarterly or yearly. If these are drafted correctly (ie, progress is easily measurable, achieving each delivers clear value, etc.), it should spill over into the hiring practices.

With the strategy and smaller objectives in line, clear roles and responsibilities can be defined. If not enough resources are available, then the hiring process can begin. Such a process is definitely not as fun or as attractive as hiring first, being productive later, but it leads to fewer problems down the road.

Expanding outwards

All businesses expand over time, even if the daily operations remain the same. As the customer base grows, managing it requires an increasingly large amount of resources. These cases, however, are fairly easy to get right. Two of the more complicated instances are:

  • Startups or fresh businesses. These are the most susceptible to chaotic growth and, potentially, mistakes. Resources are needed in all parts of the business, but it isn’t always clear how much. While the risks might be lower with third-party investments, these make it easier to “cover up” mistakes, which can be costly in the long run.
  • Development of a new product or service. Moving away from established operations will often require either small scale reorganization or new personnel to take care of the project. Either way, resources must be reallocated, and hiring is usually necessary.

At Oxylabs, our long-held belief that experimentation leads to innovation has helped us develop a repeatable process for new products and services. We start with the seemingly obvious – defining the roles needed for any scaling.

Additionally, our new projects receive OKRs like any other already existing product. While we provide more leeway for them, quarterly goals help us benchmark growth against other services.

As all of our products and services will be at least tangentially related to our existing brand, our teams already have lots of overlapping experience that would be useful for the project. As such, we carefully evaluate how many people are needed and who would be available.

Projects, in some sense, start as part time ventures that are evaluated with that in mind. Slowly, as they become more successful, we start adding full time people to the project. Eventually, it becomes so big that it can branch out to be completely independent.

Such an approach saves us a significant amount of resources and potential heartbreak. Explosive growth can lead to cases where massive reorganization might be required, resulting in people being moved to projects they don’t enjoy or even in firings.

Conclusion

Explosive growth is possible and has a lot of potential. The cases where it is applicable, however, are few and far between. If implemented improperly, it can create a huge resource sink and cause many issues in the long run.

Therefore, taking things slow and pursuing sustainable growth is the right thing to do more often than not. It will save a lot of time, resources, and heartache. Finally, it will even show the project’s true potential even better as a lot of mistakes can be covered up by throwing money at them.



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