Some of today’s most successful companies have relied (and continue to rely) on the scalability of their business model to achieve profitable and sustainable growth and development, and this attribute of business modeling can be a key factor in avoiding the risk of the enterprise being left behind.
Contents
Scalability refers to your business’s capacity of coping with a period of unpredictable growth. According to Investopedia, scalability is “a company’s ability to grow without being hampered by its structure or available resources when faced with increased production”.
Simply put, a scalable business is able to keep providing quality products and services in higher demand, maintaining or even improving customer experience, and its business model allows it to grow through new markets.
There are three features that identify scalable businesses:
It’s important to highlight that scaling is not the same as simply growing. Growing means investing in resources to have productivity and revenues increased.
Scalability is about having the productivity and, consequently, revenues, increased, without having investments and costs proportionally elevated. In short words: more output, with the same previous input.
In order to create a scalable business model, it is essential to identify and understand the drivers of scalability. The most powerful four are:
Scalability is not for every business and can even have some disadvantages:
It is fair to enumerate five patterns of business model scalability. They are:
To understand scalability better, it is important to separate it into two: internal and external.
Internal scalability is about the business model design, with all its resources and partners, and it describes how capable the enterprise is to expanding customer base and sales rapidly, at a low cost.
External scalability, on its side, concerns the business environment, with all the customers, markets, and regulations. Therefore, it will describe how the business environment is welcoming for expansion.
The BMI Scalability Matrix was created on the basis of these two dimensions:
The use of other producers and resources reduces overhead costs, like labor or infrastructure.
Automation in manufacturing is actually the reason for economies of scale. With AI and powerful algorithms, more and more tasks will be automated in the coming years.
A virtuous cycle of growth (also called flywheel) is composed of positive feedback loops. These feedback loops happen when you improve your offer in a way that benefits your customers while enhancing your revenues.
Some people simply cannot work well under the pressure of uncertainty and instability. The best option for scalable business is to rely on experienced people, with the proper mindset to scale.
Big and growing markets are the best choice for any company. However, when you have to decide between one out of the two, pick the second one. A growing market will allow you to raise funds in order to grow along with it.
Your market will always face some barriers, such as language, cultural differences, regulations, local technology, etc. Therefore, you should always think on how ro overcome limitations to expand your market.
If you want to scale really big, you need a higher purpose, more than simply a strong value proposition. A higher purpose brings something relevant to the world, and it will keep you motivated even when you face scary challenges, and help you attract talented labor.
Here are some tips on how to make your brand more scalable:
While traditional business models typically lead to returns that are linear to the investments, scalable businesses may achieve accelerating returns.
However, that requires thinking strategically both about value propositions for stakeholders, partners, and customers involved and in the business ecosystem. And that strategic thinking cannot be met simply by relying on traditional analytical exercises such as analyzing cost structures and market-segment growth.
Johnson & Johnson, a pharmaceutical and consumer goods company established over a century ago, prides…
Caterpillar, a renowned global manufacturing company, has dominated the industry for decades. With its extensive…
Instacart, founded in 2012, has quickly become a leading online grocery delivery platform. It offers…
The Quora Business Model revolves around creating a platform where users can ask questions, share…
Who owns Dollar General? A prominent discount retailer, Dollar General is not owned by a…
The Getaround Business Model revolves around providing a peer-to-peer car-sharing platform that allows individuals to…
This website uses cookies.