If you find our videos thought provoking, join our Newsletter group and we'll send you more.
JOIN OUR NEWSLETTERThe scaling engine is about horizontal scaling. The other seven engines all help you to scale vertically, which really means bigger deals, more deals, longer lasting deals, more employees etc. But at some point, you might saturate your own market and then horizontal scaling is a good option. We always recommend setting up multiple Profit Centres (P&Ls) as soon as you can. Even if you are a company of only 10 people, we recommend setting up two P&Ls. Learn how they function, learning the process to make them work. Then you've set yourself up for the future, where you can add a third and a fourth because you've learned the process and you understand how to grow P&Ls. By doing that you set yourself up for horizontal scaling.
Let me give you a few examples. First, something outside of our industry. McDonald's started with the McDonald's Brothers. They scaled the one store, basically, by maximising revenue, maximising efficiency, and then they had to open up more branches. That's horizontal scaling and they failed. Then Ray Kroc came along, convincing them he could do it. And so, what he did was that he eventually bought McDonald's Brothers out and the rest is history.
If you're looking at the Tech Services Industry, there's lots of examples. I mean for myself (Innogence) we started off with 2 branches. These were regional branches. We grew to a third one and then a fourth one and we were about to open a fifth one when we sold the business. At Bluleader, we based our practices around areas of competency or capability. For example, we would have a CRM practice and an e-commerce practice. Each practice would have a practice manager who would be responsible for the profitability of the practice as well as for the resources within that practice. They were highly incentivised on the growth of that practice. We grew from 3 then to 4 then to 5 practices. We would have carried on at this rate if we had not been acquired at this point. We proved that this is an effective way of scaling your business horizontally.
Epi-Use is a South African SAP HR payroll company that started in South Africa. The South African market has a limited size, there's only so much you can do there. So, they went for horizontal scaling. They expanded into different offerings and different regions. Today, they're a global company with 3,500 employees and that's all thanks to horizontal scaling. They’re still known as their world's biggest company focused on SAP HR payroll. There’s another company which is funnily enough in the same market, Presence of IT, they’re an Australian company who started with SAP HR payroll. I knew David Brooks, who was the founder of this company, when he only had about 10 employees. He grew his company to 600 people when he sold to Deloitte. How did he do that? Well, horizontal scaling. So, the first thing he did is, he expanded from SAP HR payroll into Oracle HR payroll, but two separate P&Ls. The niche, remained the same in the sense that they were still doing HCM for Large Enterprise. So that was a natural transition, still sticking to their niche. Then they went global, they went to other countries, including the USA. That's how they got to the 600 employees.
Getting your scaling engine up could be hard in the beginning. I'm not going lie to you. If you've never run multiple P&Ls before there's going to be a learning curve. Putting the right systems in place, managing the people launching new P&Ls, that's going to be a hard work. Yes, but once you've got that going you will never look back. This will become the best way to grow your business in the future. It's also important to remember that products come and go, so the thing that you specialise in might be hot right now and in a few year’s time, it might not be as hot. So that ability to always be ahead and invest in new technologies, that's really important. To have that ability and that's not something you do when it's too late. We're not talking about diversification. In other words, moving out of your niche. What we are referring to is how can you expand your offering within your niche? How can you further enhance your offerings so that you're seen more as a specialist. Ensuring you're able to provide additional services to your customer that are still within your niche and your customer still views you as a specialist in your field. If you can get this right, you have a highly effective way of creating a scaling engine.