Too often, we focus on the success stories—Bill Gates, Steve Jobs, Michael Dell—and forget most entrepreneurs aren’t able to scale their company into a multi billion-dollar enterprise. Why do few succeed and so many fail?
Harvard Business Review published a famous case study, which tries to address the question. The study outlines four key traits that make many entrepreneurs great at founding a company, but very bad at scaling it.
To scale a company, entrepreneurs need to:
1. Stay loyal to the company, not co-workers
Small companies need big visionaries. For entrepreneurs, your early employees are your partners in crime, the people you’d take into battle with you, and more often than not, some of your greatest friends.
Especially in these early days, team loyalty is a huge part of why startups are successful. The more loyal your team, the more likely they’ll follow you through the fire, and friendship is the way to get you there.
But if startup culture is based around a few key people, scaling a company is about a much larger team. As the study states, “In entrepreneurial mode, you need to lead like you’re in charge of a combat unit on the wrong side of enemy lines, where it’s all for one and one for all.” Scaling, on the other hand, is about processes and about reliability.
Founders fail to scale when they place loyalty over success—sometimes, a friend is failing at work, and you’ve got to be honest with yourself and with your friend and let him or her go. Otherwise, you’re at risk of losing the entire operation.
2. Set big goals; forgo smaller tasks
When you’re starting your company, you probably have your hands in every aspect of the business, from operation to product development to finance, and you execute brilliantly with these short-term tasks. It’s the long-term strategy that tends to haunt you.
Leaders of a companies that scale must understand the importance of streamlining strategy, moving away from smaller task lists to more focused, high-level goals. And when presented with new opportunities, they know how to shift their focus, realign their goals, and determine which goals can be delayed or canceled.
Founders who fail to adequately manage tasks often have a hand in all decisions and refuse to make trade-offs. To these founders, all tasks demand equal focus.
But when all tasks demand equal focus, processes slow. Marketing plans drift. And the company loses sight of its goals and its future. It folds. “Fledgling CEOs aren’t aware that by clinging to their existing strengths and habits, they risk creating dysfunctional companies.”
The most successful founders will subject themselves to the quarterly strategy audit and determine which goals to focus on and which goals to postpone for the future. Finding crucial, actionable goals and relying on the team to execute those goals is key to scaling a company.
3. Beware of single-mindedness!
You’re an entrepreneur because you have a vision. You spy with your little eye something missing in the world, and then you dream up a business plan to fill the gap. The founding of the company is all in your hands, and your laser-like focus and drive are what make your product or service successful.
But as you scale, the situation changes. Your single vision isn’t always the only vision, and if you’re not willing to see beyond it, you could jeopardize the future of your company. As the study points out, “An insulated leader who doesn’t communicate with and listen to employees with distinct opinions can end up losing their allegiance.”
Successful entrepreneurs see outside themselves.
They recognize they’re not the only one in the room with a passion—and they’re willing to admit it’s not only their passion that matters. They broaden their perspective. They reach out to colleagues for different opinions. They consider and act on other people’s endeavors because they realize their company is bigger than just one person.
And when these entrepreneurs reach out, they’re rewarded with proud co-workers who want to make the company better and better everyday.
4. Come out of isolation
Most companies begin in secret. It’s an intentional choice. Embryonic ideas demand protection. As an entrepreneur, you don’t want someone else copying your idea before you’ve had a chance to bring it into the world. Also, you don’t want people forming opinions about your idea before you’ve had a chance to figure out all the details. So, you work alone.
But at some point, the idea transforms from just an idea into a real product or service, and you’ve got to come out of your proverbial cave. You’ve got to face the world.
Entrepreneurs who fail to come out of isolation do not succeed. As the study points out, “These introverted entrepreneurs are often brilliant, but leaders who endure know that success requires some glad-handing and that they have to present their company to the world.”
Successful, scalable entrepreneurs know the importance of media. They realize how crucial marketing can be. And they’re willing to step out of their isolation, become the face of the company, and lead it on the path to success.
So what if you fulfill all these characteristics? Does that mean you’re a shoe-in for the next billion-dollar venture?
Not necessarily. These four tendencies aren’t everything; there are many reasons some entrepreneurs succeed while others fail. But entrepreneurs who stay loyal to the company, set big goals, stay open-minded, and come out of isolation are more often, more successful. The rest is…a lot of persistence and luck.
Read the full article on Harvard Business Review.