I was having lunch with a friend today, and we were discussing how does someone know when a person is scaling or not. Who will scale as the company grow and what stops someone from scaling further?
Some companies have early members scaling beautifully as the organization grows, while some don’t. A lot of smooth scaling happens typically when the company is growing organically and the growth rate is relatively modest (< 50% YoY). When a company is growing > 50% YoY, and in some cases, doubling or more, it becomes incredibly difficult for people to keep up with the scale of the company, as humans grow linearly, yet companies grow exponentially.
Below are a few questions to ask yourself to check if you are scaling with the growth needed and some tips and strategies to continue on the fast growth trajectory.
1. Am I “going horizontal?”
I came across the concept of “Going Horizontal” during 10xCEO program and we discussed extensively on how to make sure the executive team is continuing to scale at the right capacity level for the growth needs of the company.
The team internally might already be “over capacity” if the company’s growth rate is modest and the team is experienced. But if the needs for the leadership capacity emerging from growth out weigh the current capacity, then it will hurt the growth rate and the potential upside of the company as long as the leadership team is not fully built to handle the needs.
I first learned the VPC Framework (VPC: Value-Price-Cost) back in 2006 and the simplicity of the framework made an impression on me. I still revisit a few times a year to think about where our company is in the position within the framework and how we are investing our resources.
The concept is quite simple. Let’s start with the definition:
Value: This is the value your offering is creating and delivering to customers.
Price: This is the price you charge and customers pay for to acquire or use your offering.
Cost: This is the cost of creating and delivering your offering to the customer.
The differences between these elements create the benefits:
Below is a post I wrote in August 2019 within Y Combinator community (which luckily received 300+ upvotes 🙇♂️). Now that I get a pretty steady stream of inquiries about fundraising and accelerator/demo days, I thought it might be helpful to repost here in public format. Hope it brings hope to a few.
Hi S19 founders,
Now that the demo day has officially begun, I just want to share our experience at SendBird (W16), so that perhaps some of you guys can relate.
I’ll admit upfront: We were not the hot company of the demo day. No where near. We didn’t get the overly enthusiastic emails from investors piling up in our inbox.
I thought we were doing okay during the batch, but on the demo day, the ones that got the most amount of ‘likes’ and ‘quickest raises’ were not necessarily the ones we thought did the best during the batch. Some companies raised a lot of money almost on the day of the demo day, while most of us felt like we were punched in our stomach, grasping for air.
One of the macro trends we’re seeing in the software industry today is the rise of the API economy. API (Application Programming Interface) allows implementation, operation, and maintenance to become simpler by providing a set of input rules to the developers outside of the API software and giving them functionalities and processed results in return.
As discussed in the management framework #2 — abstraction and reduction — API is analogous to hiring a good management layer in a company, to provide more leverage to the developer allowing productivity gain through an abstraction layer of software. This abstraction stage is a critical phase in any industry to grow exponentially, as in any complex-enough industry, building all of the value chain end-to-end becomes infeasible and the trade-off between control and speed/quality/resource gets exponentially larger.
The information and knowledge I know today will quickly become obsolete as years go by, so instead of focusing on the transfer of knowledge, I came to believe that providing a useful set of core values and life’s frameworks are more scalable for the generations of family members. So here is the 1st version of family core values.
The core value is to help our family live and grow with a purpose and meaning in life. It will help us prioritize, make decisions, stay genuine and consistent, maintain integrity, with a long-term perspective. This is a living document and we should continue to evolve it throughout the generations.
The theme of the core values is “Entrepreneurship (企業家精神, 기업가정신)”. Entrepreneurship is a mindset and a way of living as a leader, that involves identifying problems and opportunities, coming up with solutions to those problems, and executing them resourcefully and tenaciously to create significant value to the world.
Our Family’s 4 Core Values
1. Positive Tenacity
Positive tenacity means we’re being tenacious towards positive missions and goals. It means we look at the future with optimism and execute with high energy. We are biased towards action and we believe in positive changes. We get things done by being resourceful. We work smarter and harder to achieve our goals. We are tenacious and pursue our dreams relentlessly.
