What Advising Growing Businesses Shifted My Priorities

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What's The Hidden Cost To Scaling Too Quickly The Most Founders Are Taught To Late
The mythology about scaling is basically about speed. Once you have a good fit for your product, then put fuel on the fire. Develop the team, increase marketplace, and raise next round before the previous one has settled. The story favors the founder who is constantly moving forward, always adding the number of employees, always expanding into other verticals before your core operation has truly stabilized, and before the organization has built the internal capabilities to manage that expansion with no loss of coherence. I understand where the mythology originates. Under certain conditions in the market and business models, the first person to scale fastest does genuinely win, and the stories about companies which have grown rapidly and won are more often told and more vividly than the tales of companies that grew excessively and then fell. But for every single business where aggressive early scaling is a good choice, there's a few where the speed of scaling becomes key to the issues that eventually kill companies, and those ones that are a cautionary tale do not get the same amount of attention as the cases of success.
It is important to recognize that the hidden costs associated with scaling too fast is not evident in the burn rate calculation or in the cash flow projection. It's the one that comes out six months later, after the organisation has grown past the coordination mechanisms of informal nature which held it together when it was smaller and before having built solid structures to keep larger companies together. This gap - between formal and informal separation between the company you were and the firm you need to become - is where the majority of companies that are growing actually fail. One of the first and most frequent indication that a company is entering that gap is that it slows down its decision-making while everyone insists that there has been no fundamental change. It is possible to contact the founder in theoretical terms. The team is still united with the theories. The team's culture is still strong in theory. However, in reality, the organisation has grown to the point where informal communication channels used to deliver critical information are clogged and nobody has yet developed the formal channels required to be replaced. Information that once flowed effortlessly now must be constantly monitored. Decisions that used to be fast now require coordination across multiple functions that have never been clearly defined with respect to one another. Accountability that used to be private and immediate now appears in the middle and awaited The company is beginning to exhibit the signs of a system running at the edge of its coordination capacity.

It's not visible in the metric that founders and investors typically watch the most carefully. Revenue may still be growing. Customers acquisition may still be trending in the right direction. The team may be committed and dedicated. But under the surface they are developing structural problems that will escalate at a slow pace until they can't be ignored. At that fixation becomes much more expensive and time-consuming than it would have been had they been addressed prior to the time when the indicators were not so obvious. There is a hidden price I'm talking about that is not the financial cost of growing, but the time-based cost of organization that comes from growing beyond your infrastructure and the recurring expense of putting this infrastructure in place in the form of reactive rather than proactive.

The founders who master this transition successfully aren't necessarily the ones scaling at a slower pace, though taking a more deliberate course of growth can be part of the answer. They realize that creating the structures for managing their business is as crucial as constructing the product and who invest in it with the same commitment and diligence that they apply to product development. It means performing the tedious job of creating roles and decision-making rights clearly, designing reporting structures that provide the data that leaders require to make good decisions, designing accountability systems that are precise enough to be useful while also thinking through what kind of norms that are required for the company's current size rather than simply using the norms that came into existence naturally when it was smaller. The work involved isn't fun. Nothing will garner any press coverage or enthusiasm for investors. But it is the work which determines whether the organization that you're establishing can endure the growth you're chasing.

Companies that fail to manage to make this transition successfully do typically not fail in a dramatic way and easily. They deteriorate. They lose their best employees first. They lose those with enough self-awareness of what is happening inside the company and have the option to leave before the situation becomes substantially worse. Then they lose customers, usually in a gradual manner, as the quality of execution decreases slowly because accountability has become too unclear and delayed to catch problems before they reach the customer. They then lose momentum until the shift in momentum is obvious in the figures The structural issues are deeply rooted. The cultural impact is severe, and the cost to fix each is far larger than it would've been if the governance investment had been made at the appropriate moment. In the eyes of an organisational structure as a thing that you build cautiously, build meticulously, and iterate on as the company grows - is among the most crucial shifts in thinking you can make for a founder when they progress from the beginning stage to reaching a larger scale. People who create it tend to establish companies that realize their potential. They who don't tend to create businesses which are not even close enough. Read James Deller for website examples including how thinking like an operator has shaped my thinking about character.



