Do You Know How To Scale A Business?
In business (and in life), Scaling can be achieved through two main methods; horizontally and vertically. Horizontal scaling is simply done by going wider and gaining more ground while vertical scaling is done by going deeper and perfecting your already existent product/services or reiteration of them.
Both of them have their own opportunities and limitations. For example, there's a certain cap you will encounter with vertical scaling because you've reach the peak of perfection for your product/service and can't make it better or more perfect anymore. Whilst with horizontally scaling, you run the risk of lacking a concrete business structure, what do you do really?
Horizontal ScalingBased on personal observation, horizontal scaling seems to be common this days. With the leverage tools available, implementation has become easier compared to before where expanding into different sectors was no walk in the park but rather a marathon where you'll need all the resources you've got.
Once you're able to build a core business structure and a loyal customer base, creating add ons or fulfilling adjacent customer/market needs it's not that difficult especially in the software part. The problem happens when you're not able to align it with or build it around the core business. Remember, it has to look like you're expanding and not starting anew.
That was the problem with Amazon fire phones, it didn't look like they were expanding but rather starting anew. How about Apple with Apple Pay? It definitely aligned with their core business since it was just helping customers use their native device app instead of third party apps to make payments.
Thanks to technology, horizontal scaling has being reiterated to the next level. In the coming years, especially in the digital sphere, there won't be any media, finance or retail company per se rather there will be a tech company that does media or finance or retail. The company will be a tech company first and foremost, not a finance or a retail company.
This would clearly remove a major limitation when it comes to horizontal scaling as businesses wouldn't be strictly tied to one or two industry. They can expand as much as they can provided they don't lose most of their original customer base and keep gaining new customers in every new industry. The battle becomes how much of an expert is the business in that industry, does it even need to be one?
Vertical ScalingVertical scaling is kind of expert-ish. When done correctly, It creates the perception of being the best in a certain industry. The deeper a business goes in perfecting its product/service offering the more an expert or leader they become in that industry. In an individual term, the person is a master at his/her craft.
This takes a lot of time and resources to achieve the skilled expertise, years of planning and implementation with a number of trials and error along the way. However, if done successfully, the business becomes a force to reckon with. A brand with a great reputation and a proven track record. Do you know many people who dislike Tesla or Apple products?
Apple (again?) with their iPhones are a good example of the process with vertical scaling. Each new model with its new features, designs and capabilities always seems better than the former model. This has been done so well done that iPhones are no longer seen as just mobile devices, they're also a status symbol where its users think of being superior to non iPhone users. At least some of them.
That's the main advantage of vertical scaling, you gain a lot of loyalists that trust your business because they know you'll keep delivering that value. With that, it's not entirely crazy to see them with huge valuations.
In ConclusionSometimes, Scaling a business can be a timing problem. If you scale too early, you run the risk of killing the business. Likewise, if you scale too late, the business can become stagnant and never achieve the growth you're aiming for.
But more important than timing is the direction in which you choose to scale. How you choose to scale will depend on the type of business you have and your vision of its potential. Horizontal scaling is favourable for 'generalized businesses' like retail stores while vertical scaling is favourable for 'specialized or niche type businesses' like music or movie sector businesses.
When you're not clear about the direction to scale towards, the right time will come and you won't be able to capitalize on it. So start being clear.
Are you running a business? Have you already achieved scalability?
Thanks for reading!
Profile: Young Kedar
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