Taken together, the four critical components of the Discipline of Strategy are opportunity, leverage, scalability and marketability, lead to exponential growth.
Here we will talk about scalability.
Scalability is the ability to duplicate into new markets and new geographies. You’re never going to grow exponentially if you stay the same size, in the same place. It is kind of like leverage: you want to do more with what you have.
Scalability is being able to maintain or improve your profit margins while your sales volume increases.
Think about it this way. What does a building contractor need in order to open new markets and to do business in them? The contractor must explore his relationships, positions, sales and supply chain, and be able to answer these questions: What processes do I have to duplicate to make this happen? What workforce is needed? Can I use my current staff or do I need to hire? And what can I do to ensure that I will grow and meet the needs of new and existing customers?
A business that can scale up can automate specific processes to take advantage of more significant numbers: think about an automated assembly line. The first sale carries the highest costs: everything that the company has invested in the product is counting on that first sale. Additional sales lower the per unit cost to the point where it can become negligible.
Here are several ways, or steps, in which a company can be scalable:
- Expanding markets
- Licensing agreements
Scaling-up production means you need similar growth in your customer base. You must make sure that there are enough core consumers who need the solution you’re offering. This increase could come from expanding markets to other locales to find customers, or from franchising or licensing agreements.
In franchising, a franchisor’s brand is its most valuable asset. Based on what they know, consumers decide which brand to patronize and how often. Great franchisors provide systems, tools, and support so their franchisees can live up to the system’s brand standards and enhance organizational growth..
Another way to scale business is through licensing, which has far fewer restrictions and limitations than franchising.
Licensing is commonly used when a company has invented or developed a product or process and then protected it by a patent, copyright, or trademark. Licensing is used when another party seeks access to the product or process to advance their own business.
To recap, scalability strategically exploits current and future capacity in order to build sustainability. You expand and grow by knowing your capacity, your market and your audience, and by having the proper organizational processes in place. The ways in which you can scale include expanding your market, franchising or licensing.
Where do you believe your company is scalable? Contact Us for a free consultation on how we can help you grow sustainably.