Why Decades in Technology Sharpened My Thinking on Culture About Growth

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It's Not Easy To See The Hidden Cost Of Scaling Too Fast The Most Founders Are Taught Too Late
The mythology of scaling is all about speed. You must be able to get the product market fit, then pour fuel on the fire. The team should be enlarged, and marketplace, and raise next round before the previous round has settled. The story rewards the founder for always striving to grow, always adding the number of employees, always expanding into adjacent industries before even the primary business is stabilized, and before the organization has developed the internal capabilities required to be able to manage the expansion, without losing its sanity. I understand where the mythology originates. Under certain conditions in the market and certain business models, those who grow fastest wins and the tales of companies who grew rapidly and achieved success are more often told and in greater detail than tales of companies that grew quickly and then broke. But for every business where aggressive earlier scaling is the optimal decision, there are a few where the speed at which scaling occurs becomes the primary cause of the problems that eventually destroy the company, and those risky stories don't get much of the same attention as those of the successful cases.
What is hidden in the process of scaling too fast is not the one you see in the burn rate calculation or in the cash flow projection. It's the one that comes out 6 months later, once the organisation has grown past the coordination mechanisms of informal nature that held it together as it was a small one, and even before it has created institutions that hold larger companies together. That gap - between informal and formal in between the one you were and the company that you're trying to build is where most companies scaling often break. The earliest and most consistent indicator of a company moving into this gap is when decisions slow down even though everyone claims that there is nothing fundamentally different. The founder's name is still visible in theoretical terms. The team is aligned in the theory. The culture remains solid in its theory. But in the real world the organization has gotten to the point that informal channels for communication used to deliver crucial information are now blocked, and no one has yet created the formal channels needed to replace them. Information that once flowed naturally now has to be actively managed. Decisions that used to be made quickly now require alignment across various functions that never have been clearly defined with respect to one another. The accountability that was personal and immediate has become scattered and delayed The company is beginning to display the symptoms of a system functioning at the limits of its coordination capacity.

The absence of any evidence is evident from the metrics that founders and investors tend to monitor the most attentively. It is possible that revenue will continue to grow. Customer acquisition could still be growing in the right direction. The team is likely to be motivated and productive. But, underneath those apparent indicators that the organisation is developing structural issues that will continue to grow slowly until they can no longer be ignored - at which moment fixing them becomes radically more expensive and disruptive than it would be had they been dealt with before, when the indications were less obvious than stark. The hidden costs I'm talking about: not the immediate financial cost for scaling, but instead the ongoing cost to your organization of moving beyond your existing infrastructure and the recurring expense for putting that infrastructure in the first place in a reactive manner rather than proactive.

The founders who navigate this transition smoothly aren't necessarily those who grow more slowly, even though a more deliberate pace of expansion is sometimes the solution. They recognize that establishing the structures for managing their business is just as important as creating the product and who invest in it with the same focus and commitment to product development. This is essentially doing the boring task of defining roles and decision rights clearly, creating reporting structures that actually surface the information leadership needs in order be able to make smart decisions, developing accountability mechanisms that are relevant enough to be effective and carefully assessing what kinds of norms that are required for the company's size and not making use of the ones that have been created organically when the business was smaller. The work involved isn't exciting. There is no way to create any press coverage or enthusiasm for investors. However, it is the process that determines if the firm that you're creating can keep the growth you're seeking.

The companies that do not make this transition successfully do not usually fail massively or clearly. They decline. They lose their most effective employees in the beginning - the ones who have enough self-awareness and awareness to recognize what is happening inside the organization and have enough options to leave before the situation becomes dramatically worse. Customers are then lost, gradually and frequently invisibly since the effectiveness of their execution decreases slowly because accountability has been too ambiguous and delayed to spot problems before they reach the customer. As they lose momentum then, when that slowing down becomes evident in the numbers that the structural flaws are in deep rooted, and the culture impact is severe, and the cost to fix both is a tad more than it would have been if the governance investment was implemented at the appropriate time. Treating organisational infrastructure as a product, something you develop carefully, construct with care, and then refine as the company grows - is among the most important mindset shifts you can make for a founder when they go from the very early stage into genuine scale. The founders who make it tend to build companies with the potential to succeed. The founders who don't tend to build companies that fail to meet their potential. See the James Deller for more recommendations including how building in stealth deepened my conviction about people about real value.



