What Data-Driven Thinking Continues to Inform My Decisions About Building Well

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How To Avoid The Costs Hidden Of Scaling Too Fast The Most Founders Learn Too Late
The mythology surrounding scaling is often centered on speed. Find the right product-market fit, then pour fuel on the fire. Build the team, expand marketplace, and raise next round before the previous round has settled. The mythology rewards the founder who is always in the process of expanding, adding staff, constantly expanding into other industries before an organization's primary focus has genuinely stabilized and the company has built the internal capabilities to handle the growth without losing its coherence. I understand where the mythology originates. With certain conditions on the market and business models, the first one to scale the fastest wins, and the stories of companies who grew rapidly and achieved success are reported more frequently as well as more vividly than stories of those who grew rapidly and fell apart. For every business that aggressive prior to scaling up is the best strategic option, there's several cases where the speed of scaling can be the main cause of problems that ultimately destroy the company. In those cases, cautionary stories do not get much of the same attention as those that have been successful.
It is important to recognize that the hidden costs associated with scaling too quickly is not the one that is revealed in the calculation of the burn rate or the cash flow projection. It's the one that comes out after six months, once the business has moved past the coordination mechanisms of informal nature that held it together when it was small, but before it's built institutions that hold larger organizations together. The gap between informal and formal of the company that you were and the firm you'll need to grow into - is where most companies scaling have a tendency to break. The most evident indication that a company is moving into this gap is when the speed of decision making slows even though everyone claims that nothing fundamentally changed. The founder's access is maintained in the theories. The team is aligned with the theories. The culture is still robust in theory. But in the real world the organization has gotten to a point at which the informal communication channels used to convey important information have become clogged however, no one has yet set up the formal channels that need to replace them. Information that was flowing effortlessly now must be effectively managed. The decisions that were made quickly now require alignment across various functions that never have been clearly defined relative to one another. Responsibility that was private and immediate now appears deferred and elusive and the business is beginning to show the symptoms of a system that is running at the edge of its coordination capabilities.

None of this is visible in the data that investors and founders typically monitor the most attentively. Revenue could be increasing. Customer acquisition could still be going in the right direction. The team might still be committed and dedicated. However, beneath the surface indicators they are developing structural issues which will only get worse in a quiet manner until they are unable to be ignored - at which moment, fixing them becomes more costly and disruptive than it would have been if they had been addressed in the past, when the warning signs were less obvious than stark. There is a hidden price I am talking about that is not the financial cost of scaling, but the future cost of running beyond your existing infrastructure and the rising cost to put that infrastructure in an environment that is reactive instead of proactive.

The founders who master the transition with ease aren't necessarily those who expand more slowly, although a more deliberate pace of growth may be the solution. They realize that creating the structure for governance of their business is just as important as developing their product and invest in it with the same focus and rigour that they bring to product development. This is essentially doing the boring job of creating roles and decision-making rights clearly, designing reporting structures that actually surface the information needed by the executive to make sound decisions, setting up accountability mechanisms that are relevant enough to be effective and carefully assessing the kind of culture the organisation needs at its current size rather than using the norms that took shape naturally when it was smaller. None of this work is stimulating. There is no way to create any press coverage or enthusiasm for investors. However, it's the work that will determine if the company you are building can actually sustain the growth you are trying to achieve.

The companies that fail to accomplish this task successfully do not often fail very visibly. They slow down. They lose their top employees in the beginning - the ones who have enough self-awareness to see exactly what's happening within the organization and to have options to walk away before the situation gets dramatically worse. In the next phase, they lose customers at times invisibly, due to the fact that their performance decreases slowly because accountability has been too ambiguous and infrequent to recognize problems before they impact the customer. They lose momentum, and before the decline in momentum is visible in the figures The structural issues are deep-rooted, the culture damage is substantial, and the cost to fix both is much more than it would have been if the investment in governance were implemented at the appropriate moment. The idea of treating organisational infrastructure as a item - something that is designed meticulously, construct carefully, and build upon as your company grows - is one of the most important mental shifts one can make by a founder as they progress from the beginning stage to reaching a larger scale. The founders who make it tend to build businesses capable of reaching their goals. People who don't tend to create businesses that do not come even close. Follow James Deller for site tips including what making investment decisions shapes every decision i make about culture.



