Every major business started out as a small operation but when demand necessitates a growth spurt, a business must decide how to scale. Scaling is a delicate balance between growing just fast enough to retain interest, quality, and profitability, while outpacing competitors and staying relevant. Check out the infographic below to see how some companies have handled scaling.
In only three short years, Slack grew from eight employees to nearly 400. Much of the success of Slack, a cloud-based team communication tool, can be attributed to how quickly and easily the tool becomes part of a user’s everyday life; Slack users spend on average 10 hours a day interacting with the tool. Slack pinpointed exactly what employees needed to collaborate with their colleagues and took the proper steps to grow rapidly and responsibly.
Where Slack was able to scale effectively, unfortunately this was not the case for Pets.com. What went wrong? Pets.com lacked a workable business plan and lost money on nearly every sale. They opened more warehouses than need demanded and ended up selling products for approximately one-third the price they paid for production. On top of that, in 1999, despite only having $619,000 in revenue, the company spent $11.8 million dollars in advertising. Pets.com was sold in 2000 and remains a cautionary tale to this day.
Some companies can be their own worst enemies for scaling. Groupon, the e-commerce group coupon marketplace, had the second-largest tech IPO in history, behind Google. It was an easy to replicate business model that didn’t factor in a plateau in user behavior. As they scaled, Groupon had a hard time growing profits and took investor money despite not having a plan to be profitable. While still in business, the stock has dropped dramatically since the IPO, from $20 per share to $3.75 per share in April 2017.
Some companies were so big, they refused to adapt to the changing tide of consumer demand. Despite having actually invented the digital camera in 1975, Kodak didn’t fully accept it as the future and hesitated to adapt to the digital photography boom, allowing other companies to steal their market share. Blockbuster, the mega-store of home entertainment, failed to react quickly enough when new channels of entertainment started to pop up. They passed on a deal with Netflix, only to watch the streaming service take its place at the top of home entertainment market.
Starting a business is hard enough, and business owners know that to become successful, you must be prepared to grow with the demands of the market. Scaling a business may be considered a good problem to have, but as this infographic can attest, knowing how to scale as it relates to custom digital software development can play an integral part to the continued success of the company.