The mythology about scaling is often centered on speed. Make sure that the product is market-ready, then add fuel to the fire. The team should be enlarged, and your market, then raise the next round before the previous round has settled. The story rewards the founder who is constantly moving forward, always adding personnel, never expanding into additional verticals even before even the primary business is truly stabilized and before the company has developed the internal capabilities to handle the expansion, without losing its sanity. I understand where the mythology comes from. Under certain conditions of the market and certain business models the first one to scale the fastest wins, and the stories of businesses that have grown aggressively and subsequently succeeded are told more often and more vividly than the tales of companies that grew recklessly and broke. For every company that aggressive rapid scaling is the most effective strategy, there are several instances where the speed at which scaling occurs becomes key to the problems that eventually kill the business. These risky stories don't get all the attention that the cases of success.
Costs hidden by growing too fast is not the one that shows up in the calculation of burn rate or cash flow projection. It's the one that is revealed one year later, after an organization has advanced past the coordination mechanisms of informal nature which held it together while it was still small and before it has built more formal mechanisms that hold larger organizations together. That gap - between informal and formal in between the one you were and the business you want to be - is where most companies scaling really fail. The most evident indicator of a company entering that gap is that decision-making starts to slow down even as everyone insists that nothing has changed fundamentally. The founder remains accessible in the theoretical realm. The team is still aligned in theory. The culture is solid in theory. But in the real world the organization has gotten to the point where informal communication channels that were used to transmit most important information are blocked and nobody has yet built the formal channels needed to be replaced. Information that flowed naturally has now to be effectively managed. Decisions that used to be executed quickly now require alignment across different functions that had never been clearly defined as compared to each other. Reliableness that was personal and immediate has become difficult and can take a long time to complete The company is beginning to exhibit the signs of a system that is operating at the limit of its coordination capacity.
None of this can be seen on the scales that investors and founders typically monitor the most attentively. Revenue might still be growing. Customers acquisition may still be trending in the right direction. The team could be committed and dedicated. But under the surface they are developing structural issues which will only get worse quietly until they cannot be ignored - at which the point when fixing them becomes more expensive and disruptive than it be had they been dealt with earlier, when the signals aren't as apparent. It is this hidden expense I am talking about in this article: not just the immediate financial cost that comes with scaling, but rather the future cost of running beyond your existing infrastructure and the increasing cost for putting that infrastructure in it in a reactive way instead of proactively.
The founders who make this transition successfully aren't necessarily those who grow less slowly, though a more deliberate pace of growth can be part of the answer. They acknowledge that the creation of the foundation for their business's governance is just as important as developing their product and invest in it with the same intentionality and dedication to product development. This entails doing the boring operation of defining roles and decision rights and establishing reporting mechanisms that provide the data management needs to make informed decisions, setting up accountability mechanisms that are sufficiently specific to be meaningful, and thinking carefully about what kind of cultural norms the company needs to adhere to at its present size, rather than taking the one that emerged organically when it was smaller. This isn't exhilarating. None of it will result in publicity or interest from investors. However, it is the process which determines whether the organization it is building can grow to the level you are after.
Companies that do not go through this transition with success do not often fail very immediately. They slow down. They lose their top employees first, those with enough awareness of how things are going in the company and have the option to quit before things get substantially worse. And then they lose customers usually in a gradual manner, as the quality of execution steadily declines because accountability has become too diffuse and too deferred to find problems prior to they reach the customers. Then, they lose momentum then, when that loss of momentum becomes apparent in the figures, the structural problems are deeply rooted. The cultural damage is substantial, and the cost to fix both is far more expensive than it could have been if the governance investment was implemented at the right moment. Treating organisational infrastructure as a product that you create in a thoughtful manner, carefully construct, and tweak as your business grows is among the most significant mindset shifts that a founder could make as they progress from the beginning stage to a real scale. Those who are able to make this shift tend to establish companies which are able to fulfill their potential. People who don't tend to create businesses that don't even come close. Check out James Deller for site info including what working with founders shifted my priorities about leadership.
