10 Rules of Scaling a Company
Scaling a company is a tricky process. Balancing your attention between customers, employees and investors whilst trying to keep up your energy and dealing with stress and setbacks is no easy feat.
Our friend Tim Ferriss ran an episode on the process with guest host Reid Hoffman. He conducts deep dive interviews with companies like Evernote, Google and Facebook as well as many others to give great contextual stories behind each rule. These are my notes adapted from the Tim Ferriss podcast The 10 Commandments of Startup Success with Reid Hoffman
1 — Don’t worry about the No’s
Keep going, just because a customer or investor doesn’t get it do not let a no damage your energy in any way. Some successful companies met with 50 investors before they made it. (Even the Beatles were refused record contracts from numbers of record companies)
- A series of no’s can be a good thing, innovative ideas often don’t get accepted straight away and it takes time for the market to accept it
- If you are ahead of the crowd and know that your idea makes sense keep working to stay ahead
- Pay attention to the quality and not the quantity of rejections. If they say no due to a concept or belief that they have, move on and better explain it next time
- A squirmy ‘no’ means you’re on to something, you just need to be more convincing
2 — Hire like your life depends on it
Your first staff are the most important part of your company as you scale. They will be the initial family you depend on to grow the business and you need to know you can rely on them. Also, note that you might not have the money to get the best-qualified people for the roles and will have to seek younger talent that has the potential to grow into the roles. Things to check:
- Pretend you are seeking a job, would you work for this person?
- Does this person bring something different to the team? Personality and background differences are very important for a good culture and making better decisions
- Do they understand and buy into the vision? Would they stick around if you couldn’t pay them one month? What about three months?
3 — Do things that don’t scale
Sounds stupid on a list of things to help you scale. However, initially, you want to refine your product and the processes behind it. You need to fully understand your customer and how you serve them to build a perfect machine that you can then scale.
You need to work each business process behind the customer experience yourself to understand how you can optimise it. Handcraft your experience and serve customers one by one and take feedback directly.
What is your 11-star experience?
A great thought game to play it the ‘11 star experience’, an idea invented by Airbnb. They massively overthought the ideal user experience at check in. You make a hypothetical scenario where you go much further than any realistic process to please your customer. Work backwards to the point that is still surprising enough for the user to rave about you to their friends.
1 star — there is a bed
2 star — bed is made and a towel and soap and stuff
3 star — clear directions, water and fruit available on arrival
4 star — 24-hour check-in with a safe box
5 star — champagne reception
6 star — free massages and taxi booked takes you directly to the place
7 star — you don’t need to pack any clothes because they know your size and have all the clothes you need
8 star — Your work is done for you and you get to play computer games all day/chill on the beach
9 star — there is a choir singing your favourite songs and you
10 star — private jet picks you up, Leonardo DiCaprio is your driver and you get box seats to your favourite sports event/show
11 star — you are taken to Mars
4 — Raise more money than you think you need
You want to part with as little of your company as possible, but only taking what you foreseeably think you need is very dangerous.
- Unexpected expenses — Setbacks and expenses crop up you haven’t accounted for and your money will go down faster than you plan for
- Unexpected opportunities — As you progress you will continue having good ideas and maybe new opportunities will present themselves. You want to have the money to jump on the opportunity whilst the fire is hot rather and seize the advantage rather than waiting to raise more money and your competitors get ahead.
5 — Release an MVP that is Embarrassing
Your first release should not be perfect. It is important to get feedback as quickly as possible so you are building things in the right direction rather than wasting time on features that might never be used.
Important note — It should fulfil the main product requirement and not illicit any law suits by not actually delivering what you’re selling.
Read Lean Start up for more info
Move fast and break things
Furthermore, the Facebook philosophy of move fast and break things is a great mindset to adopt. Keep on experimenting and releasing imperfect features that you trial and test on users, it is key to staying innovative. Listen to your users but also observe. They will often say one thing but they will actually do another thing. Sometimes it is better to stick with a hunch and give it enough time to build some data rather than just listening to opinions.
Most users don’t like new things and numerous Facebook updates have been met with exclamations of hate. But then a few days later they are using the new feature like it has always been there.
6 — Decide fast — Wrong is better than no decision
You can usually fix things. But not doing something is often the worst thing you can do. Put in place a decision framework to ensure all important decisions get made and are not put on the side. If there are conflicts between the team hash them out don’t drag them out. If you can’t all agree you have to ‘disagree and commit’ and the people who don’t like the idea still have to give it their energy.
As a company scales it becomes harder to maintain a quick decision process as you get more people involved. People lower down need to be empowered to make the right level of decisions that would waste your time and theirs by bringing it to your attention. Equally, on bigger items there should be an easy process to get a decision to your desk and to have it put to rest quickly. t is important to maintain an ability to make quick decisions!
7 — Be willing to Pivot — Make and break plans!
Regularly check if company systems and processes need reviewing. Have a clear system for providing feedback within the organisation and processes in place for identifying faults.
Often when companies triple in size many things break and you can’t hold onto the things that were an important part of your culture when you started.
e.g. FB celebrating every birthday, as a company too big they needed to change this as they were having a party everyday…
8 — Don’t tell employees how to innovate — Manage the chaos
It is important to step back a little and not be a control freak. Empower employees to do awesome stuff by having faith in them, not by micro-managing them.
Case study google:
- Managers on a project have to convince employees to work on their project idea. They don’t just get assigned, workers
- Employees have 20% free time to do their own ideas for things that might be cool
9 — Everyone must own part of the company — Culture must be cultured
People work better when they are part of it. They feel involved in the decision process and benefit from the rewards. Find people that reflect what you’re looking for. If you need to stay disruptive, employ people who will always be willing to change things. Demonstrate the culture explicitly.
e.g. Netflix culture deck available online. Shows their model as a sports team (not a family)
Avoid internal competition
A culture of competition among employees is very damaging. Of course, you need to have performance reviews, rewards and penalties, but dissociate them from relation to other staff members and actively discourage competitiveness. Where possible reward teamwork over personal work.
Ask people if they can identify who helped them in their career.
Encourage people to help others and reward this massively.
10 — Have grit
Any start up has highs and lows and it takes immense grit to ride through the problems and come out the other side. To keep up levels of grit people need to observe a mix of determination, persistence and being a little lazy
Determination and persistence speak for themselves. But being a little lazy requires some explanation. Basically, by being slightly lazy you have more energy to show grit when you need it most. Using grit inevitably saps at reserves inside you and you need to also put time into filling these reserves. In the end, they summarise grit under two rules:
- Be able to relax sometimes to keep some energy in the store.
- Be willing to stake everything on the chance to be a hero.
Bonus Tip — Pay it Forward
You will get a lot of help along the way. It is only right to put some energy into helping others where you can.
Entrepreneurs that help others tend to become investors, mentor other entrepreneurs or even help employees start their own things. The effect of being altruistic will also have personal benefits as it will teach you more about yourself as you explain things to others. and just maybe it will come back around as it helps expand your network and it increases the success rate of the people around you.
In summary I thought it was a good episode, certainly worthy of making notes! I hope this helped provide a useful set of tips to look out for. I’d love to hear your own thoughts and any other tips you have on scaling a company whilst I’m working on scaling my own AI startup automorph.