Markus Dietrich

Thoughts on Scale

scale

When I was asked to write an introduction to this Theme, I thought initially to write about my personal experience as co-founder of Hilltribe Organics on the challenges of scaling up as a social enterprise. However, when studying the excellent blogs of this Theme and digging a bit deeper in the scaling up literature I grew increasingly aware that I have been using this term very liberally and probably too liberally. One of the reasons is probably that, as IB is at the nexus of development and business, both “speaks” mix to the confusion of everybody, which is not helpful to the sector.

What is scale anyway?

Is it a term that needs to be “left deliberately vague”, but as a “rule of thumb, means reaching people in the hundreds of thousands, rather than the thousands or tens of thousands” as stated in a recent Adam Smith report? Does this mean that successful inclusive business such as City Waste Group, Botanica and AACE Foods, which reach thousands or tens of thousands, do not have scale? Many people would disagree. Are inclusive business models, which engage the BoP as customer, inherently “better” as they reach the hundreds of thousands, as Ignitia does.

Is reaching scale “overrated”, as Jonathan C. Lewis positions, or “the most critical challenge for inclusive business”, as Marcos Neto puts it? Should scale even be a prime concern of companies or should they rather focus on “becoming much better at what they do”, as Will Coetsee states.

There seems to be a certain disconnect between the development and the business community, which manifests itself on the term scale.

When trying to trace the disconnect, I found that from a business perspective “scaling” has a very distinct meaning. According to an HBR article: “scaling means adding revenue at a much greater rate than cost” and should not be confused with growth. By nature, software companies have therefore one of the most scalable business model. Does it now mean that every inclusive business has to get into the software industry in the search of a “scalable” business model? Of course not.

On the other side of the spectrum, I came across MSI’s Scaling up Management Framework for development practitioners, which provides a toolkit to take projects, NOT businesses, to scale through expansion, replication or collaboration.

Confusion occurs when the term “scale” is applied on business growth such as scaling up, wide and deep approaches which have been found to be “analogous to the highly popular product-market growth strategies presented by Igor Ansoff” in 1957. Growth again is a concept, which every businessperson is very familiar with, and understands extremely well.

So where does it leave us?

Rather than indiscriminately interchanging “scale” and “growth”, I, for my part, will in the future be more careful in using the terms, especially when talking to the private sector. Probably I will use the term growth more when talking about inclusive businesses while using scale when entering the macro level of inclusive markets.

What is your take? Let me know about your opinion on scaling IB here at the blog.

 

This blog post is part of the February 2018 edition of the ‘THEME’ that reflects on scaling inclusive business.

What motivated entrepreneurs to stay focused while scaling their business? How did they overcome hard times trying to reach scale? What navigated them through this process? Read the full series to see what thought leaders and practitioners think about these questions.

 

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