Leadership pitfalls to avoid when scaling a business
With the success or failure of a growth strategy resting in the hands of leadership, it pays to ask yourself: What pitfalls should we be looking out for and which behaviours drive long-term growth? We’ve identified 5 pitfalls that might be standing in your way, together with some key takeaways to help you avoid or overcome them.
When it comes down to it, scaling a business is about leadership. With the success or failure of a growth strategy resting in the hands of leadership, it pays to ask yourself: What pitfalls should we be looking out for? And, at the same time, which behaviours drive long-term growth?
These are the kinds of questions leadership teams come up against as they push for continuous, sustainable growth.
Our Horizon research analysed the top 100 companies on the Sustainable Growth Index and found four key pillars of sustainable growth – adaptability (how quickly a company can react to changes in the marketplace as they occur), future focus (ability to think long term), customer centricity (keeping customer needs front and centre of business planning) and sense of purpose (knowing why they exist).
> READ THE RESEARCH: Beyond the Horizon - A manifesto for long-term growth
For the purposes of this discussion, let’s focus on the flip side:
- What’s standing in the way of adaptability?
- What’s preventing a future focus?
- Are customer needs the top priority? (And if not, why not?)
- Is everyone clear on your organisation’s purpose?
We’ve identified five pitfalls that might be standing in your way, together with some key takeaways to help you avoid or overcome them.
1. Creating a strategy that misses the detail
A business strategy with engaging narrative and powerful language can make a strong impression – but if it lacks the detail to enable plans to convert to action, it isn’t really a strategy at all.
A critical component of strategy development is an analysis of what we call ‘strategy enablers’ – the capabilities, structures, processes and technologies that enable your vision to convert into reality. These are not simple guardrails but rather specific enablers that need to be identified, planned, budgeted and resourced correctly in order to support your strategic objectives. Without the enablers in place, your strategy will fail to materialise.
KEY TAKEAWAY: A business strategy has to be more than just a beautifully articulated ode to ambition. Be detail-oriented when it comes to developing your strategy. The ‘how’ is as important as the ‘what’.
2. Aversion to risk
Our analysis identified that some companies fall foul of a doom loop of short-termism, meaning they shy away from growth opportunities on the basis of perceived high risk and instead focus on achieving profit through incremental revenue gains and cost-reduction programmes. When the external environment changes, these risk-averse companies are highly reliant on their existing business model – because that’s where they’ve put all their investment. As a result, profitability dips and there’s less cash and less confidence to invest in future growth – and so the cycle begins again.
Having the long-term vision to see not only what customers need now, but also what they will need next, gives you the confidence to invest in growth through acquisitions or organic expansion, and the agility to adapt when needed.
KEY TAKEAWAY: Taking risks is necessary when you’re growing a business. But when you take the time to understand your customers’ needs and the value they’re seeking – now and in the future – you’ll come to realise that the real risk would be failing to invest in growth.
3. Losing sight of strategy in the face of opportunity
Sometimes, opportunities arise that look like they promise growth, but which don’t necessarily make sense for your business. Making a wrong decision here can cost you big time – which is why it’s essential to return to your organisation’s purpose when deciding how to grow your business.
Purpose is the key to success and can be considered a compass for growth. Being guided by this compass gives your business (and its people) a shared goal and understanding that enables constant progress and sustainable growth. Whether you’re deciding to enter a new market, expand into a new region, or even acquire a new business, decisions made on the basis of what serves your purpose will prove far more energising than those made simply because an opportunity arises. Purposeful expansion will also support and bolster your business identity, whereas opportunistic expansion may erode that identity, leading to internal turmoil and external confusion.
KEY TAKEAWAY: When opportunities for expansion come up, ask yourself ‘How does this serve our purpose?’ If you have to stretch for the answer, it’s probably not as good a deal as it seems.
4. Prioritising short-term results over long-term growth
Shareholders expect strong returns each quarter, which puts pressure on companies to focus on short-term results. In this situation, change might be seen as an obstacle to short-term results, rather than an enabler of long-term growth.
It’s up to the leadership team to challenge this dynamic and incorporate future focus into the day-to-day. Alongside purpose, ‘How does this serve our long-term growth?’ should be a question asked during every decision-making process. Having the conviction to make long-term decisions is not easy, and requires senior leaders to carefully balance short-term imperatives with the long-term ambition.
Such efforts pay off. Our research found that over a 15-year period, companies who focussed on their future business created an average 32% revenue benefit when compared to those more focused on their current business.
KEY TAKEAWAY: Sustainable growth requires long-term vision. Giving people the capacity for long-term thinking – and a little wiggle room in those quarterly results – pays off.
5. Diluting company culture
Scaling a business while maintaining its original culture is a challenge. Once your employees number in the hundreds or thousands, maintaining a shared culture has to become more of a conscious effort. But if you don’t put in the work, what are you left with? A soulless organisation? A multitude of mini cultures? Neither is going to give you the cohesive team you want.
Purpose is a great unifier and can help you establish a company culture that is unharmed by growth. But it can only have this unifying effect if it is clearly and repeatedly articulated – not just in internal marketing, but in all the big and small decisions the company makes.
KEY TAKEAWAY: Build culture around purpose, and it will scale with you.
Zooming out to scale up
On the road to £1bn, our analysis has found three distinct pressure points at which growth is more challenging to come by – ‘growth plateaus’ at which most businesses will either see their growth slowing, stalling or declining. However, we’ve also seen that stagnation is not inevitable. Companies with a commitment to customer centricity, adaptability, future focus and purpose can fly through these growth plateaus with very little impact.
When you’re in the thick of things, it’s hard to step back and take stock of where your blind spots are or might be. That’s why many companies bring in independent strategy experts to help them achieve their long-term ambitions and navigate their short-term challenges.
> RELATED ARTICLE: How to scale a business beyond a growth plateau