A playbook to take your firm into the unicorn club3 min read . Updated: 04 Mar 2020, 10:34 PM IST
When a mega trend and a large market come together, it attracts 'gorillas' or the large incumbents
A great idea is essential to starting a company that has potential to scale, but an idea alone isn’t always enough to take a startup out of a garage and into the league of large enterprises. Questions from first-time, and even serial, founders often revolve around the concepts of growth and scale. For the past 18 years, I’ve been working with high growth startups, and I believe there are nine determinants of scale. The odds of scaling and growing into a unicorn increase significantly if all these conditions are met.
What really matters
To start with, mega trend and market opportunity. At times, a mega trend may not be obvious or evident, and can be triggered by a smart entrepreneur who can visualize this. For others, the mega trend may only be visible in hindsight. Whether Amazon and Uber spotted a mega trend before it was visible or just happened to be the first to execute what were obvious mega trends is a debate worth having.
When a mega trend and a large market come together, it attracts “gorillas" or the large incumbents. Gorillas are, however, not always as successful as more nimble entrants, but often have sufficient heft and financial clout to cause these new entrants serious pain. Gorillas come in different forms, and one common manifestation is in the global player like Uber and Amazon. Ola and Bigbasket have proved to be strong competition to Uber and Amazon in the Indian market through a combination of great execution, strong founder ambition, and an alliance with other gorillas (SoftBank and Alibaba).
Then comes what I call the two Fs of scaling: founder ambition and foundation. It was business thinker C.K. Prahalad who said, “If your aspirations are not greater than your resources, you’re not an entrepreneur." Amazon started as an online bookstore and could have remained that but it went on to do many different things, including creating a cloud services platform in the form of AWS. Swiggy is another example of founder imagination and ambition. Ambition and imagination can manifest in different forms—for some is it about hustle, for others, getting the right organization architecture.
Despite the lack of a strong foundation, a startup could scale for a short period of time, but this usually is not sustainable. Almost every startup funded by Rocket Internet in India falls into this category, including Jabong and Food Panda. Rapid scaling without a good product-market fit is a case of riding on a weak foundation.
The third aspect to scaling is strategic choices and strategic execution. Most startups that scaled made right strategic choices at key points in their journey. They handled the inflection points and pivots well, and made the right decisions when it came to mergers and acquisitions. Making the right strategic choices is a combination of clear thinking, courage to forego short-term benefits in favour of long-term sustainability, and doing the right things for the right reasons.
Beyond the big strategic choices, teams need to make the right choices every day in the context of execution. Problem-solving skills and an ability to collaborate help make the right choices every day. It is about getting a bunch of seemingly ordinary and interrelated pieces to dovetail perfectly that for an outsider it would not even look like innovation. Strategic execution is also about knowing what not to do. It is about prioritization and focus.
Culture, customer centricity and human capital are the other determinants of scaling. Customer centricity starts by asking, “Why does a customer buy our product or service?", at every stage. It is being able to design the product or service based on continuous feedback. Bigbasket’s decision to go in for an asset heavy (or a full-stack) model was based on thoughtfully answering the question “why does a customer shop with Bigbasket".
This playbook for scale is at best a broad set of guidelines. When ambition is backed by knowledge of the enablers of scale, and an idea of how to make these determinants work for you rather than against you, the odds of scaling are multiplied.
T.N. Hari is head of human resources at Bigbasket.com and adviser to several venture capital firms and startups. He is the co-author of Saying No To Jugaad: The Making Of BigBasket.