We are the leaders and we take responsibility in any situation regardless of the circumstances. We embody first-principle thinking and decision making. We uphold our integrity and always do the right thing. We are able to think both strategically and tactically. We are independent thinkers. We also know the importance of great communication and being positive examples to others. We believe the good in people and focus on their strengths and positives, rather than their shortcomings and negatives. We inspire people to take action and lead towards a positive future.
3. Learn & Adapt
The world and the universe is constantly changing and the only way to survive and grow is to adapt to the changing world rapidly. We continuously learn and adapt to any environment. Adaptation is not a single event, but a continuous and never-ending state of being. It means to learn anything as quickly as possible, stay curious throughout our entire lives, never get complacent, always pursue becoming better than the best.
4. Think Long-term
We are long-term forward thinkers. We aspire to a positive future and make that dream become a reality. We live with a long-term perspective and are patient through our lives, stay generous and resilient, and are able to embrace the challenges with a long-term view.
Over the first few days of the new year, I’ve took the course on the big five model of personality — “Discovering Personality.” It was a fascinating refresh of the big five model and had the opportunity to go deeper into the understanding of the two aspects for each of the five factors.
It was helpful to understand the amount of statistical rigor that went into building this model, although as noted in the lecture, the names of the factors I think is somewhat poorly done and feels more biased than neutral.
The key takeaways from the lecture were being able to better understand myself beyond what I had before, especially around the aspects of conscientiousness and how these aspects interact with other factors.
While I was setting up the goals for 2020, instead of grouping to traditional categories (areas of goals) like before, I’ve layered the goals based on the impact across the different layers of society.
There’s a phrase “修身齊家治國平天下” from an ancient Chinese classic “大學”, which translates into four phases of ruling the world:
修身: Developing and disciplining yourself to raise your intellectual and moral capacity
齊家: Taking care of your family and organizing your household
治國: Ruling the country
平天下: The world will be peaceful
Inspired from this phrase, I’ve organized the goals into the following four laters of 2020 goals hierarchy:
People tend to be a bit skeptical about setting a personal annual goal. Plans often don’t align with your reality and we’ve all experienced the frustration of setting a goal and giving up a few months into the year, unintentionally hurting your self-esteem.
But, if we don’t have a goal and a plan, we don’t really know whether we are headed in the right direction nor whether we’re making a progress towards a goal or not.
I deeply believe one of the core purpose of personal goal setting is not only to achieve them, but to build up your confidence and increase your self-esteem.
As an organization reaches certain scale, it is inevitable, at least due to the current limitation set by human interaction mechanisms (e.g. verbal communication, synchronous meetings, groups, hierarchies, physically independent) that there is a certain level of structure that needs to be put in place to manage the organization.
There is a few frameworks that can be useful when scaling the leadership. It’s local applications of the general management frameworks, so let’s explore how they can be relevant to scaling leadership.
1. Convergence <> Divergence framework
This framework demonstrates how to navigate within the horizontal layer (x-axis) of management.
As your organization scales, one thing you constantly run into is the overall increase in diversity within the organization. The proportion of diversity may increase or decrease, but the absolute number of diverse entity (in this case, employees) will simply increase as your headcount grows.
I was first recommended the book “Leadership and Self-Deception” from Stewart Butterfield during Y Combinator Growth program late last year. I finally got the chance to open the book recently and the story resonated so much that I recommended this book to our entire company.
A high-level summary might go like this: if you get into self-betrayal, you go “in the box” where your perspective of the world starts to distort in your favor. By self-justifying, you find ways to blame others, while inflating your own virtue.
The result is making your relationship worse and inviting others into the box along the way, starting a vicious cycle. Below diagram shows the inside of Bud’s mind, one of the characters in the book. Bud’s baby son David wakes up in the middle of night. The diagram shows what goes through Bud’s mind as he thinks about whether to get up and tend to David or not, while his wife Nancy is asleep besides him.