The term ‘Hypergrowth’ sounds fascinating to every entrepreneur; after all, who wouldn’t want to grow by leaps and bounds. However, as fancy as it sounds, many fail to realize the real deal that comes with it – maintaining the standards. Fuelled by explosive growth prospects during the scaling phase, businesses often struggle to prepare for the challenges that crop in the way – which leads them to their biggest downturns.
While unprecedented challenges can be tackled with immediate measures, the primary growth challenges pose a bigger threat. While the need for organizational culture is an undebatable deal, CIOs and CFOs of enterprises with a validated business model have an uncalled for responsibility to develop a ‘scaling culture’ within their internal systems to pilot management tools for dealing with the pace of explosive growth and with the unique challenges that emerge out of hypergrowth – a balance between long-term strategies and quick decisions.
The deal with organizations having stable growth rates is very different – their challenge is mostly about developing the right product and acquiring a market. The difference between growth and scaling in linear terms is in the effort – while adding new resources (like financial and human capital, technology) to drive streams of revenue is referred to as growth, scaling, simply put is, achieving an increase in revenue without increasing the resources. And hypervelocity growth, in mathematical terms, is expansion with a CAGR of above 50%.
For organic and sustained growth, every organization needs a Strategic Planning Function, reason why management positions like CEOs and CFOs are increasingly being involved in strategizing. Their responsibilities are expanding from the regular purviews of internal controls, budgeting, investor relations, corporate governance, and risk management. This call to being moved up the value chain involves an extensive understanding of the product value proposition.
Consider asking yourself these questions when you plan a scaling drive:
- Why do your customers prefer buying your products?
- Do you have futuristic solutions to overcome pain points?
- Is your business economy sustainable and driven by relevant metrics?
- In which stage of product adoption lifecycle is your business presently?
- What are your plans to expand the relevance of your product/s for gaining market share?
- What is your long-term strategy to fill product gaps?
Since the prime differentiator for fast-growing firms is the growth rate, appropriate talent acquisition is one of their biggest challenges in terms of enduring the pace at which they are rising. Without the right people and systems in place, any fast-growing enterprise is likely to fall apart. Developing this understanding is very crucial for making the right financial decisions. This also includes identifying the sectors where a firm wants to initiate the cost drivers.
The Roadblock called ‘Tech Debt’
For any enterprise that looks forward to scaling, the C-suite needs to have a good understanding on the extent of technical debt as it may account for all short-cuts taken previously in terms of Software Development that may affect the prospect o scalability. You need to consider the probable future costs in the financial model that allows your software stack to be scaled up. As the higher-ups, you should be ready to tread on the ‘risk curve’ while planning these investments wisely, keeping in mind the business’s lifecycle, liquidity needs, and sizeable market.
Most hypergrowth businesses are not particularly focused on growth – their consistent efforts are towards steady revenue growth, acquiring smaller businesses, and cornering the market sector. For hypergrowth companies, it is essential that they maintain their pace for years before their investors see sizeable returns. This also means a steady flow in the business capital to hold the business solvent.
With my experience in the venture-building scope, I have listed below a couple of challenges that hypergrowth companies commonly face:
1. A singular focus on top-line revenue growth: Because these businesses are expected to sustain their growth for a number of years before they finally see results, the C-suite gets exceedingly engrossed with numbers, often disregarding the need for modernization of infrastructure and software scaling. Late attention towards building human or IT capacity often leads prominent businesses to their downfall.
2. Drooping retention rates: What companies fail to realize is that during the start-up phase, every employee puts in their best. However, with time, these efforts get saturated, and the business process feels burnt out. Putting in extra hours cannot be a long-term strategy for your workforce; it only leads to employee dissatisfaction and a toxic culture.
3. Skyrocketing marketing costs: You cannot expect that the marketing cost will remain the same over the years as you transition from a start-up to a company with an increasing growth rate. The C-suite needs to identify what money goes in for new client acquisition. Unjustified marketing costs during your growth years can scare off investors from your business.
In the world of fast-paced venture capital, only a potent scaling strategy can help you navigate through challenges. Here are a couple of time-tested tips that worked for us and helped us chalk an actionable plan:
Redefine culture in terms of observable behavior: Every leader in your firm will have their own work culture, which will be followed by their respective team members. But you should remember that in your hypergrowth phase, the count of your resources might increase exponentially, and good work culture might get lost in translation.
It is very important to reinstate your business values and yet be adaptable to different working styles. The key is to develop skills or reskill on the basis of a well-defined set of principles.
Document changes and build a digital stock of learning materials: Gone are the days when HRs would walk employees through several hours of onboarding processes and pivot them about the company culture. We can safely assume that a majority of the new workforce will be working remotely. Hence, it becomes extremely crucial to build an easily accessible digital library of training materials. Besides being your intellectual reserve, these virtual programs will be the documentation of change that your organization goes through.
Also, these online materials, when made interactive, become an effective thread of communication between employees and the HR suite as the employees view these more of as fun interactions than textbook training.
Reinforced Manager-employee communication: Ask any people manager, and they will tell you that how significantly their equation with their team has changed in the post-pandemic world. And this one aspect that you cannot have control of! With more pressure to drive growth and optimize productivity at their levels, the managers at times tend to focus more on achieving business goals. Reduced communication and recognition are two disastrous reasons that your employees might feel undervalued and disconnected.
It is very important that people managers recognize individual efforts because, just like your customer experience, your employee experience matters too. As one of the businesses that started working 100% remote in the early phases of the pandemic, our team leads and management realized that with the virtual work culture, we need to refocus on our expectations from our employees. This is not to discount them on their responsibilities but rather identifying their core strengths and redesigning their performance metrics to the extent that they are able to reskill as per emerging demands.
Also, in this regard, it is important to understand that redistribution of power is one of the key drivers to upscale effectively. While the ultimate decision-making abilities should be within the guarded walls, you, as the hierarchal tops, need to delegate some power to the ones who are more connected to the regular operations – since they have a better understanding of the real struggles in the process and can better foresee red flags.
Scaling is an extremely technical term; however, it calls for a lot of behavioral changes within the organization. In order to maintain and sustain the velocity of your growth, you must be ready to walk on a tin rope and more develop an adaptable but deep-rooted cultural value for your organization.