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Growth

Planning for the future: The importance of scalability

George Groves
Technology Journalist

George Groves is a writer interested in all forms of technology, creativity and digital trends

George Groves
Technology Journalist

George Groves is a writer interested in all forms of technology, creativity and digital trends

With economic uncertainty on the horizon, making sure your business can adapt to change is more important than ever.

Business models can be split in to two overarching categories: scalable and structural. While the definitions of both vary by source, essentially a scalable business model is one where incremental costs decrease as revenue increases.

Trying to run an entirely scalable business is a big undertaking, but integral to the success of a business if the aim is ongoing growth. All areas of the business must be taken into consideration: from human resourcing and information technology, to marketing and the product itself.

So what does scalability mean for two of the most important assets of any business: its product and its people?

Bridge viewed from above

Scalable product delivery

At the core of every business is what it sells, be it a product or a service. And much of the innovation, from a technology point of view, is around allowing businesses to deliver their product or service to customers with as little friction as possible.

Possibly the most notable evolution in product delivery has been the music industry.  Looking at the history of music delivery systems, we’ve evolved from listening to live performers, to listening to recordings on physical and digital media to now streaming from the cloud.

The industry’s history of product delivery offers all small businesses a valuable lesson in adapting. Keeping ahead of technological advances enables scalability, and Australian businesses are already harnessing scalable product/service delivery using technology like telepresense or utilising connected mobile salespeople.

One of the big drivers of this scalability has been the growing availability of the National Broadband Network (NBN) and a fastbroadband infrastructure more broadly. Fast broadband is helping businesses, particularly those reaping the benefits of eCommerce, in the form of being able to download more and get support on applications as diverse as cloud collaboration and video conferencing.

Scalable businesses experience less friction in growing, particularly in areas such as eCommerce, software as a service (SaaS) and other evolving forms of distribution.

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Agile resourcing

In Roger Hallowell’s “Scalability”: the paradox of human resources in e-commerce, published in the International Journal of Service Industry Management, he explores why many businesses in the US failed in the late 90s.

The bursting of the dotcom bubble was driven by a number of businesses investing in fixed-cost investments (such as their websites) instead of investing in resources necessary for effective service delivery.

One example Hallowell cites is an online toy retailer, eToys. With heavy investment in its web presence, it quickly gained millions of dollars worth of orders. But due to a lack of planning in human resourcing, it was unable to keep up and 10 per cent of its orders were left unfulfilled.

Customer service also suffered, with hold times of over 20 minutes and emails left without a response for days. As a result, eToys experienced a quicker and harsher stock price decline than its peers in the crash.

Professor Lee Dyer of Cornell University also acknowledges the value of scalable human resourcing in his paper In Pursuit Of Marketplace Agility published in Human Resource Management where he suggests that many firms stumble in their efforts to keep pace due to lack of organisational capacity.

One of the outcomes of Dyer’s studies was the need to look at staff that aren’t performing and find ways to increase their productivity or find new staff. This stops the company from losing money while preventing staff from becoming stagnant. Businesses should take care to avoid creating a toxic environment by facilitating any staff turnover with humanity.

Modern advances in HR processes such as Workforce Guardian are making agile resourcing available to both large and small companies, particularly by reducing time required to produce employee and freelance contracts, and making HR guidance available at the click of a button.

A lesson in scale

  1. An infinitely scalable business isn’t always viable. Understanding your industry, your customer base and where opportunities are (and aren’t) can help you identify the ceiling
  2. Identify scalable areas of your business to reduce operational costs. Look at how technology can facilitate efficiencies and scalability. Solutions exist in admin, marketing or product/service delivery
  3. To identify these scalable areas, have a comprehensive business plan. A good plan sets out goals for where you want to be in the future and how you’re going to get there 
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