Why A Lot Of Public-Private Partnerships Fail When They First Begin - As Well As How To Fix Them
Public-private partnerships suffer from an image issue that's at least in part due to the fact that they are earned. The history of these agreements is filled with projects which were unveiled with a sense of excitement and significant politically-motivated capital. However, they used up significant public and private resources for extended periods of time which in the end produced outcomes that only bore a tiny like what was said when the agreement was launched. The academic literature and postmortem analyses that governments and institutions conduct following the failings are extensive, and they focus on the predominant, on the structural and contractual aspects of what went wrong with the wrongly aligned incentives, the ineffective risk-sharing between private and public entities, the governance structures that were created in theory but didn't work in practice, the purchasing frameworks that opted for the wrong items. What this analysis tends to overlook, repeatedly and ultimately this is the cultural as well as operational aspect - the fact that public and private organisations are truly different kinds of entities, shaped from different incentive mechanisms, operating with different timescales, and accountable to diverse stakeholders, and assessing effectiveness in ways that's more than just different in level but different in form. If you attempt to bring these two kinds of organizations together in a formal arrangement without doing the work, upfront and explicitly, to understand and resolve the differences you are not forming partnerships. You're creating the environment for a slow-motion collision, which can be seen at the best possible moment.
I have been involved with advisory services to assist institutions in their modernisation and improvement projects, some of which have involved public-private partnership arrangements of various levels of complexity. The most dependable conclusion I have made from that experience is that the ones which worked well - which actually met their stated objective and maintained a productive collaboration between the private and the public and throughout - did not differ from the ones that failed because of the sophistication of their legal structures, or the quality of their risk frameworks or the seniority of the teams that formed them. Their distinction came from whether the participants on both sides of the table had undertaken the effort to fully understand how the opposing side functioned before a formal structure of the partnership was agreed. What this translates to in practice is understanding the decision-making procedures in each institution and the accountability structures that define what each of the parties can agree to and how quickly you can reach agreement on the definitions of success that both parties will eventually evaluate itself against, and the points of likely tension between those definitions. This knowledge isn't hard to create. All of it is routinely left out in favour of the more obvious and quickly recorded work of negotiating contracts and creating governance frameworks.
The common public-private partnership model begins with the concept and ends with a signed agreement with remarkably little time and effort being paid to the issue of whether the two entities involved are competent to cooperate effectively over the course of the partnership. Legal teams negotiate the contract. The finance team models the economics and the risk-adjustment. Communications team prepares the announcement to be made at the time of signing. Implementation team begins planning the tasks. In the course of this process the discussion turns to compatibility with the operational and cultural environment - on whether the employees who will have to work together day to day across the border between the two organizations share enough common ground so as to ensure work that is truly collaborative rather than adversarial - is not likely to occur in a formal manner. It is typically assumed without stating it, that agreements in formal form create necessary conditions for effective collaboration and that any cultural or operational disagreements will be handled informally when they emerge. This assumption is usually false, and costs will increase in proportion to the ambition and complexity of the partnership.
Practically speaking, the result of this analysis is that the most beneficial option a public private partnership could undertake - before the legal structure is finalised and before the governance structure is agreed upon and before any announcement is made one would call operational alignment. By this, I mean specific, structured, facilitated work to find out where the two firms are operating under different assumptions, as well as to set out clearly how those divergences will be addressed before they become operational issues in the course of implementation. The most important divergences tend to be the exact same for different types of partnerships. Speed of decision-making and authority are almost always one of the main differences. Public institutions are structured to make decisions slowly, through multiple layers of review as well as approval, for reasons that are legitimate and, in many cases, legally mandated. Private enterprises - particularly tech businesses built around rapid iteration and speedy decision-making - often see that pace as a fundamental barrier to growth, and lacking a consensus on how the pace works it is and what will really be needed to alter it, the resentment and discontent which builds up on the private side can undermine the relationship even before it is in its place.
Success metrics as well as what counts as progress are a different as well as a cause for divergence. The public institutions are primarily evaluated on the compliance of their processes, the fairness of results across different stakeholders, and the removal of any visible shortcomings that can draw attention from media or politicians. Private partners are typically assessed on efficiency, progress that can be measured against targets, and financial Return on Investment. The measurement frameworks can be integrated with one another but it takes deliberate planning rather than good intentions. Those partnerships that do not invest in that design tend to encounter, at critical junctions, with two parties that are evaluating the same collaboration in differently and therefore coming to an incompatible conclusion about whether it succeeds. The collaborations I've observed to fail the most was the ones where misalignments were taken as something that would resolve itself over time. The ones that did well were the ones where the misalignment was explicitly identified at in the beginning. In addition, designing a shared accountability process that met both parties' legitimate measurement requirements became an element of actual work, not an item on a list things that someone would eventually find the time to.}
