Managing growth Super-project.eu

From start up to scale up Each venture typically goes through different stages of development – a simplification - each stage requires different strategies and management techniques to make the venture successful Figure 1: Financial performance and stages of new venture development (Smith et al., 2011)

Scale up strategies The four basic growth strategy modes: Market penetration Market development Product/service development Diversification Growth strategy must be consistent with firm’s capabilities, its competitive advantage, and the competitive situation

The dimensions of business growth Business growth is a dynamic process involving development and change within an organization, as well as changes in its interaction with environment Growth and development of the venture must be understood from many perspectives, mainly: Financial, Strategic, Structural, Organizational.

Financial growth Related to the development of the business as a commercial entity. Concerned with increases in: Turnover, Costs, Investment needed to achieve the turnover, Resulting profits. Company’s assets. Value of the company, i.e. what a potential buyer would be willing to pay for it.

Strategic growth Relates to changes in how business interacts with its environment in a strategic whole. Concerned with developing capabilities to exploit market presence, incl. selection of opportunities and acquiring assets to create sustainable competitive advantage Must be at the heart of the growth process All competitive advantages are sensitive to business growth: Cost advantage Knowledge advantage Relationship advantages Structural advantage

Structural growth Factors driving the structure of the organization as it grows: Organization size Operational technology Organization strategy The organization’s environment Power, control and organizational politics

Organizational growth Implies the need to design and create an organization. One of the approaches is to: Consider the resource requirements, and Design its structure around them. Particular functions are then formed to manage acquisition of these resources In addition, the complete organization will include two more functions: Operational system Strategic control function

Consolidating the venture At some stage, the growth slows and company becomes mature – it has to undergo a process of consolidation Maturity - much more than a simple slowdown of growth - number of changes in the following main aspects: Finance Strategy Structure Organization

Harvesting, business exits and exit strategies At a certain stage, entrepreneur can decide to exit the business and harvest by realizing its value Plans and expectations towards the exit should be clarified from the very beginning VCs and investors normally negotiate harvesting options at the time of the initial investment Two basic exit/harvesting alternatives: Selling to outsiders Selling to insiders

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