Scaling-up entrepreneurial enterprises – Pitfalls to avoid and lessons to learn
When an entrepreneurial venture is clearly offering solutions to both social and economic challenges, it is inevitable that it be asked to scale-up its operations. However it is certainly not an easy task, even when it clearly stands to benefit the society at large.
It is fact there are hundreds of innovation driven enterprises being set up in the market every year by visionary entrepreneurs. While many of these innovations fail to take off and some do prove successful because of their relevance in the local context.
Amongst those brave enough to choose to scale-up, their projects are faced with limits to organisational growth such as inadequate resources or dwindling returns on initial investment.
Considering all, it’s important that we break the myth that locally start up enterprises have failed to achieve scale. For example, the likes of Amul and Shri Mahila Griha Udyog (the genius behind Lijjat Papad) have annual turnovers that would put any MNC to shame. Both are co-operatives that have taken on much larger multi-nationals head on and have been slowly and steadily scaling-up. We must remember that they have taken time to grow, not only grow but also created solid and sustainable businesses. A more recent example would be the Faasos chain of environment and pocket friendly fast food. So is it only the product oriented organisations that succeed? Not necessarily. Service and even simply logistics oriented enterprises such as Grofers are carving out a niche for themselves in the dynamic Indian economy.
The Three Biggest obstacles to scaling-up being –
Are you actually READY to scale-up? – You must first objectively analyse if your business is suited to scale. Experience tells us that many businesses are not meant for scaling-up and this doesn’t necessarily make them bad businesses. There are many alternative ways for an enterprise to effectively maximise their impact without scaling-up and this can be through collaboration, sharing of ideas and social innovation. Rather than wrestling down the more traditional approaches, we suggest looking at alternatives to scaling-up. Scale of business doesn’t necessarily equate to scale of impact.
Managing ‘operating leverage’ – Simply put, this is being able to generate additional revenue with smaller additions to your operating costs. You cannot spend INR 2 lacs without actually making at least INR 2.25 lacs off it. The smaller the scale of operations, tauter must the revenue-to-profit ratio. It is myth that as an upcoming enterprise you may need to spend a little more to get things moving in the right direction.
Getting the Fundamentals Right (before marketing) – Faasos, launched in 2010, almost died a rather painful death in 2013-14 before re-inventing themselves in 2015 and today they are more popular than ever! The reason they failed to scale-up the first time around, is the same as what has helped them grow beyond Pune and Mumbai in 2015.
Their inability to identify the target crowd had cost them dear earlier. The most important part of starting a SME (Small and Medium Sized Enterprise) is to be able to identify the RIGHT target group for your product or services. Chalking out an efficient workable plan is much simpler thereafter.
Team Faasos understood that young India had to often move away from home to make good their chosen careers. They missed home-cooked food. So Faasos went for Indian Gharka Khanna with Twist. On the menu were “wraps”, (vegetarian or non-vegetarian) that were actually just home cooked dry sabji wrapped in flat breads (chapatti)!
Next comes knowing when, where and how to engage with the defined Target Group (TG). Faasos took to Twitter to get orders. The first couple of hours saw just 15 orders being placed on Twitter but soon the 15 turned to 1500 and then 15000 in no time! Not long before #Faasos and #AajKhanemeinkyahai (a question that every homemaker dreads!) etc were trending on Twitter. Not only had Faasos managed to actively engage their TG but they had firmly established their brand equity across social media.
Excellent response time and making the customer feel “special.” Faasos tied in little personal touches to their responses over Twitter and on their bills etc which obviously made the customers (who, as mentioned earlier, were far away from their family and friends and probably all by themselves in an alien city) happy and rather special.