Crossing the chasm from start-up to scale-up is exhilarating. But don’t expect it to be easy. You’re entering a whole new world, and things are going to have to change.
In a scaling tech business, certain risks and challenges are all but inevitable. Whether you’re the CTO or hold any other C-suite role, you’re bound to encounter them at some point.
We’ve pulled out three of the big ones that can cause the greatest harm if they’re not anticipated and dealt with effectively. Start giving them some thought at the earliest opportunity; it will help you make more purposeful and focused decisions on a daily basis.
The premature scaling trap
Research by the Startup Genome shows that growing too fast is a common cause of failure for start-ups. It’s estimated that around 70 percent of scaling businesses fall into the trap of premature scaling.
So, how fast is too fast?
A tell-tale sign of premature scaling is business expansion that outpaces actual business growth. It can come in many guises, ranging from unmanageable customer acquisition levels to over-hiring. While a rapidly increasing turnover and headcount might look good on paper, things can quickly unravel if the underlying systems aren’t in place to handle the change in circumstances.
Growing customer numbers too fast risks an inability to keep them satisfied. If they leave you in droves because your system keeps crashing, you probably won’t get a chance to win them back.
Hiring too many people too soon can also be hugely detrimental. Before you start that recruitment drive, ask yourself whether you have adequate resources and procedures in place for the training and cultural induction of new employees. Consider whether you really need more staff, or if you could empower and enable the existing team to achieve more with better processes or technical approaches.
The technical debt quandary
Technical debt can be a thorny subject for the scale-up CTO. There’s no easy way around it. Sub-optimal technical decisions that may have been perfectly acceptable in the start-up phase usually need to be revisited and rectified to enable sustainable growth.
When technical debt isn’t addressed, it gets harder and harder to change things. It’s like having sand in the gears, stalling progress and potentially bringing everything to a halt.
However, this doesn’t mean you should never incur technical debt as a scale-up. When you need to act fast to develop ideas that meet rapidly changing customer needs, it can be exactly the right thing to do. (Check out our post on why organisations should embrace technical debt as they get set for the post-pandemic new normal).
As with most things, it’s about finding the right balance. Accept that technical debt is normal, but acknowledge that it needs to be rigorously managed and repaid. You can find some tips for scale-ups wanting to loosen the grip of technical debt here.
The operations question
As a scale-up CTO, you probably need to dedicate time and attention to platform stability and resilience. While your early adopters might have tolerated service disruption or outages, the early majority will be less forgiving. System performance, availability and security need to move up the agenda. But you don’t want to encroach too far on the time, space and energy required for new innovations and feature development.
Chances are, you already follow DevOps principles to a certain extent. Nevertheless, most scale-ups have to invest in advanced engineering skills to ensure applications are highly operable at scale. There’s the question of 24×7 support to consider too. How often can you expect team members to be on call out of hours without risking resentment or burnout? And if you extend the team to reduce the burden, will you fall into the premature scaling trap?
There’s no fast and simple solution to this challenge. It’s important to look at your specific circumstances and business goals, then prioritise technical decisions accordingly. A Well-Architected Review can be a great place to start.
You’ll grow faster if you take time to scale properly
As you move beyond the start-up phase, all eyes are on growth acceleration. Naturally you want this to happen as fast as possible. But carving out time to do things properly – and taking care not to scale prematurely – will reap dividends.
The Startup Genome research mentioned earlier found that start-ups which scale properly ultimately grow 20 times faster than those that scale prematurely. What’s more, none of the premature scalers passed the 100,000 user mark and 93 percent failed to break the $100k monthly revenue threshold.
If you try to do everything at breakneck speed, there’s a good chance that growth will peak too soon, or worse still, that the business will fail. Aim instead for a sustainable approach, even if it means an initial delay. In the end you’ll grow faster and stronger for longer.