In this fun talk at ProductTank London, product management advisor Thor Mitchell discusses the messy reality of how to scale his cheese on toast business, and outlines how product managers can use a three-step process to take the burden of scaling away from company founders.
What Does Scaling a Business Even Mean?
Different stakeholders will have different opinions, but Thor’s definition encapsulates it simply as: “Exponentially more revenue without exponentially more cost so long as it remains both legal and ethical.”
He breaks this down into three principles:
- Increase engagement – bring more visitors to the product
- Increase conversion rates – convert visitors into paying customers
- Increase efficiency – ensure the business copes easily with the increased volume of customers
Sounds simple. But how do you achieve this?
Thor suggests three steps to untangle the messy reality of scaling a business:
Step 1: Identify the Growth Vectors
This is the direction the company chooses to go increase growth.
There are many options to choose from: increase sales volume, more product lines, new premium or budget options, or a new geographic location. However, Thor explains a process is needed to select only one vector to pursue. This avoids conflict and cultural strain while the company tries to adapt to the new direction.
How do you identify which growth vector to use?
Step 2: Do Your Research
The type of research you do depends on the growth vector you choose.
For example if you are seeking to add a new product you will research demand, pricing, margins, and competitors. If you are seeking to expand into a new location you will investigate the size of the market and any local competitors. Keep going until you have whittled down all the options to what is the most promising. Choose one and move on to step 3.
Step 3: Map Dependencies
What are the dependencies which accompany your chosen growth vector?
Will you need more support, more tech, new suppliers? What is the possible ROI on this investment? Could this be offset by introducing a partner?
Identifying the single biggest bottleneck to achieving this growth and removing it is the best way to tackle dependencies. But Thor cautions us to be mindful that the most obvious solution is not always the best.
For example, when looking at a process we want to improve there is usually a range of people and skills involved: At one end there may be people doing repetitive routine-based tasks, while at the other there may be highly specialised people carrying out more complex tasks or processes. The temptation is to automate the routine processes and leave the more specialised processes alone. But this may not be the best use of resources.
The teams carrying out routine operations will be low cost with the ability to grow or shrink depending on demand, and the more highly specialised functions could offer greater ROI. This is why research is crucial.
Using this three-step process Thor shows us how to determine all options for expanding the business, how to research to make informed decisions on which direction is best, and the tactics we might use to achieve this. It can help you take your product and team to the next level.