June 13, 2011

Challenges of Scaling Up

Pradeep Gupta of the Cybermedia Group has a nice article in Business Today on the topic:
Another bottleneck is absence of delegation. When a company starts, the entrepreneur behind it often performs multiple roles, from chairman to caretaker. He takes a wide range of decisions from technical ones to marketing, from production to administration. His team too depends on the entrepreneur for every kind of decision. At a later stage, this hampers growth. The entrepreneur soon finds his knowledge inadequate to tackle challenges, or faces time management problems, which hold back the company. To achieve genuine delegation of responsibility, a second rung of leadership has to be created and empowered. Till this is done, businesses cannot scale up. Entrepreneurs often feel that by delegating they are giving up control. In reality, they are helping the business to bloom.

...There is also the pitfall of execution. In entrepreneurial companies, much work gets done without being formally recorded. Inherently, a small group shares more information and has greater clarity about the company's plans than the rest. But as the company grows, such informality has to be replaced by processes, technology and internal communication.

Resources - both money and people - present their own challenges. Entrepreneurs often bootstrap their companies and use the same philosophy for scaling up. This needs to change. Execution plans must be adequately funded for people to execute and deliver as expected. The key to scaling up is to scale up the organisation's capabilities. Once this is done, the scaling up in terms of performance, revenue and profitability will automatically follow.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in