Organizations often need help finding two fundamental objectives: growth and optimization. It's a seesaw dilemma that many businesses face, where they oscillate between expanding their operations and refining their existing processes. Scaling can occur because it adds more complexity and disrupts the already established workflows and processes. That's where optimization teams come into play. They help to simplify workflows and systems, allowing for sustainable long-term growth.
In this blog, we'll explore why these two facets should not be viewed as opposing forces but as symbiotic aspects that must work harmoniously for an organization to thrive.
The Problem with Scaling and Growth Models
Every business wants to grow their company. Whether you plan to increase your bottom line, grow your partnerships, or increase your company size, scaling presents its challenges.
The Messy Nature of Scaling
Scaling an organization is often a messy affair. Rapid growth can strain resources, overwhelm teams, and introduce chaos into well-established processes. This growth can lead to inefficiencies and setbacks without proper planning and governance. Many businesses need to start scaling earlier. They tend to scale before even when there are unresolved issues.
For example, they may need to be more clear on who their customers are or may not have the workflow or systems capacity to fulfill growth at scale. If you still need to resolve these issues, your company needs to optimize the operations and other business areas before you begin to scale.
Neglecting Governance and Efficiency
During rapid expansion, organizations may focus on hiring and revenue generation while neglecting essential aspects like governance, standard operating procedures (SOPs), and operational efficiency. This oversight can create bottlenecks and hinder long-term sustainability.
Governance, standard operating procedures (SOPs), and operational efficiency are often considered the unsung heroes of organizational stability. They provide structure, consistency, and order to an organization's operations, ensuring that processes run smoothly and that resources undergo optimal utilization.
Bottlenecks start to emerge as processes struggle to cope with the increased workload. Miscommunication becomes commonplace as teams work in silos, each racing to keep pace with growth. Critical decisions may be delayed or made without the necessary oversight, leading to costly errors.
The Risk of Hiring for Growth
As an organization scales, the instinct to hire rapidly becomes ingrained. More employees are onboard to accommodate increased workloads, serve new markets, and fulfill rising customer demands. The focus often shifts toward building larger teams, emphasizing quantity rather than quality.
We've seen this scaling problem throughout history. During the dot-com bubble, many internet-based companies scaled rapidly, driven by investor enthusiasm. They hired extensively, often with little regard for sustainable business models. When the bubble burst, numerous startups went bankrupt due to their unsustainable growth and high operational costs. A famous example is Pets.com, which went from an IPO to bankruptcy in less than a year.
Hiring for growth is essential, but organizations sometimes overlook the need for optimizers—individuals or teams dedicated to refining and improving existing processes. This imbalance often leads to a lack of focus on efficiency and optimization.
The Consequences of a Seesaw Approach
A seesaw approach to growth and optimization can result in a rollercoaster ride for an organization. It can lead to instability, employee frustration, and missed opportunities for improvement. Teams may experience frustration and confusion as they constantly shift between growth- and optimization-focused modes. This inconsistency can also result in missed opportunities for improvement, as efforts are divided rather than integrated.
The seesaw approach can compromise the organization's ability to achieve sustainable success. Instead of viewing growth and optimization as separate endeavors, organizations should recognize their interdependence. A more strategic and holistic approach involves integrating continuous improvement into the fabric of scaling, ensuring that growth and optimization occur in tandem. This approach reduces chaos and promotes stability, efficiency, and long-term prosperity in the dynamic business world.
The Need for Parallel Focus
Growth and optimization are not mutually exclusive; organizations should pursue both in parallel. Pursuing both objectives means that operational teams need expertise scaling their organizations or departments and optimizing their processes. While this may sound challenging, it's crucial to understand that embracing change and continuous improvement should be ingrained in the organizational culture, ideally starting from the leadership level.
But how can an organization successfully manage continuous improvement without leaving team members behind? Our answer lies in the "4 ImPERAtives" framework: Plan, Enact, Review, and Adapt.
How to Use Continuous Improvement Frameworks for Rapid Growth and Optimization
Continuous improvement should be at the core of all business operations. Frameworks like PERA and Kaizen offer structured approaches to drive continuous improvement. These methodologies emphasize the importance of iterative, incremental changes.
The 4 ImPERAtives of Improvement
Our version of continuous improvement is built around four key imperatives: Plan, Enact, Review, and Adapt. This framework provides a structured path for organizations to navigate growth and optimization simultaneously.
The Plan-Enact-Review-Adapt, or PERA, cycle is one of the cornerstones of continuous improvement methodologies. In the "Plan" phase, you identify opportunities and devise a change strategy. During "Enact," you implement the change on a small scale. "Review" involves analyzing data to assess the impact of the change and determining its effectiveness. Finally, in the "Adapt" phase, you broaden the implementation of the change and continue to monitor and refine it. If any stage proves ineffective, you can restart the cycle.
For example, software teams frequently execute PERA cycles when launching new features using a technique known as "feature flagging." Feature flagging entails rolling out a new feature to a select subset of actual customers in a controlled test environment. This test aims to gauge whether customers with the new feature experience greater success than those without it. After reviewing user data, teams proceed to the "Adapt" phase by introducing the feature to the entire user base or making necessary adjustments based on the results.
