Beri Meric of The Ivy sends over actionable insights from interviews with top leaders and business people in the world. Below is an excerpt of advice with minor notes, edits, and comments based on one of the most recent March interviews:
These notes are courtesy of John A. List a renowned behavioral economist at The University of Chicago. One thing that stands out is the ability to adapt to your environment and situation at hand otherwise you’ll be come a radio shack.
- How can you make the critical inputs of your business even more scalable?
When you try to scale a business, there may be inputs that made you initially successful but you can’t get at scale. It might be a unique element, like people. A unique individual, such as a super talented chef or teacher, is very difficult to scale. The key here is to figure out what the non-negotiables are that make your business successful and if you can replicate those at scale.
Be sure to consider which of your non-negotiable inputs will scale horizontally and vertically. Horizontal scaling forces us to ask “To what extent can we scale our inputs scale across different geographic markets?” Vertical scaling forces us to ask “To what extent can we scale our inputs within the same geographic market?” From there, we need to ask “What can we do to make our inputs more scalable, both horizontally and vertically?”
For example, as I look to scale our Chicago Heights pre-K program, if I have a curriculum that only works with really good teachers, I can’t vertically scale with that curriculum, because there are only so many really good teachers in Chicago. What I can do is try to develop a curriculum that will work with the types of teachers I can hire at scale, both in Chicago, and across the country. - How can you better scale across time?
When you look at the data on the Fortune 500 companies in 1955, only 52 of them are still standing as the same entity – 448 of them are gone. It’s difficult to stay on top because of a few reasons.
One, because people turn over. That causes a new line of thinking and a new approach in most cases. Secondly, the world changes. When you look at organizations that have failed–old sugar companies, old steel companies, RadioShack–they failed because they weren’t willing to adapt. They had ideas that had the signature of scalability, and then the market changed or the people changed. They didn’t change to match.
If you’re willing to continuously change and remain state of the art, you have a shot at the long term. This is a constantly evolving problem that you can’t solve just once. Whether it’s a nonprofit or a for profit, any organization in a competitive market will need to come to grips with how to use data to make the way you do things and the way you try to change the world better, or you will be put on the endangered species list. It’s that simple. - How can you better overcome the five common pitfalls of scalability?
We can only solve big problems by working at scale, but not every good idea is scalable. If your project has any of the following five pitfalls, you will fail to scale until that pitfall is addressed:
- Are parts of your project based on false positives?
These cases occur when initial research appeared to indicate scalability where there was in fact none. How can you gather additional data to avoid basing critical decisions on false positives?
- Are you overestimating the significance of a small sample?
Avoid overestimating the impact of small focus groups, pilots, and surveys that measure the preferences of a small sample group. How can you ensure that your experiments are as close to real-life as possible, with replicable results across different groups?
- Does your project have unscalable ingredients?
A good example here is a restaurant that is launched around a famous chef vs. a restaurant that is launched around quality ingredients. You can order more ingredients as you scale, but a business built around the talents of one person won’t achieve the same scale. Look at your inputs and determine if they are replicable. Just because something worked one time or in one place, doesn’t mean you can replicate it.
- Does your project appropriately anticipate spillovers and unintended consequences?
Scaling can have cascading effects, both positive and negative. What will be the impact on your key ingredients, stakeholders, and marketplace as your project gets bigger? Be sure to anticipate the negatives and embrace the positives by rigorous scenario planning.
- Does your project have economies of scale?
This is the supply side of economics. What does it cost you to expand production, and are there economies of scale or diseconomies of scale? How can you make sure that as you produce more, your cost per unit will go down (instead of going up)?
- Are parts of your project based on false positives?