Why The Majority Of Public-Private Partnerships Fail Before They Even Start - And What Can Be Done To Prevent Them From Happening Again?
Public-private partnerships face a reputation problem that is, for the most part and largely, earned. The past of these agreements is filled with projects which were made public with a genuine excitement as well as significant politically-motivated capital. However, they consume significant private and public resources over a long period, and then produced outcomes which lacked any similarity to the outcomes promises when the partnership was launched. The academic literature and postmortem examinations that governments as well as institutions conduct following the mistakes are extensive, and focus, for the most part on the structural and contractual aspects of what went wrong and the lack of alignment between incentives, the ineffective risk distribution between private and public entities and the governance frameworks that were created in theory but were not able to work in practice, the procurement frameworks that were able to pick the wrong things. What this analysis tends to neglect, invariably and ultimately it's the cultural and operational dimension, which is that public institutions and private organisations are really different kinds of entities, formed in different ways by incentive systems that operate on radically different timelines, accountable to distinct stakeholders, and measuring effectiveness in ways that's not only different in extent but also different in nature. When you bring those two types of organisation together with a formal agreement without taking the necessary steps, both upfront and in a clear manner, to recognize and manage the differences between them, you're not creating an alliance. You're creating the environment for a slowmotion collision that can be seen at the worst time.
I've been involved in advisory work for institutional Modernisation projects, several of which had public-private partnership structures that vary in terms of complexity. One of the most reliable observations I can make from that experience is that the partnerships that did well - ones that actually met their stated objective and maintained a productive working relationship between the private and public parties throughout the duration of their existence - weren't distinguished from those that did not due to the complexity of their legal structures or the rigorousness of their risk frameworks or the seniority of the teams that started them. There was a distinct difference in whether the individuals who were on both sides of the table had been able to understand the way in which the other side operated prior to when the formal partnership framework was approved. What does that mean in reality is understanding the decision-making processes the organizations operate under and the accountability structures which govern what parties must be able to agree on and how quickly it can be agreed upon, the definitions of success for each party to be evaluating, and those points where there is likely to be tension between those definitions. This understanding is not difficult to build. All of it is avoided in favor of visible and immediately documents-able task of negotiating contracts and designing governance frameworks.

The typical public-private partner process starts with an initial plan and then a concluded agreement without much focus on the issue of whether or not both organizations involved are actually able to work together successfully over the length of the agreement. Legal teams negotiate the contract. Finance team models the economics as well as the risk distribution. The communications team prepares the announcement in advance of the time of signing. The implementation team is beginning to plan the project. Somewhere in that sequence it is the time to discuss cultural and operational compatibility - about whether the people needing to work together day to day across the border between two organizations have enough in common collaboration more so than adversarial - does not tend to occur in any formal manner. It is assumed, usually without being stated, that an agreement in writing sets out the conditions for effective collaboration and that any cultural or operational disagreements will be dealt with informally whenever they emerge. It is nearly always wrong, and the financial cost of it tends to compound in proportion to the ambition and complexity of the partnership.

Practically speaking, the result of this analysis is that the most valuable option a public private partnership could do - before legal structures are finalized as well as before the governance framework is formulated, before any announcements are made to the public - is in what would call operational alignment. It is the specific, structured, and supported work that identifies the points in which the two companies' operating assumptions diverge and to come to an agreement on how those divergences will be taken care of before they become operational problems during implementation. These divergences that are crucial tend to be the same across different types of partnerships. Faster decision-making time and authority are almost always one of the main differences. Public institutions are structured for slow decision-making, by utilizing multiple layers of review and approvals, in order to achieve goals that are entirely legitimized and often mandated by law. Private businesses - particularly technology companies built around fast iteration and quick decisions - typically see this speed as a major hinderance to innovation, and in the absence of a shared understanding of why the pace is what it is and the steps that would need to be done to change this, the frustration from the private part can deteriorate the relationship long before it has found its feet.

Success metrics and what counts as progress is another constant and contributing cause of discord. Public institutions are often evaluated according to process compliance, equality of results across different stakeholder groups, and absence of apparent failures that make headlines or attract media attention. Private companies are usually judged on efficiency, measurable progress against objectives, and financial results. These measurement frameworks are combined however it requires thoughtful design, not only good intentions. The partnerships that don't invest in the design of the framework tend to come across, at critical moments, with two different parties who are evaluating the same partnership in differing ways, and consequently coming to different conclusions about whether or not it is achieving its goals. The partnerships I've observed that failed the most were ones where misalignment was considered to be something that would become apparent over time. The ones that were successful were the ones where the misalignment was clearly stated at the beginning. Then, designing a shared accountability framework that met the legitimate measurement needs of both parties requirements turned into an actual work, not an thing on a checklist of things that one could eventually find the time to.}