From Start-Up to Scale-Up: How Singapore companies can make the jump

There is a lot of focus on creating a start-up culture in Singapore, and that is good. However, there is a bigger question that should be answered, and that is whether Start-Ups who survive the brutal birth pangs of entrepreneurship can become Scale-Ups.

This is because research has shown that economies are driven by Scale-Ups and these companies who could make the switch from small to medium employ the most people in any economy. Germany is a good example, being powered by their Mittelstands.

So what can stop a Start-Up from becoming a Scale-Up?

First, let us define what Scale-Ups are. According to Gazelles International, Scale-Ups are companies with the ability to keep growing at 30% at least annually on a consistent basis, for more than three to five years.

Thus to be a Scale-Up, a Start-Up must not only survive, be profitable, but also be sustaining profitable. In business strategy terms, it means focusing not only on profitability but also on profit-ability.

So what needs to be done to ensure that a Start-Up matures into a Scale-Up? First of all, let's look at what mistakes a Start-Up should not make.

The first, and most important, is to not let early success get into their heads. Verne Harnish, acclaimed business growth guru, whose system has helped more than 2000 companies to scale their businesses, observed that the number one reason that hinders breakthrough is ego. This observation is not without basis - various other sources point to this as well.

For example, John Mullins, business professor at the London Business School, said in a recent conference in Dallas, USA, the Growth Summit organised by FORTUNE, that 75% of Start-Ups fail after getting investments from VCs. Besides not knowing what to do with the money strategically, the other reason he cited is the success that got into the heads of the business owners, and they start to focus on the wrong things.

At the conference, I asked business coaches from Dubai and Germany if this was also the case for their countries and they also observed this phenomenon of how success imbued conceit, and that led to failure.

Another research by Jim Collins, the author of the book From Good to Great, points out that the seeds of failure of a business is not sown when the 'S curve' life cycle starts to taper off at the top end, but when it is nearing its peak because this is where a sense of invincibility starts to creep into the mindset of the management team.

This mindset prevents innovation, change, listening to feedback, or to continuously learn and adapt the business. He calls this the Hubris of Success.

However, I believe there is another 'ego' that Start-Ups must take seriously, and that is E.G.O. It stands for Endgame, Game plan, Organisation. Start-Ups should not have ego, but must have E.G.O!

Endgame

How many businesses start with an endgame that is motivating beyond dollars and sense? If you ask most Start-Up founders what they wish to achieve, they will say either to sell-out or to IPO. But is that endgame going to motivate your company to greatness?

Steve Jobs talked about making a dent in the universe as his prime motivator to create one of the most innovative companies in the 20th century. He also said that businesses deemed as 'overnight successes' take a long time to build.

What about you? What will motivate you beyond money, keep you humble and learning when faced with failure and hardship, when the road is long and tough? More importantly, what endgame will inspire good people to join you and stay with you when the going gets rough?

Game Plan

Do you have a game plan? I mean a real strategic plan based on sound principles of thinking through strategy? As my professors at NUS Business School said, when a business fails, it is not because they had no strategy, only bad strategy.

Why? This is because many Start-Ups mistake tactics for strategy. This is not just a flaw of Start-Ups. Some of the Scale-Ups I coach run into this problem and they start to plateau or they find that there will be competition that they can't overcome because they were growing on luck, guts, and hard work.

So what is good strategy? Good strategic planning includes the following components:

1. A thorough understanding of customer needs and fears
2. A plan that helps you to make trade-offs to balance scarce resources with results
3. A plan that gives you three to five moves that will differentiate you from your competitors. These moves will make it hard for others to copy you.
4. An execution plan that keeps everyone accountable

Several companies I worked with, when asked to define their strategy, would say 'This year we will focus on marketing', or 'We will implement IT'. How does this move differentiate you? Aren't they things that your competitors could do too? How do they make you 'un-copy-able'?

Organisation

In every business forum or conference I attended across various regions, the number one reason business leaders state as an obstacle to becoming a Scale-Up is attracting good people. Do you have a plan to get the best people? And when you found them, do you know how to organise them?

During business coaching sessions, I will ask companies if they:

1. Have the Right people
2. On the Right seats
3. Doing the Right things

These three questions seem simple, but are extremely difficult to answer. This is because businesses do not really know what the Right person looks like, the Right seats look like, and what the Right things look like.

The Right person is not just someone with the right qualifications or experience, but also the right fit and the grit to fight alongside you. The first two are easy to find but fit and grit? Do you know how to assess and find people with fit and grit?

One very big company I work with confessed that they focus on the organisation chart when they hire and not on identifying the Right things and the Right seats – the two things that create value.

If big companies fall into this trap, Start-Ups should start to think about them before they become a big ship which will be harder to turn around. What I wrote on E.G.O. is nothing new. So why do I think it is worth repeating? This is because it is better to set these practices into a business when you are starting up and build it into the company's DNA instead of waiting until you become too big to change.

It is always easier to steer a small ship in the right direction than to change course for an aircraft carrier. One of the CEOs of a small company I coached was very wise when he said he had the end goal to franchise his business, so he wanted to put E.G.O. in place so that when he replicated the business in other countries, it would reproduce itself with the right DNA.

Let me end with a sad story I heard many times. Whenever I run workshops on strategy in the region, business owners who are struggling come and tell me that their businesses made profits for the first five years but they used the profits from the first five years to pay the losses for the next five.

Why?

Because early success made them resistant to change, to innovation, to continuous learning, and to feedback. Success has a way of binding a person's mindset to resist change, relying on old ways that worked. Start on the right footing, and save the headache later.

Don't let EGO stop you from becoming a Scale-Up. Let E.G.O. scale you up.