April 3, 2014 | Written by: Paul Are Angell Killie
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Technology opens up enormous potential and speed in scaling a business. There are many examples of ideas that have scaled into million dollar businesses in a very short time. What are the fundamentals for scaling that can turn a business idea into a fast growing cash machine?
First, let’s take a look at different forms of scaling.
Are we operating the business at scale?
Operating the business at scale mean allocating and optimizing resources to drive the greatest results and volume across market segments. This means running the production lines at the capacity they can operate. However, there is a difference between the production of the Model T and the production of Facebook users.
This difference decides the ability cloud can give to operate your business at scale.
Are we taking advantage of the scale of our business?
Scale is another word for size. Companies can leverage their size by negotiating exclusive deals, favorable terms and volume discounts with other providers. They can use their size to get business benefits from manufacturers and vendors. This is the game of procurement.
Cloud technology can help to organize and structure but not take advantage of the scale of our business.
Can the product scale up or scale down depending on demand?
Adjusting cost and capacity of production to market demand is a vital economic criteria. The just-in-time system Kanban was introduced at Japanese car factories in the 1970s and helped make successful car manufacturers. The ability to scale up and down is about adjusting production capacity and having variability in cost structure.
Move money from CAPEX to OPEX (investment to operation) to give effective use of money. It also gives the ability to adjust quickly to changes in market needs.
Cloud computing can help to scale up or scale down depending on demand.
We are currently scaling out the team
A successful business is based on a successful business model. How the business model scales depends on the architecture of the business. Business models built the traditional way need to scale out the team in new geographies and markets. A business operation that is resource consuming takes time and is risky.
Cloud can help to build a business model which prevents the need to scale out the team.
Does the business scale?
Companies need operating leverage to scale fast. They need to scale administration with minimum effect on administrative cost. Capacity in administrative procedures cannot be sensitive to scaling business operation.
Cloud computing can help scale processes if they are designed for business scaling.
Given these different forms of business scaling, we have three important criteria for successful born on the cloud companies.
1. Production capacity. The fastest growing companies produce their product or service with unlimited scaling possibility using cloud. How can cloud computing give your product or service scalability up and down.
2. Administrative capacity. Scaling a business is also about scalability of administrative processes. A fast scaling business needs a lean organization. How can administrative processes be outsourced and based on scalable technology like software as a service (SaaS)?
3. Sales and delivery capacity. A key factor for scale is reach of the sale and distribution of the product. Can cloud technology be of help for sale and delivery? What is the size of the reachable market with the way you sell and distribute?
All these factors are important for market potential and speed of growth. With a born on the cloud setup, business ideas have shown extraordinary market growth. Some of the world’s most valuable companies are born in this decade. They have proven the explosive power cloud give a business to scale.
Cloud is not all about technology—it’s more about the business model. Born on the cloud is a business model for the future. Please comment below to share your thoughts or connect with me on Twitter.