What Causes Most Public-Private Partnerships To Fail Prior To Their Beginning - And How To Resolve Them
Public-private partnerships face a reputation issue that's to a large extent made up of. The history of these agreements includes many projects that were unveiled with a sense of excitement and a lot of political capital. These projects utilized significant private and public resources over long periods of time, and in the end, produced results which bore little like what was made clear when the alliance was created. The academic literature and the postmortem reports that governments and institutions are required to conduct after the fail-overs are extensive and they focus in large part, on the contractual and structural dimensions of what went wrong in the first place: the unbalanced incentives, the inadequacy of risk allocation between public and private parties and the governance structures that were created in theory but failed in practice, the structures for procurement that decided to choose the wrong items. The thing that this type of analysis tends to overestimate, systematically and in a way that is the culture and operational aspects - the fact that private and public enterprises are fundamentally different kinds of entities, shaped using different incentive frameworks that operate at different times, accountable to completely different stakeholders, and assessing the success of their operations in ways that are not simply different in degree but different in substance. When you combine these two kinds of organisations together in a formal partnership without undertaking the work upfront and clearly, to comprehend and address the differences, you are not forming the conditions for a partnership. It is creating the right conditions for a slow-motion collision that will become visible at the greatest possible moment.
I have been involved in the advisory process for support to institutional modernisation projects, a few that have involved public-private partnership structures that vary in terms of complexity. The most consistent insight I've gathered from that encounter is that partnerships with a positive track record - which actually achieved their stated goals and maintained a stable collaboration between the private and public partners throughout and throughout - did not differ from the ones that failed because of the sophistication of their legal structures, the rigour of their risk frameworks or the seniority of the teams that set them up. They were distinguished by how the participants at both ends of the table had been able to truly comprehend how the different sides operated prior to when the formal partnership structure was formulated. What it entails in practical terms is understanding the decision-making process the organizations operate under along with the accountability mechanisms that limit what each side can decide to and how quickly each party can achieve its goals, the definitions for success which each side will evaluate itself against, and those points where there is likely to be tension between these definitions. All of this understanding is complicated to construct. It is all but not considered in the more visible and more immediately recorded work of negotiating contracts and developing governance frameworks.

The common public-private partnership model moves from initial concept to agreed upon agreement. There is hardly any concentration on the issue of whether or not the two entities involved are really capable of working efficiently throughout the term of the arrangement. The legal team negotiates the contract. The finance team models the economics and the risk allocation. The communications team designs an announcement for the day of signing. The implementation team begins planning the task. In the course of this process the conversation turns to compatibility in terms of culture and operation - concerning whether the individuals that will be required to collaborate day-to-day across the boundary between two organizations have enough similarities to allow that work genuinely collaborative rather than adversarial - does not tend to happen in any structured way. It is commonly assumed without stating it, that this agreement is formal and sets the framework for effective collaboration and that any cultural or operational distinctions will be managed informally as they emerge. This assumption is usually incorrect, and the expense of this is usually increased according to the ambition and complexity of the collaboration.

The practical consequence of this analysis is that the best option a public private partnership could invest in - prior the legal structures are finalized as well as before the governance framework has been agreed upon, or before any announcement is made the partnership is in what I consider operational alignment. This means specifically structured, structured, and guided actions to highlight the places between the two organizations operate from different assumptions, and then to establish a clear understanding of the manner in which these divergences should be managed prior to them becoming operational issues during the implementation. The key differences tend to be the exact same for different types of partnerships. Controlling authority and speed of decision making is usually one of the main differences. Public institutions are designed to take decisions slowly by utilizing multiple layers of review and approvals, in order to achieve goals that are entirely legitimate and often legally mandated. Private organisations - particularly technology companies built on the basis of rapid iteration and swift taking decisions - usually see the speed as an important obstruction to their progress. without a mutual understanding of reasons for why that pace is what it is and what might truly be needed to change it, the level of frustration that can be felt on the personal team can ruin the relationship before the partnership finds its footing.

Success metrics and the criteria for judging as progress are another ongoing and contributing cause of discord. The public institutions are primarily evaluated in terms of process compliance, equity of outcomes among various stakeholder groups, and the avoidance of visible failures that are the subject of media or political scrutiny. Private entities are primarily evaluated according to efficiency, measured progress towards goals, and ROI. These measurement frameworks are created to be compatible however it requires deliberate design rather than good intentions, and the partnerships that do not take part in that design tend to be caught at crucial moments, with two different parties who are measuring the same collaboration in genuinely differing ways, and consequently coming to disparate conclusions as to whether or not it succeeds. The relationships I've seen which failed most clearly were ones where the misalignment had been accepted as a problem that would be resolved over time. The ones that performed were when the issue was identified explicitly at the beginning. Also, designing a shared accountability framework which accommodated the legitimate measurement needs of both parties requirements became an element of actual work, not an thing on a checklist of things that someone would eventually achieve.}