The Scale-up Process Gap – Getting Started
Our opening post on this theme introduced the problems that companies face as they transition from start-up to scale-up mode. In addition to the gaps identified by others, we identified the Process Gap as one that needs closing if a company is to successfully scale.
To help re-establish the context, here’s a spot-on quote from Julie Zhuo, VP of Product Design at Facebook:
“A company that has already hit the bar of “have we made something valuable?” generally needs to sustain and bring that value to more and more people. Sheer creativity and brilliant product instincts are no longer what singularly matters, and things like good process and effective operating skills start becoming more important.”
In short, the company has to adopt more structured and disciplined ways of working.
Here’s another quote, this time from Erik Fairbairn, CEO at POD Point, which captures the pain / challenge of it:
“Each time your business doubles everything seems to break; your sales process, finance processes, management information flow, so every time your company doubles in size, you end up re-designing every process you have.”
Even if you had it right at one stage, the chances are that it won’t stay right. And, there are going to be scenarios where you have nothing and have to define the process from scratch.
Business analysts and management consultants have been writing about process improvement for many decades. Your initial web search on the topic won’t be encouraging as you will find millions of hits to follow. One useful resource to help you is the Process Excellence Periodic Table produced by the PEXNetwork.com community, and available to download (registration required). It is a list of common methodologies, tools, technologies, goals and metrics that have been identified by techniques such as Business Process Management (BPM), Lean, Six Sigma & Total Quality Management over the years. The range is immense, but the tabular format makes it all a bit easier to digest.
My view is that these lists are not the best place to start. It’s too overwhelming and it all becomes reminiscent of the fable about the blind men and the elephant. I’ve been reading about the merits of BPM software for years and my general criticisms of the BPM-type approach include:
- Seem to start in the middle and ignore the “how do I get started?” question
- Example-driven but examples are often banal e.g. invoice approval flow
- Poor availability of practical guidelines and methods
- Focus on data rather than human factor in process
- Used sporadically for one-time improvement projects and short-term initiatives
The worst advice of all, which you still see on some BPM software vendor websites, is that you should “start somewhere, anywhere” and “jump right in”. But that’s because the worst place of all to start is with Technology. The tools should fit into a method or framework.
In April 2016, Barclays Bank convened a Scale-up UK report (download, PDF 112MB) which combined six recommendations each from the University of Cambridge and the University of Oxford business schools. The Oxford contribution focuses primarily on funding, but the Cambridge section provides two simple frameworks for understanding scale-up growth. These are the “staircase framework” and the “growth paths matrix”. The first helps to better capture currently available value, and the second helps to generate new value. They are useful tools, and they help to highlight that management practices come in “bundles” or “systems” (e.g., HR systems, Logistics systems, Accounting systems, etc.). But they are still just Tools as in two elements in the periodic table example above. They don’t give the top-down, context-establishing, structured approach to understanding the key process engines that I would like to see. The report in general is still well worth a read, however, mine is a point on detail.
I mentioned Verne Harnish and his 2014 book “Scaling Up” in the first post. The Gazelles web site has a set of resources such as the One-Page Strategic Plan (OPSP) that you may find useful. These tools are well-regarded but have never quite done it for me. Maybe you need the whole Program to get the full value.
Another popular tool is the Balanced Scorecard, which is often used in tandem with Strategy Maps. Briefly, these encourage you to analyse the business from four key perspectives: Learning & Growth, Business Process, Customer, and Financial. The emphasis is very much on performance measurement (but including non-financial data). Nothing wrong with this as a tool, except that it does over-attribute the causal relationships between company-internal factors and doesn’t say anything about the external world e.g. what competitors or regulators are doing.
You could turn to academic research. For example, Dallas & Wynn (2014)1 use a case study approach to develop and test a practical approach to process infrastructure identification for a Small Business. They advocate a top-down, 6-level Process Architecture as follows:
- Level 1 – Strategic Activities
- Level 2 – Process Groupings
- Level 3 – Process Overviews
- Level 4 – Processes
- Level 5 – Sub-Processes
- Level 6 – Procedures
This is more like it, apart from the sticky problem that we have to discover the Level 1 strategic activities before we can get down to the more deconstructed levels. It echoes the long-held view (e.g. Jeston & Nelis, 2008)2 that the goal should be to ensure that BPM projects have a clear link to the organization’s strategy and add value towards defined strategic outcomes.
How do we do that?
My view is that there is an existing and popular tool that is very well suited to this, but we haven’t really considered it as a way to think top-down about business processes. It’s the Business Model Canvas as initially proposed by Alexander Osterwalder3.
Before I delve into why, let me make a general assumption about your Business Plan. One of the following is true:
- We wrote an 80-page business plan in Microsoft Word with lots of Excel spreadsheets that was shared with investors, but we haven’t touched it in nearly two years and frankly it is just embarrassingly wrong in its predictions.
- We used the Lean Startup Canvas and the concepts of the Lean Startup to guide us back when. It was good to do and very effective at the time, but we haven’t looked at it in nearly two years and things are much more complicated now.
- We didn’t do either of the above, but somehow survived and here we are about to scale-up. Don’t ask!
One of the reasons why founders use the Lean Startup Canvas rather than the original Business Model Canvas is that the former explores facets differently than the latter. The emphasis on the Unfair Advantage and the Problem/Solution fit is particularly useful for a startup that is looking to define and differentiate itself.
But things have moved on for the startup, past Problem/Solution Fit and even Product/Market Fit, to the problem of scaling-up. Developed as it was to work for more established companies, the Business Model Canvas is better suited for the task.
There is a lot to say about why the Business Model Canvas is so suitable, and this will be the topic for our next post.
1 Dallas, Ian & Wynn, Moe T. (2014) Business process management in small business : a case study. In Devos, Jan, van Landeghem, Hendrik, & Deschoolmeester, Dirk (Eds.) Information Systems for Small and Medium-sized Enterprises. Springer Berlin Heidelberg, pp. 25-46.
2 Jeston, J. and Nelis, J. (2008), Business process management. Practical guidelines to successful implementations, Elsevier, Oxford.
This post was written by Paul Walsh.