Image from Google Nano Banana
I posted a while back on typical problems with early stage scaling. As an exec consultant you see similar issues at every business. Contexts vary and sometimes scenarios can surprise you. But its rare. If your business is VC or PE backed the race for scale often compounds some issues.
Early stage scale-up pitfalls: What do businesses get wrong first?
Scaling sales before the product is mature enough.
Over-hiring and lack of appropriate forecasting.
Technical debt from an earlier previous PoC that went into production or outsourced firm.
Poor operating and delivery discipline, lack of delivery management.
Poor technical roadmap and architectural planning. Often from poor product requirements and lack of tangible user acquisition numbers.
Key mid level managers/directors level off in roles struggle to deliver.
Key hires at this stage often want to move on as soon as formality sets in. Typical departures are lead/principle engineer and CTO or Head of Engineering roles. These people wear the titles but their skills don’t translate to the new environment. Their capability is formed around project level delivery. They have levelled off.
Product owners who have been involved since the early days can also be a key risk of departure or poaching by a competitor. Their knowledge is often a bottle neck and not documented.
But you need to let these people go. They are brake for progress and are change resistant. These profiles prefer the lack of accountability and want to avoid data driven measures which maturing and scaling a business demands. If small is where they are comfortable, then let them find another role that fits.
Onboarding times can often start to slow at this key transitional stage, organisations often have not invested in considering the pace of new hires and the acceleration of business demands with capital injections.
The hardest roles to hire for at this point are product leadership. Once something is established few product leaders are capable of defining the next stage beyond additional product utility.
Ahead on sales, but behind on product
One of the biggest problems is an unfinished product that has a mature sales team. The biggest gap here is always that the scale-up exec leadership has under estimated the amount of control, effort and utility the product needs to support large enterprise customers. Whose expectations of any vendor may match that of a much larger more established organisation.
Investors often compound the issue by wearing the unrealistic statements of the portfolio company leadership and not challenging on operating maturity early enough. This is most often a combination of lack of operating software technology knowledge, poor due diligence and no one being brave enough to admit that they were wrong, the founder wasn’t transparent or simply didn’t listen to advice. Whatever the reason it’s a difficult scenario to turn around.
Few due diligence reviews take into account end to end automation of the customer product and the context of what it takes to scale beyond the underlying technical solution and obvious commercials. I have seen organisations which claimed to be “ready to scale”, yet didn’t have a customer journey which could let a customer self serve from one end of the solution to the other. Building in this logic for automated billing, invoicing and customer sign ups can be a serious undertaking.
Later stage scale-up challenges: Operational inefficiencies and M&A integration
Lack of operating business intelligence, need to be more efficient but limited insight to drive improvements.
Lack of meaningful product roadmap to drive growth.
Missing product automation which limits operating efficiencies. For example: automated account sign ups, integrated billing etc
High M&A growth often creates infrastructure and organisational integration issues. Operating overheads balloon.
People changes become more onerous than system changes.
Large organisational application inventory with each department using only 20/30% of any one solution.
Mid managers become a necessity and curse, adding headcount to elevate their income and status and trying to take “ownership” which slows down organisational decisions. Bureaucracy can start to bloom at this stage of business, and it takes some vision from the C-suite to ensure operational focus and efficiency.
M&A activities often bring in new layers of politics when founder led businesses brim with frustration that they are suddenly part of a much bigger organisation. You were a business owner and are now an employee working their handover period, subject to targets to get your equity out. Its no wonder these transitions are difficult.
Having an external assessor can help to map the wood from the trees here putting some clarity around organisational targets and mapping a path to get there, it can be a useful facilitation technique. But the more important mechanic to solve problems here is to restructure the organisation so that you limit the influence of legacy cultures on the new organisational structure, and those that remain with the business have clear tactical achievable goals set out from the earliest stage.
Why product leadership stalls in scaling software organisations
Later stage organisations often still have the legacy end to end customer automation which has limited their growth opportunities. They also most commonly level off with product strategy. Most businesses at this stage need a mechanism for distribution beyond standard field sales in the B2B space. Mapping the value chain and dependencies for positioning the product and its technical, operational and marketing channels is often a quick exercise but one that is rarely done. How many software companies would benefit from API services and MCP layers that could query them? Well many certainly could but this is currently often answered with Forward Deploy Engineers.
Again external consultants can help map the strategy and execution here which internal teams often struggle to facilitate being too wrapped up in the day to day.
Why Fractional and Interim Executives often outpace tenured staff
Its impossible as a tenured member of staff or exec leadership to really understand the context you get to witness as a fractional or interim exec. The learning curve is accelerated. It is any wonder to me that people with this experience are not more highly sought after. We have solved problems in multiple scenarios few execs ever get to see once.
Yet still the market focuses on hires from big corporate names they have heard of and wonders why such profiles under perform significantly in scale-up roles. Well the obvious is that the context and thereby skillset is entirely different. If you’re in one role for many years you will lack that context and will not respond to issues fast enough.
Delivering returns depends on ability to identify the right issue and make tactical changes quickly. As a consultant you have to deliver results and learn quickly it is simply how you get paid.
Solving scale-up problems needs to be immediate and tactical. Assessments of those issues and possible solutions should be apparent within an initial conversation with someone experienced. Assessments should be done within days and tactical execution plans should offer short term as well as medium term value.
Most of the problem with consultants has historically been misaligned incentives with large corporate projects, generic skill sets which don’t fit the context and inability of hiring managers to match skills to outcomes.
Its also obvious that if you’re salaried staff stuck in the day to day, running around to hit targets, hung up on politics because its the nature of the environment you are in, its hard to move quickly. Salaried roles will suffer from this, no matter how talented the team or individual.
I will post in future on solving common scale-up problems and hiring, the skills required and the different stages of business and why its so important to get this right.