Editor’s Note: In the new podcast Masters of Scale, LinkedIn co-founder and Greylock partner Reid Hoffman explores his philosophy on how to scale a business -- and at Entrepreneur.com, entrepreneurs are responding with their own ideas and experiences in our hub. This week, we’re discussing Hoffman’s theory: To scale, do things that don’t scale.
The theme of the first episode of Masters of Scale, that “in order to scale, you have to do things that don’t scale,” stuck out to me because of my personal experience with this seemingly contradictory strategic approach.
The idea here is that not everything about your business needs to be “scalable” when you’re just getting started. So, what makes a business component scalable in the first place?
It’s hard to define concisely, but these are three important variables to consider:
- Reliance on resources. Ideally, a business component will not rely on individual resources to grow. For example, if a consulting business has only one expert on a given subject, it’s nearly impossible to serve an increasing number of customers without investing in training for new hires, which could compromise your profitability.
- Duplicability. If a system is easily duplicable, it’s easy to scale. For example, if you use a centralized inventory management system, it would be easy to rope in a new warehouse or new employees simply by creating new login information and possibly paying for new licenses.
- Model translation. Your model also needs to scale up in an efficient way. For example, if you’re marketing your business exclusively through local newspapers, that strategy may not hold up when you expand to become a national franchise.
Hoffman argues that if you want your business to grow, you may need to have some business elements that aren’t scalable. For example, in the early days of AirBnB, co-founder and CEO Brian Chesky went door-to-door to collect feedback from hosts using the system. This isn’t scalable because it’s neither time efficient nor appropriate for a system that’s home to 650,000 hosts -- yet it provided the business with a strong foundation.
How a similar strategy worked for me
I can personally attest to the power of non-scalable strategies in helping a business grow. As many of you know, I’m the founder and CEO of AudienceBloom, a content marketing agency.
When I first started the business, I was working full-time at another job, and I used my lunch breaks and what remained of my leftover free time to personally drive to prospective clients’ offices for face-to-face meetings. The night before each scheduled meeting, I would spend an hour or more scouring the potential client’s website for ways to optimize it, conducting extensive competitor research and analysis, conducting keyword research and then creating a custom PDF proposal based on my findings, including recommendations on how to move forward -- all before I was paid a dime.
And since these were just prospects (not yet paying clients), it wasn’t uncommon for me not to get the deal, in which case I spent all that time and effort for nothing.
None of this is or was scalable. There’s no way I could personally visit all my current clients (many of whom are located across the country or internationally), much less any of the leads who reach out via my company contact form. And all that keyword research and competitor analysis I used to perform for free? These days, those kinds of services cost thousands of dollars each.
But here’s the thing -- if I hadn’t spent all that extra time, I wouldn’t have established the foundational relationships and processes necessary to build AudienceBloom into the multi-million dollar agency it is today.
As I slowly gained clients, one after another, I used what I had learned to hire my first employee, who I tasked with those responsibilities so I could focus on higher-value business goals and initiatives. And as the agency continued to grow, I was able to start phasing out offering free upfront services altogether; our brand and reputation grow to such a point that it negated the need to be so generous to non-paying prospects; we began charging for keyword research and competitor analysis services, and clients were happy to pay.
Why these strategies are necessary
So, why are non-scalable strategies tolerable, or even beneficial for a business whose end goal is to grow?
The value of early relationships. Your first customers will be the hardest to get; you won’t have a reputation, customer reviews or history to call upon when making a pitch. These customers will also be your first reviewers, and will give you the feedback you need to make your business sustainable. They’re your most important customers, and the hardest ones to get -- so you’ll need to spend a disproportionate amount of time building those first personal relationships.
The demand for businesses to change. Few businesses remain the same throughout the scaling process, even if they’re “scalable” from the get-go. You need to remain flexible to incorporate new ideas, respond to feedback and react to new market conditions. If you invest too heavily in scalable infrastructure at the beginning, you’ll lose money when those changes unfold. Non-scalable procedures are easier to change.
Shifting priorities. It may sound strange, but maximized efficiency and profitability shouldn’t be your top goal in the first year or two of your business. Instead, you should be focusing on solidifying your brand, building your reputation, and gaining the experience and insight you’ll need in the coming years.If you’re just starting a business, or if you’re still in the first year or two, don’t get too caught up in chasing “scalable” practices. Scalability is important, and it’s something you’ll need to consider before attempting to expand, but before you get to that point, you’ll need relationships, flexibility and branding -- all of which are best attained with non-scalable approaches.