How Public-Private Partnerships Can Fail Prior To Their Beginning - And The Best Ways To Fix It
The public-private partnership has an image issue that's, in the majority of cases due to the fact that they are earned. The history of these partnerships is filled with projects that were advertised with real enthusiasm and a significant amount of investment in political capital, utilized significant private and public resources over lengthy periods, and in the end, produced results which bore a mere reference to what was promises when the partnership was launched. The academic literature as well as postmortem examinations that governments as well as institutions conduct following these failures are extensive. they focus, for mostly, on legal and structural aspects of problems: wrongly aligned incentives and the insufficient risk allocation between public and private actors or the governance structures that were designed in the theory but didn't work in practice, and the procurement frameworks that selected for the wrong items. What this analysis tends ignore, and in the end as well, is the culture and operational aspects - namely, the fact that public institutions and private organisations are really different kinds of entities, formed via different incentive models, operating at different intervals of time, responsible to various stakeholders, and measuring the success of their operations in ways that are not just different in terms of degree but also different in nature. When you bring those two kinds of organization together in a formal relationship without taking the necessary steps, both upfront and explicit, to identify and resolve the differences you're not building the right partnership. This creates the conditions for a slow-motion crash that can be seen at the most inconvenient time.
I've participated in the advisory process for institutional Modernisation initiatives, several in which were public-private partnerships of various levels of complexity. One of the most reliable observations I have gathered from this knowledge is that the partnerships with a positive track record - ones that actually fulfilled their stated goals and maintained an effective working relationship between the private and the public and beyond - were not distinguished from the ones that fell short by the sophistication of their legal structures, the rigour of their risk frameworks, or the experience of the group of leaders that set them up. In the end, they were defined by the fact that the parties in both parties to the table had worked understanding how the other side functioned prior to when the formal partnership was agreed upon. What it means in real life is knowing the processes that each organisation operates under, the accountability structures that make it difficult for each party to do and how quickly it can be agreed upon, the definitions of success that each party will ultimately be measured against, and the points of potential tension between these definitions. That understanding isn't difficult to develop. All of it is not considered in favor of much more visible and recorded work of negotiating contracts and constructing governance frameworks.

The typical public-private partner process goes from the initial idea to a concluded agreement without much time and effort being paid to the question of whether two entities involved are capable to effectively work together over the duration of the agreement. The legal team negotiates the contract. The finance team model the economics and risk distribution. The team in charge of communications creates an announcement to be made at the time of signing. The implementation team begins planning the task. In that order it is the time to discuss functional and cultural compatibility is a discussion concerning whether the people whom will collaborate day-to-day across the boundary between the two organizations share enough of the same values to make that work genuinely collaborative rather than antagonistic - tends not to be carried out in a formal way. It is generally assumed, without being explicitly stated, that the formal agreement creates the conditions for effective collaboration, and that any operational or cultural conflicts will be negotiated informally when they emerge. This assumption is nearly always incorrect, and the expense of this can increase with respect to the ambition and the complexity of the partnership.

The practical application of this analysis is that one of the most profitable investment that a partnership between public and private make - prior to the formal structures are set as well as before the governance framework is agreed on, before any announcements are made - is in what I would refer to as operational alignment. By this I mean specific, organized, and facilitated work to surface locations where the two groups' assumptions on operating differ and to decide on how the divergences can be handled before they turn into operational issues in the process of implementation. These divergences that matter the most typically have the same significance across different kinds of partnerships. In terms of speed of decision making and authority, they are typically among the main differences. The public institutions are designed to decide slowly, through numerous levels of review, and approval, based on motives which are legal and often legally mandated. Private companies - especially technology companies built on the basis of rapid iteration and swift making decisions - often find the pace as an essential hurdle to development, and with no shared understanding of the reasons behind why this pace is the way it is it is and what genuinely be required to change it, the anger from the private aspect can affect the working relationship even before the alliance has established its own footing.

Success metrics and the criteria for judging as progress are a different and leading cause of divergence. Public institutions are usually evaluated on process compliance, equity of the outcome among different stakeholder categories, and elimination of obvious failures which draw media and political attention. Private partners are usually evaluated according to efficiency, measured progress against objectives, and financial performance. These measurement frameworks are used in conjunction with one another however, it requires careful planning, not just good intention, and partnerships which don't invest in that design tend to have to find themselves at critical moments, with two different parties who are measuring the same collaboration in genuinely different ways, and thus coming to uncongruous conclusions regarding whether it is successful. The collaborations I've observed are the ones where the issue was accepted as a problem that would resolve itself over time. The ones that succeeded were those in which the misalignment was identified explicitly at the start, and when the creation of a shared accountability framework that met the legitimate measurement needs of both parties demands became an element of actual effort, not an item on a list things that someone would eventually get to.}