In addition to the 4 ImPERAtives, there are several other continuous improvement methods worth considering:
The Lean Method: Lean methodology is a systematic approach to minimize waste and maximize process efficiency. It emphasizes continuous improvement, customer value, and eliminating non-value-added activities. Lean principles are commonly applied in manufacturing, service industries, and software development to streamline operations.
The Kanban Method: Kanban is a visual management system from Japanese manufacturing. It uses visual boards with cards or digital tools to represent work items and their status. Teams can easily visualize work in progress, identify bottlenecks, and optimize workflow. Kanban promotes flexibility and efficiency in various industries, especially project management and software development.
Six Sigma: Six Sigma is a heavy data-driven approach focused on process improvement and reducing defects or errors to a minimum. It employs statistical analysis to measure and improve the quality of processes, products, and services. Organizations that follow Six Sigma principles strive for near-perfect performance and aim to achieve a Sigma level of six, indicating very low defects.
Total Quality Management (TQM): TQM is a holistic quality management approach emphasizing continuous improvement and customer satisfaction. It involves the entire organization's commitment to quality, aiming to eliminate defects and errors in products and services. TQM principles include customer focus, process improvement, and employee involvement.
Agile Methodology: Agile is a flexible, iterative project management and software development approach. It values customer collaboration, adaptability to changing requirements, and delivering working solutions in short cycles (sprints). Agile methodologies like Scrum and Kanban promote teamwork, transparency, and customer-centric development.
How PERA Helps Your Company Balance Both Sides
When trying to grow, adapting a lean methodology framework like PERA can optimize processes, eliminate waste, and continuously improve efficiency in an organization. The Plan-Enact-Review-Adapt (PERA) framework should be at the core of growth and optimization for companies for several reasons. PERA fosters a culture of continuous improvement within the organization. It encourages employees at all levels to actively participate in identifying opportunities for growth and optimization, creating a more engaged and empowered workforce.
This continuous improvement framework allows organizations to identify and mitigate risks associated with growth initiatives. Companies can minimize potential pitfalls and setbacks through careful planning and data analysis.
At the heart of PERA or any lean methodology involves identifying what the customer values and is willing to pay for. Anything that doesn't add value is considered waste.
Once the value is defined, the entire process or value stream undergoes mapping to identify each step and its contribution to delivering value to the customer. This mapping process helps in recognizing areas of inefficiency.
After identifying and eliminating waste, Lean creates a smooth and efficient flow of work or products through the value stream. Scaling will be smooth when processes are efficient since you've removed all the system bottlenecks.
The Solution is to Establish Growth and Optimization Teams
We recommend establishing separate teams or assigning specific individuals responsible for each aspect to address the challenge of balancing growth and optimization. These teams must collaborate effectively. Growth teams should appreciate the value of optimization, while optimization teams should understand the need for growth. When they work harmoniously, an organization can achieve sustainable success.
How do you establish growth and optimization teams when both sides seemingly have two goals?
Here's how:
1. Establish Clear Objectives: Clearly define the distinct but interrelated objectives of the growth and optimization teams. Ensure that each team understands its primary mission and goals.
2. Foster Mutual Understanding: Organize cross-team meetings and workshops to understand better each team's purpose, challenges, and strategies. Encourage team members to learn about the roles and responsibilities of their counterparts to appreciate the value each brings to the organization.
3. Develop Shared Metrics: Identify standard performance metrics to which both teams can contribute. For example, customer satisfaction, revenue growth, or cost reduction can be metrics of shared interest. Ensure that these shared metrics align with overall organizational objectives.
4. Collaborative Project Teams: Create cross-functional project teams that include growth and optimization team members. These teams can work together on specific initiatives that require a balanced approach.
5. Open Communication Channels: Establish open and regular communication channels between the two teams. Encourage them to share insights, challenges, and successes.
6. Leadership Alignment: Ensure that the leaders of both teams align with the organization's overall strategy and objectives. They should lead by example in fostering collaboration. Promote a culture of teamwork and cooperation from the top down.
7. Regular Alignment Meetings: Schedule regular alignment meetings between team leaders and key stakeholders to review progress, identify bottlenecks, and strategize together. Use these meetings to adjust priorities and ensure that both teams remain aligned with the organization's goals.
By implementing these strategies, organizations can build growth and optimization teams that coexist and thrive by leveraging each other's strengths and contributing to the company's overall success.
Mastering the Growth-Optimization Equation for Continuous Improvement
In the dynamic business world, balancing growth and optimization is not just a choice but a necessity. Embracing the continuous improvement journey through the 4 ImPERAtives of Improvement can lead to remarkable results. Organizations can thrive in an ever-changing landscape by establishing dedicated growth and optimization teams, fostering a culture that values both aspects and implementing strategies for alignment. Remember, it's not a matter of choosing between growth or optimization but achieving both in harmony for sustainable success.
