The Paradoxes of Scaling

“If you really look closely, most overnight successes took a long time.” — Steve Jobs

Kellogg School of Management Professor Mohan Sawhney sat down to discuss the paradoxes of scaling and the importance of timing your transition correctly. As companies scale, they must shift from being opportunistic to becoming strategic.

Professor Sawhney has worked with a range of companies at various stages of their life-cycle, from startups, to mid-sized companies, to large enterprises. He says he’s observed an interesting phenomenon in that several aspects of strategy are absolutely critical for you to grow in the early stages, but if you keep persisting with those strategies, they will kill you as you try to scale.

He says the paradox is that the very strategies which really work out in the early stages start to hurt you in the long run. You almost need to reverse your strategic thinking as you scale up.

For example, Professor Sawhney says, when you start off choosing customer and markets, you have to be opportunistic. You need to probe different segments, different customers, and explore different opportunities. In fact, you’ll be probing in may different directions early on in the startup phase. However, if you persist in being opportunistic for too long, you’ll spread yourself too thin.

He says you’ll need to begin narrowing your focus as you get traction within a vertical and start to winnow your choices. At some point you have to flip the switch and become strategic.

Interestingly, Professor Sawhney says, how you drive sales and generate demand early on in the company’s life-cycle is all about relationships. The founders and key personnel go out and sell the rolodex. People are buying from you because they know you. In the beginning you can’t sell without that personal connection, but at a certain point, you’ll want to scale. He says this is when you need to begin investing in building a brand. The brand becomes a proxy for a personal relationship with someone who’s never met and doesn’t know you.

Professor Sawhney says to scale, you’ll need to make a shift in processes. Smaller companies don’t typically have these processes in place because it’s really only one person in a department trying to do everything. But as you grow, you can’t rely on individuals and key personalities. He says you need to institutionalize the expertise and shift from people to processes.

These are some of the paradoxes in scaling a company. As a business leader, it’s crucial to understand when you need to make the switch as you seek to scale. You can view his full comments here.

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