The importance of scalability for a business

Jun 20, 2024 - Reading time : 5 min
The importance of scalability for a business

Scalability is a major concept for companies nowadays; but what exactly is it in a business context?

Scalability in business refers to an organization’s ability to grow to meet new demand, without losing its qualities and sacrificing performance.

In this article, we will deep dive into what scalability is, why it matters for companies and the strategies to put in place to build scalability in a company. We will also go through the different challenges associated with trying to make a company scalable. Lastly, as scalability is most of the time associated with business, we will also address the scalability of the business logic, which can be attained through automated processes.

Agenda

  1. Definition of scalability in a business
  2. What are the criteria to qualify as a scale-up?
  3. Difference between scalability and growth
  4. The benefits of scalability for companies
  5. Strategies for building scalability into the business: focus on scalability of the business logic and automation

Definition of scalability in a business

As mentioned before, scalability refers to the ability for a company to grow, while managing the impact of growth on the company, but also retaining the same business vision.

A scalable business is able to sustain growth, economically and operationally.

What are the criteria to qualify as a scale-up?

To reach the scale-up status, there are some criteria that companies need to reach, that shows its growth trajectory, stability, and potential for continued expansion.

The OECD definition for a scale-up includes those criteria:

  • An average annual growth in employment or revenue of at least 10% over three years
  • At least 10 employees on permanent contracts at the beginning of their growth

Difference between scalability and growth

While scalability might often be associated with growth, there's a difference between them, although both of them are crucial for companies.

Scalability refers to a company expansion without a corresponding increase in costs. Business growth, on the other side, refers to a business expansion but is associated with additional costs.

The benefits of scalability for companies

Any start up plans to grow and become a bigger company in the long run. What are the benefits of scaling for a company ?

Increased revenue

Revenue growth is the obvious key benefit of scaling a company.

Scalable companies indeed mean a bigger customer base, a bigger market share, more sales and eventually, more revenue, with the latter increasing faster than the increase in costs.

Increased efficiency

Scalability is often linked to more efficient processes, too.

Increasing revenue with no additional cost must automatically be linked to more efficient ways of handling processes such as automation, outsourcing, use of technology, among others.

Competitive advantage

A common characteristic of scalable companies is their investment in technology and commitment to promoting innovation, helping them stay ahead of competitors. Additionally, the common flexibility and adaptability of scalable businesses allows them to quickly adapt to market changes, further enhancing their competitive advantage.

Challenges associated with scaling a business

Scaling a business presents numerous challenges.

Here are some of the challenges that businesses trying to scale can face:

Organizational and cultural challenges

A business that scales will face organizational and cultural challenges.

Company culture needs to adapt to these changes

Customer experience

As the company scales, the customer base expands. It might be challenging to retain the same level of customer experience with a significantly higher number of clients. Besides, personalized customer experience has become a hot topic for companies over the last few years, but providing personalized experiences at scale requires sophisticated data analytics and customer relationship management systems, which can definitely be another challenge scalable companies might face.

Technology integration

Ensuring that IT systems and infrastructure can handle increased loads is crucial. Legacy systems may need upgrades or replacements to support scaling efforts. Besides, scaling often means handling larger volumes of data securely and efficiently can be a significant challenge, especially with increasing concerns about data privacy and cybersecurity.

Time and resources

Time and resources pose significant challenges for scaling companies, particularly as scaling efforts rely heavily on developers for new processes and tools. There's indeed a shortage of skilled developers, technology integration are complex projects and require time, and scaling solutions typically require multiple iterations and refinements, further extending development timelines.

Scalability of the business logic

While implementing technology can be a challenge for business scalability, automation can be a fast and efficient way to scale more rapidly.

Let's take the example of customer service.

A company receives 500 calls a day. After a year of growth which has brought new customers to the business, it receives 1000 calls a day.

It cannot handle all of them without recruiting more people in the customer service department, which comes with a cost.

One solution to this is automation.  While implementing chatbots for regular or easy queries, customer service agents can focus on more complex queries with a greater added value, and the company does not need to recruit any new agent.

Automation can be the key, but it needs to be flexible and easy to iterate

As seen previously with the customer service department example, automation is a strong solution to a scalable business.

To ensure effective functionality and value for businesses, the system must be easy to iterate and free of significant bugs.

This is one of Blitz's many advantages, and to a longer extent, one of no-code platforms, that can help scale your business. The no code platform offers easy ways to iterate fast and efficiently.

Blitz no code platforn

Key takeaways

- Scalability is the ability for a company to grow, where the revenue grows quickler than the costs

- Scalability brings various advantages to businesses: increased efficiency, increased revenue, …

- At the same time, companies scaling are also facing some challenges: change management, quality of customer experience among others

- Automation is one of the ways for companies to scale efficiently and quickly

- However, in order for it to work, it must be flexible and also easy to iterate

Sources:

OCED library

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