In LTV this semester, we have talked a great deal about the difficult decision of when to scale as well as how to do so. One particular view that stuck with me was when the Rent the Runway founders were discussing their own decision to take the company to the next level and said that for them “necessity was the mother of invention.” In their case, customers were literally knocking down their door and they had to act quickly. While I like their sentiment, I don’t actually think that pressure - be it internal or external - should be the motivator for growth. In fact, I think that if there is too much pressure to scale (perhaps as in this case) this is a sign that you have missed something and need to readjust.
In thinking about timing, one of the areas of consensus we reached in the course was that you should generally do so when “product-market fit” is achieved. According to Marc Andreessen, this means “being in a good market with a product that can satisfy that market.” While this is relatively easy in an abstract sense, it can be extremely difficult to know exactly this has been attained.
While there isn’t a perfect time to scale, I think that waiting too long can be extremely detrimental to customer experience, future growth, and valuation and have come up with a few lessons / signs / considerations to take into account in making the decision to scale:
- Trust Early Signs of Product-Market Fit: Fred Wilson spoke about the importance of the first data points and validation you’ll get and how these can be powerful in your decisions when used appropriately. He spoke of when a new customer calls in the second week to add ten new accounts or when your first round of clients is recommending your product to others. While you shouldn’t act on the first positive feedback, you should carefully monitor sentiment and trends and use qualitative information in your decision-making.
- Evidence of Mainstream Interest: One of the biggest hurdles to scaling a business is the need to “cross the chasm” from early adopters to mainstream users. It is extremely important to test ideas and products as early and as rigorously as possible with mainstream customers. Do your best to get the product in front of the widest audience possible and listen and watch adoption closely. Because even if you reach product-market fit with your first users, there is no guarantee that mainstream users will like it as well.
- Alignment of Activities: In the case of RTR, they had put their foot on the gas in terms of promotion, but had hung back on developing some of the key infrastructure and other investments to be able to scale the business. The lesson I took from this was that it is important that whether you decide to go for it or not, your activities should be aligned. This includes the key operational factors as well as your marketing and sales. This ensures that all parts of the organization are able to fully and completely support one another.
- Prepare Levers to Be Pulled: In a lot of cases, there are decisions that can be made well ahead of time to prepare a company for future investment or growth. A company should constantly be asking what options do we have for scaling now and what does our runway look like (for everything!) if we did need to push the “go” button.
- Go Big or Go Home: Related to alignment, when you do decide to scale, you should fully invest in doing so. Holding back some areas could harm the others, so you should make the decision and trust that judgment. If it makes sense to pull back or pivot later, then handle that then. Just don’t do it halfway.
While none of these suggestions are sure-fire ways to ensure you are ahead of pressures, I believe they can be helpful in keeping an eye on key risks in falling behind and to make sure that necessity is never the mother of anything.
