At Scale Vs Scaling!

The topic of scaling attracts a lot of attention and deserves to merit attention too. How else can we have the kind of large scale socio-economic impact that organisations are expected to deliver? Every entrepreneur’s dream is to see his / her business become like an Infosys or a Reliance Industries. Every entrepreneur’s aim is to grow the enterprise to a size that can move markets, impact a large part of the world, make front page news, or get to the cover of top business magazines. For all of the above to happen, the entrepreneur needs to think about scale. The possibility of the above outcomes are also a strong influencer / motivator for the entrepreneur among others.

But while entrepreneurs think about growth – they confuse two aspects: ‘scaling’ and ‘at scale’. A project that is to be scaled to have large scale impact is very different from a project that is viable at a large scale. The typical approach to creating and growing the two projects into enterprises is very different. The former needs to be planned as multipliable units with a factor while the latter needs to be planned only as large units with minimum operating sizes. A simple example for the former is that of a sandwich store and the latter would be a power plant.

When an entrepreneur has an idea which is profitable at smaller scale – like that of a sandwich store; scaling is multiplying the number of stores with each store being individually profitable. It would be difficult to imagine a large group of stores to make profit, with individual stores making losses. Because scaling in this case is simple – how many times can you multiply the success of a single store. Hence individual store owners or small groups of store owners become critical in the scaling process. The approach to scaling also must involve thinking on aspects which are smaller level activities – namely choosing store location, identifying the right store manager and staff, understanding the economics of store level purchases, and tracking the possibility of supply side economics where possible. On the contrary, a person interested in putting up a power plant or a manufacturing unit – has to think at scale right from the beginning. The entrepreneur of such an enterprise must ask himself different questions – size at which the project makes sense; how large is it, can the required inputs be gathered reasonably, is there a location where a facility of this size can be constructed, does it have access to markets / ports where end products can be delivered economically, are there regulatory hassles with respect to power, societal, cultural, climatic, and importantly political influence. There may be other factors too. But the approach to start is obviously different, and the thinking behind the approach fundamentally is different. This should also be a factor taken into consideration seriously by the entrepreneur even before starting the project. An entrepreneur must look at his / her own risk profile and match it with the appropriate type of venture while deciding to start.

I find a lot of aspiring entrepreneurs come up with interesting product ideas which have demand, but make sense as a venture only ‘at scale’. But many of them plan on starting small and then scaling, which may not happen favourably. In case they have these ideas, it makes sense to seek venture funding to start at scale or look at selling the Intellectual Property (IP) to a larger enterprise with similar interest. But aspiring entrepreneurs need to understand the difference before they decide to begin their sprint to make that dent in the universe!

Happy Decision Making!

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