Why A Career in Business Reinforced Operational Discipline About Character

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What's The Hidden Cost To Scaling Too Quickly: What Most Founders Learn Too Late
The mythology surrounding scaling is in large part about speed. To get to market-fit for the product, then add fuel to the fire. The team should be enlarged, and the market, raise the next round before the previous one has settled. The mythology rewards those who lead the company by working hard, constantly adding numbers, and always expanding into other industries before when the main business of his genuinely stabilized and the company has developed the internal capabilities for managing the expansion without losing the semblance of. This mythology originates. With certain conditions on the market and business models, the first company to scale fastest wins and the stories of businesses who were aggressive in their growth and ultimately succeeded are told more often and more vividly than the stories about companies that scaled quickly and then broke. However, for every company where aggressive earlier scaling is the optimal option, there's several cases where the speed of scaling becomes the main cause of issues that ultimately end up killing the company, and those cautionary stories do not get nearly the same attention as those that have been successful.
Unseen costs in scaling too fast isn't the one that is revealed in the calculation of the burn rate or the cash flow forecast. It is the one that is revealed 6 months later, once an organization has advanced past the coordination mechanisms of informal nature that held it together when it was smaller, and before having built the formal structures that hold larger organizations together. The gap between informal and formal in between the one you used to be and the one you need to become - is where the majority of growing companies actually break. One of the first and most frequent sign that a firm is at the point of entering this gap is that decision-making slows when everyone says that nothing has changed fundamentally. It is possible to contact the founder in theoretical terms. The team continues to be aligned in theory. The culture is robust in theory. However, in actual practice, the organisation has grown to the point that informal communication channels which used to transport most important information are blocked and no one has built the formal channels needed to replace them. Information that once flowed naturally is now continuously managed. The decisions that were quick now require coordination across multiple functions, which have never been distinctly defined in relation to each other. The accountability that was immediate and personal is now diffuse and delayed and the organization is beginning to exhibit the symptoms of a system functioning at the limits of its coordination capacity.

The absence of any evidence is evident through the metrics the founders and investors are expected to watch most carefully. It is possible that revenue will continue to grow. Customers acquisition may still be moving in the right direction. The team might still be active and efficient. However, beneath the surface indicators an organisation is experiencing structural issues that can only grow quietly until they cannot be ignored - at which point fixing them becomes dramatically more costly and disruptive than it would be had they been addressed earlier, and when the signs were more subtle than obvious. There is a hidden price I'm talking about in this article: not just the immediate financial cost to scale, but the long-term organisational cost of growing beyond your existing infrastructure and the added expense when you put the infrastructure in position in a reactive rather than proactive manner.

The founders who handle this transition smoothly aren't necessarily the ones who scale at a slower pace, though an intentional pace of growth is sometimes part of the answer. They recognize that constructing the structure for governance of their business is just as important in the same way as creating the product and invest in it with the same zeal and commitment to the development of their products. This means doing the boring operational work of clarifying roles and decisions clearly, building reporting structures that reveal the data required by leaders to make the right decisions, making accountability mechanisms specific enough to be meaningful while also thinking through what kinds of norms that the organization needs at its scale, instead of following the rules that emerged organically when it was smaller. The work involved isn't engaging. It's not likely to garner excitement in the media or inspire investors. It is the effort that determines whether the organisation you're building will sustain the growth you are trying to achieve.

Companies that fail to achieve this feat do not typically fail spectacularly and immediately. They decline. They lose their most effective employees initially - those who have sufficient self-awareness to be aware of what's happening in the organization, and enough choices to leave before the situation becomes much worse. Then, they lose customers usually in a gradual manner, as the quality of execution slows down because accountability has changed and accountability has become too vague and deferred to find problems prior to reaching the customer. It is then that they lose their momentum, until the decline in momentum is visible in the numbers in the numbers, the structural weaknesses are deep-rooted, the culture destruction is extensive, and the cost to fix both is orders of magnitude higher than it would have been if the governance investment was made at the right time. Associating organisational infrastructure with a item - something that is designed cautiously, build meticulously, and build upon as your company grows - is among the most significant mental shifts you can make for a founder when they transition from the initial stage to a real scale. When founders make this change, they tend to build businesses that reach their potential. Those who fail tend to create companies who are a bit too close. See the James Deller for blog advice including how supporting institutional change continues to inform my decisions about character.



