Scaling a business successfully is the goal of every start-up. Without the potential for scale, even though the business is returning a huge profit at the moment, it’s not sustainable over a long time. Scaling up a business involves that you can increase your revenue, without directly increasing your operating cost. This depends on the profitability of existing customers, the cost of acquiring new customers and the rate of repeat purchases made by customers. The scalability of a business is beyond opening new offices or hiring new staffs. Recall that at the time WhatsApp was sold for $19 billion, the business had only 55 employees servicing 450 million users who were sending 34 billion messages a day. That’s a company with little size, but huge scale. Today scale means fewer expenses, few employees, and wide usability.
Scaling too fast, because there’s enough fund, can be dangerous. Entrepreneurs need to start small, innovate rapidly, fail and fail fast. They need to build, measure and test the market through validated learning to prove their idea. Once the threshold of minimum technology adoption is past, then you can start thinking about scale. Here are a few steps worth taking note of:
- Identify the pain points
Before you can scale your business, first you need to identify an unmet need. Whether you are just developing your product, or it has been existing, the most important thing is that you are providing solutions to problems customers are willing to pay for. This requires a lot of empathy, deep interaction and iterative process that immerses you into the obvious and predictive needs of your customers. Without carefully identifying what the pain points of your customers are, you do end up creating products they never wanted
- Develop a low cost solution
Once you have identified a need, the next thing to do, is to create a fast and cheap means to solve the customer’s problem. Here, you must avoid the temptation of building a perfect product which you think completely solves the customer pain points. This cheap product does not necessarily implies an inferior or low quality product. In fact, you may not even build any product at all. What is important at this stage is that you can rapidly experiment your products with real time customers, observe the way they interact with your product, get their feedback and use it to tune the growth control elements of your business. If you go ahead to build a full-fledged product, without taking conscious efforts to understand your customers’ needs, you will end up building features not needed by your customers, or not including what they really want. Once this gap exists in your products, it creates holes for competitors to do it better than you and in no time, you are out of the market
- Experiment and Learn
The goal of a start-up, is not just to develop a preconceived idea, but to adapt such idea to the specific needs of customers and such needs must be one, customers are willing to pay for. By developing a low cost solution, you can effectively carry out usage experiments via customer interaction, learn from them, and adapt it to fit their specific needs. The beauty of a low cost solution, is that you can easily deploy it over a small chunk of remote customers. These customers will give you honest feedback that you will use to make improvements to your products. By doing this, you are putting your customers at the center of your product design, a step closer to a customer-centric firm.
When Airbnb was first starting out, their user base was small and a lot of their service was manual. At that stage of growth, it was an advantage because they could get a lot of in-person feedback.
The founders realized that they had to talk to their customers and learn about them, but how? One of the things they tried was offering free photography to their hosts. When a new host signed up, the founders offered to travel to their apartment or house and photograph the property. That gave the founders a great opportunity to hear about what the host wanted out of the service. As it turns out, having beautiful photography also became a key feature to boost bookings on the site.
In the early days, the founders would personally travel to host cities like New York, and visit new hosts, photographing their property and talking to them about Airbnb. As Airbnb grew, the founders couldn’t personally visit every host, they started hiring freelance photographers in key markets to take the photos, and bringing on interns to process host requests for photos and then manage uploading the images themselves.
Over time, the time and energy it took to process all the requests and manage all the photos started clogging up internal workflow, and it became obvious that they would need to automate pieces of the process.
For example, rather than having hosts request a photographer by email, give them a button that automates the request process right on the site and eventually app. Another example, rather than manually uploading photos to a host account, automating a way for photographers to upload photos and directly show up in the host’s account allows the Airbnb team to be more responsive to requests and get listings up and running with beautiful pictures a lot quicker.
These pieces didn’t all happen at once, but they happened over time as they were needed and the pain point became acute.
The team would do it manually, learn about it, see traction with it, and then automate what had become painful bottlenecks that stood in the way of growth. The automations allow the process to become more efficient and the business to scale. And taking the time to let automation opportunities to emerge helped the team spend tech resources on the right features and all of that learning by manually doing it helps them to get the features right. Piece by piece, task by task, action by action, they were able to automate an entire process over time, and eventually it became a fully automated gear in the overall experience that makes hosting on Airbnb easy and delightful.
The human judgement may not always be right, but can definitely be sharpen through validated learning activated and sustained, via customer interaction. Just like a scientist keeps testing and validating his hypothesis until it becomes a theory, an entrepreneur must equally employ the same approach to product development. According to Eric Ries, the author of The Lean Startup
Only 5 percent of entrepreneurship is the big idea, the business model, the whiteboard strategizing, and the splitting up of the spoils. The other 95 percent is the gritty work that is measured by innovation accounting: product prioritization decisions, deciding which customers to target or listen to, and having the courage to subject a grand vision to constant testing and feedback
Rather than spending time debating on which product features to include in your design, why not allow your users to be your final decision maker? That insightful and honest feedback you get directly from customers are actionable and auditable metrics you will never get on Google. Do you wish to start scaling your business with limited resources, please get in touch.
This piece was written by Durotoluwa Olumide from Osun state. He offers advisory services on innovation, business strategies and developmental issues. You can contact him directly via: firstname.lastname@example.org