The Growing Pains of Rapidly Expanding Businesses (Part 1)

For the last 8 years I have been a parent to my two teenage boys and I've watched with proud admiration as my sons have faced into the plethora of challenges related to being a teenager and still managed to grow physically, mentally and emotionally.  It is miraculous to watch, a joy to behold and can have its very funny moments (which I’m under strict orders from them not to share); it can also have its less funny and very painful moments too.  As a conscientious parent you can’t help but be aware of the range of physical, emotional and mental challenges that your teenagers are facing and whilst your hearts may go out to them, you are as a powerless as King Canute before the tides of the sea to prevent the raging torrents of hormones, the intrigues of friends and the rigours of tests and exams from impacting on your children.   I suspect it is, at least in some part, the very personal impact that these visceral growth challenges have had on me that has fuelled my fascination with the growing pains of rapidly expanding businesses.

Unlike children, some businesses are born small and beautifully formed and stay that way throughout their lifetimes, other businesses grow consistently over a number of years.  However, there are also not an inconsiderable number of businesses that start small but grow rapidly – moving from start up to aspiring big business within a few years.  Unsurprisingly this rapid growth can cause a range of issues as predictable as spots and revision angst are for teenagers.   Much as many parents struggle with the notion of their babies growing up, so can many entrepreneurs struggle with their business growing up.  The secret to navigating these difficult times – is, like with any functional family, talking about it openly – preferably before it happens.  It won’t stop organisational puberty being painful at times but it could stop it being disastrous.

I’m currently working with one of the UK’s most successful high growth digital businesses.  It has rocketed up from being a precocious start up to being a billion pound sterling business in just 6 years.   The success has been undeniable but it now faces a suite of standard problems that are all too familiar to my teenagers – physical pains, emotional pains and mental pains.  Of course, this business isn’t alone - many rapidly growing businesses face the same set of predictable growing pains.  How it deals with these growing pains will determine whether or not it successfully makes the transition into a mature big business or whether it will dither, wither and die.

Over my next few blogs I’ll outline 10 of the most common “Growing Pains” I come across when working with rapidly expanding innovative businesses.  I’ve also added thoughts on how the “Pains” affect the business and have offered advice on what can be done to ease the passage through the “Pains”.  In this first blog I’m going to look at two of the “Pains” the rapidly expanding businesses will hit first – Changing the Starting Line Up and Building the Business Infrastructure.

1.     Changing the Starting Line Up – as a business rapidly expands it is almost inevitable that the people that started the business will not be the people who are best placed to see the business through to maturity and beyond.   The transition from the initial team/leader to the new team/leader can often be painful and can on occasion be crippling.  It is rare that people want to be dropped from a position of power, influence and success in a booming business they helped start.  It is also highly unlikely that the same talent that set the business up is going to be the right talent to oversee its development.  This is a difficult circle to square.  The drama that unfolds in the excellent “The Social Network”, a film that charts the rise and rise of facebook, fabulously demonstrates the vitriolic fall out that can ensue when an entrepreneur just changes the team without discussion.  Many fledgling business leaders fail to navigate their way through these highly charged emotional waters and end up, like the proverbial insecure teenager, determined to win the argument, driving their fledgling vessels onto the rocks made of their own bloody mindedness, greed or vanity, all too often simultaneously destroying long standing relationships too.

How can you ease the pain – in addition to talking about the inevitability of the need to change the team early in the businesses development it is worth ensuring that the “who owns what” of the business is properly documented.  It is unrealistic to believe that all the key players are going to make the entire journey with the business – especially if the business has external investors.  However, it is realistic to believe those who took the risks and that started the business are properly acknowledged and rewarded.  Talk about it – get in a facilitator and take the time to thrash it out properly – then get the paperwork sorted.  Parting on good terms with no hard feelings and fair reward is massively preferential to the animosity of a legalistic court battle. 

N.B. for entrepreneurial leaders - There is nothing more painful and likely to destroy a relationship than the perceived betrayal of a friend/partner/colleague/boss who had made a verbal promise they didn’t hold too. 

N.B. for an early contributor - If you can’t get the debate on “who owns what” had or you can’t get the agreement you think you have written down and signed, then prepare yourself for disappointment and start looking for another job.  

2.     Building the Business Infrastructure – for many entrepreneurs building the necessary business infrastructure (finance functions, risk functions, HR functions etc) is as exciting as watching paint dry and about as important.   Their business is growing rapidly, people are loving their products and wanting more – why focus on anything other than product enhancements and marketing strategies – “infrastructure is a drain on the business, a cost that will only slow us down and kill the culture.”  This is a view that is particularly prevalent amongst the digital start-ups.   It is, of course, wrong.   Anyone who has played any kind of strategy game like the Sims, that seeks to ape real life conditions, will know that building infrastructure at the right speed is what helps you win the game in the long run.   So what makes our entrepreneurs so averse – quite simply, like being made to do your homework it can seem a bit dull and a bit of a chore.   Business infrastructure is also likely to be an area that they are not an expert in and will not naturally be at home recruiting the right people and making the right decisions.  It’s not what excites them and gets them leaping out of bed in the morning.  However, like a failure to revise properly for an exam, ignoring the need for infrastructure can seriously hamper your long-term performance.

How can you ease this pain – well, a bit like exam revision, building business infrastructure requires a plan and a bit of self-discipline.  The good news for the single minded, easily bored leaders of rapidly growing businesses, is that due to the massive proliferation of infrastructure services available on an on-demand basis, via the cloud, building business infrastructure is no longer as big a pain as it used to be.   Almost all business Infrastructure is now readily available to rent on an as needed basis, allowing fast growing businesses the flexibility to ramp up and down the provision as required.   For example, in HR, every service from pay roll management to business partners can now be easily sourced from 3^rd parties.  There is absolutely no need to directly employ any HR people unless you decide you want to.  The additional good news is that as the services are delivered by third parties the dilutionary effect on the growing businesses culture is massively reduced.   Whilst this approach to building business infrastructure doesn’t remove all the pain it does, at least, lessen it considerably and it leaves the business leaders relatively free to get on with what they are good at.  So my advice, take the time to figure out your business infrastructure requirements, build a plan and then employ or deploy a COO (they like doing this stuff) to source them and bring them online for you.

That’s all for now – hope you enjoyed this introduction.  In my next blog I’ll cover more of the Top 10 growing pains that are faced by rapidly growing businesses and explore what can be done to alleviate the pain.  If you or anyone you know needs support and advice for their rapidly expanding business then do get in touch.  You can reach me at rickfreeman@addonova.com