Why Most Public-Private Partnerships Fail Before They Even Begin - And How To Repair Them
Partnerships between public and private companies have a reputation issue that's to a large extent paid for. The history of these agreements includes many projects that were announced with genuine enthusiasm and a lot of investment in political capital, taking up large amounts of private and public resources over lengthy periods, but ultimately produced outcomes which lacked any like what was initially promised when the partnership launched. The academic literature and the postmortem analysis that governments and institutions conduct following the failed projects are extensive, and they concentrate on the major on the structural and contractual dimensions of what went wrong that resulted from the misaligned incentives the inadequacy of risk allocation between the private and public sectors as well as the governance systems which were designed in theory but failed in practice, and the procurement frameworks, which were designed to prioritize the wrong items. The thing that this type of analysis tends to neglect, invariably and ultimately, is the cultural and operational dimension. It is the reality that public and private companies are two distinct kinds of entities, formed in different ways by incentive systems, operating at different times, accountable to completely different stakeholders, and assessing effectiveness in ways that's not only different in extent but are also different in character. When you mix these two kinds of organisations together by forming a formal partnership but not having the effort, prior to and specifically, to learn about and manage those differences, you're not forming one. It is creating the right conditions for a collision in slow-motion that can be seen at the lowest possible time.
I've participated in advisory work to support institutional modernisation projects, a few of which involved public-private partnership arrangements of various levels of complexity. The most consistent observation I can offer from that experiences is that the partnerships that performed well - that actually fulfilled their stated objectives and maintained a dependable working relationship between the both private and public entities throughout they were not distinguished from the ones that failed because of the sophistication of their legal structures, their rigor of their risk frameworks or the seniority of the leadership teams that created them. There was a distinct difference in the extent to which those who were sitting on both sides of the meeting had been able to really understand how other side operated prior to when the agreement on the formal partnership structure. What this means in actual practice is understanding how decision-making processes that each organization operates under as well as the accountability frameworks that constrain what each party can accept and when, the definitions of success that both parties will eventually be judged on, and the points where there could be tension between those definitions. This knowledge isn't difficult to come up with. All of it is routinely avoided in favor of visible and immediately documents-able task of negotiating contracts and developing governance frameworks.

The typical public-private partner process goes from the initial idea to a final agreement. However, there is very little structured attention paid to the issue of whether the two companies involved are really capable of working effectively over the course of the agreement. The legal team negotiates the contract. Finance team models the economics and risk allocation. The communications team is responsible for preparing the announcement for the moment of signing. The implementation team begins planning the task. At some point, the conversation about compatibility with the operational and cultural environment - concerning whether the individuals in the actual position to cooperate day-today across the borders between the two organisations share enough of the same values to make working truly collaborative, rather opposed to antagonistic - fails to be conducted in a structured manner. It is typically assumed with no explanation, that agreements in formal form create prerequisites for effective collaboration and that any cultural or operational issues will be resolved informally as they arise. It is nearly always untrue, and the cost of it can increase as the ambition and the complexity of the partnership.

What this means in practical analysis is that the greatest investment a public-private partnership could do - prior to when the legal structure is finalised and before the governance framework is formulated, before any announcement is made to the public - is in what call operational alignment. This means specific, organized, and facilitated work to find out where the two organisations' operating assumptions diverge, and to decide in advance how those divergences will be addressed before they become operational issues in the course of implementation. The main divergences generally are the same for various types of partnerships. Decision-making speed and authority is almost always one of them. Public institutions are designed to take their decisions slowly, using multiple layers for review and approval, with reasons which are completely legitimate and, in many cases, legally mandated. Private businesses - particularly technology businesses built around fast iteration and quick decision-making, often perceive the speed as an important obstacle to progress, and in the absence of a shared understanding of exactly why the pace is as it is, and what would really be needed to alter it, the frustration from the private side can poison the working relationship even before it has established its own footing.

Success metrics, and what counts as progress are an additional and consequential source of divergence. Public institutions are often evaluated on process compliance, equity of outcomes across stakeholder groups, and rejection of glaring failures which generate media attention or political pressure. Private partners are generally evaluated on their efficiency, progress measured against their targets, and the financial returns on investments. The measurement frameworks can be integrated with one another however it is deliberate planning rather than good intentions. Those partnerships that do no invest in this type of structure tend to discover themselves at critical points, with two partners that are evaluating the same collaboration in unrelated ways and, consequently, coming to contradictory conclusions as to whether the collaboration is achieving its goals. The relationships I've seen not to be successful were ones where the misalignment had been considered to be something that would become apparent over time. The ones that worked were the ones where the misalignment was made clear from in the beginning. In addition, creating a shared accountability system that accommodated both parties' legitimate measurement requirements turned into an actual work instead of an option on a wish list of things that a person could get to.}