Top scalability challenges to overcome for digital startups and scaleups

scalability and growth for startups and scaleups
 At 25Friday, we help digital start-ups and scale-ups succeed. With almost any of our new customers, we start off with a "scalability scan". The goal of this scalability scan, is to find "inhibitors for scale". We have effectively done 20+ scalability scans at digital/tech start-ups and scale-ups of varying size. It's time to share the most common inhibitors for scale that we found!
digital product management, product ownership, technology strategy and software development is the golden tringle of 25friday

25Friday is a product management company

Before we talk about what we found, it’s important to understand what scaling means for digital companies.

Scale is required because digital companies grow fast and want to achieve growth against acceptable cost levels. Suppose your customers grows twofold, you don’t want to double in developers, sales people customer service agent or product owners.

Basically, there are 3 growth factors that require tech start-ups and scale-ups to scale:

  1. Growth in customers
  2. Growth in products or product features
  3. Growth internationally

Because 25Friday is a product management company, we assess these growth factors from 3 different perspectives: product management, technology strategy and software development. Here’s what we found are the 3 most common “inhibitors for scale”.

3. The product architecture looks like a “halfway finished Jenga game”

tech startup and scaleups often keep developing their technology untill it changes into a Jenga game

Jenga-game architecture of tech startups and scaleups

Most experienced founders or later stage product people will usually say the following: “after you validate your market-fit with your first product, it’s best to throw it in the trash and start over”. Still around 50% of the tech companies we help, did not pay attention to this advice.

When your initial product is getting traction with customers, it’s hard to step back and redo the technology. However, 1-2 years down the road, when growth and scale become your new best friends. The product is full of technical debt, frontend and backend code are mixed and all applications and storage is running on the same server.

Congratulations, you created a Jenga game that’s halfway in collapsing. Collapse then occurs at the most inconvenient time, when you are growing in customers or launching that new killer feature. During such an event, your product is stressed on performance or new code can cause unforeseen issues. Because your product has many interdependencies, if only 1 component fails, your product will be offline. Customer cannot use your product, this is usually bad for business. Therefore it is best to play Jenga at home.

2. Using too many junior developers or interns to create the product

digital scaleups should attract a more senior development team

Like in the previous challenge, timing is very important. Again, more experienced founders/CTO’s will recognize this challenge. They hire experienced developers as soon as their budget allows for it.

All great development teams we worked with, have an even mix in seniority. Suppose you have a team of 5 developers, then ideally you have: 2 seniors, 2 mediors, 1 junior. If you have a small budget, it’s better to spend it on hiring 1 experienced developer instead of hiring 2 or 3 junior or interns.

Why? Because most experienced developers are 2-8 times faster and make better quality software. When growth is high, experienced developers must focus on improving the product. They should not be occupied with fixing rookie mistakes or explaining basic coding/testing skills to the entire team.

And, let’s be honest, we are all for making mistakes and learning from them. We enjoy the creativity and energy of just out of college/university people. However, most of your customers don’t care. Customers prefer a working product. So when you start building that scalable product, make sure your product team has a healthy balance of experience.

If you cannot find experienced developers in your local market, start near-shoring for experienced developers. Do not be tempted  to hire interns/juniors locally because it’s easy, cheap and they are available. This works when you are an early startup, it doesn’t work when you desire scale and growth.

1. Not setting clear objectives and creating focus for key people

Apply OGSM or OKR frameworks to set specific objectives

Unclear objectives are hard to hit

50%-70% of the tech companies we help, do not have clear, transparant, measurable and a limited set of objectives. Most of the time, they have an idea about how much growth they want to achieve. We hear objectives like: “we want to break even” or “we want to attract new customers” . But these kind of objectives aren’t helpfull in creating focus during day-to-day practices.

We frequently hear that everythings important and it’s usually important right now. However, when we do a target setting session with these customers, we notice that there are only 1-3 objectives that really matter. Moreover, the objectives will be concrete, for example: “In the next quarter, close 3 new customers for a total annual recurring value of €300.000”.

Settings objectives is crucial when you expand in customers, product features or countries. Managing every part of your business becomes more complicated and time is still limited. Therefore, making focussed choices becomes important for yourself as founders and for your team. Many early scale-ups try to grow on all 3 growth factors at the same time. However, we advise to focus on only one or two factors at any point in time. It is better to alternate on objectives then to do them at the same time. So, for example, focus on growing customers in Q1 and internationalization in Q2.

In all cases, keep in mind that for software developers, focus is the most important factor for writing quality code. No objectives = no focus = lower quality product.

 

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