Scalability is generally defined as the ability of a system to support larger demands on it, or having the capability to grow in order to meet those demands. This is most often used to describe networking infrastructure, software platforms, and other IT-related systems. In economics, scalability implies that a business model has the potential to support extended growth of the company with minimal incremental costs.
A prime example of a scalable product is software. Almost all of the developmental costs are upfront, while the finished product may be duplicated indefinitely at practically no further expense. As many potential start-ups have discovered, scalability is one of the prime factors potential investors look for when deciding to fund companies or not.
Businesses must lay a foundation of scalability in order to foster continued growth. It does no good to develop a new market channel or expand your geographic footprint if you overextend your existing support systems to the point of failing. Market volatility, too, is a primary concern. While “scalability” usually implies expansion, it is critical that both your IT and organizational systems are able to condense when necessary.
Here is an overview of the three-legged stool when it comes to your business, outlining three areas in which scalability is vital.
1. IT Architecture
This category includes hardware such as servers and computers, as well as any software used to conduct your business.
No one starts a company thinking: “I only plan to have 100 customers, so I don’t need a huge customer management system.” When evaluating your IT needs, be realistic, but also be optimistic. Choose hardware and software that can easily accommodate future growth. Many companies offer cloud services, making their physical drives and servers available to store and process your data, avoiding the need to purchase your own hardware, and most software-as-a-service platforms have different subscription tiers depending on how many users require access at any given time, allowing you to adjust according to your current headcount.
2. Internal Processes
This category includes your workflow, headcount, and your company’s core competencies.
Adding a new product line or offering additional services requires an extensive look at your existing infrastructure. Building new facilities, adding logistics services, and recruiting and training new employees takes time and money. Further, expansion in these areas is accompanied by an increase in overhead costs, as well as the risk of market shift.
Using outsourcing services to handle day-to-day routines such as accounting, final assembly or technical services can reduce your financial exposure. Outsourcing can also be used to expand your service offerings by providing expert teams in your field on an as-needed basis. By outsourcing auxiliary departments and processes, you can retain a team whose sole purpose is furthering growth in your primary markets right when you need it.
3. Org Chart
This category includes your management teams, chain of command, and communication.
Dovetailing into the second point above, your management structure must be able to grow with the business with no confusion as to goals, responsibilities, and reporting. When a business just has a few employees, it’s easy enough to yell across the room. When you have seventeen locations on three continents, though, it’s a different story. One of the most important things a business owner has to learn is how to provide clear leadership in order to foster co-operation, a common vision, and clear channels of communication in the management structure, so as that structure grows with the company, there is no loss of productivity or duplication of effort.
A stool with only two legs serves no purpose. No matter your company’s size, product, or service, it will not be flexible enough to survive volatile market conditions, serve new customers, or be as efficient as possible without foundational scalability in the three key areas listed above.
