At CDTM, we realize that while it can be fun and rewarding, founding a start-up is hard. You constantly live in uncertainty and iteratively adapt your product as you learn more about the market. In many cases, the idea might not even work out at all because there is no sufficient demand.
When you have finally reached your product-market fit and can show that your product satisfies a market need, you might think the rest would be easy. However, many companies fail in scaling their operations in what is known as the “second valley of death”. Fortunately, scaling a company is not an art, it’s a craft and therefore a skill that can be learned – and this was exactly what we wanted to do in our CDTM elective “Scale-Up” in the past semester.
Electives are an important element in the CDTM study curriculum. Besides the three core courses and the abroad stay, students can choose between several electives to complete at least three during their studies at CDTM. Electives this semester ranged from IoT Hardware Prototyping over Social Entrepreneurship to our elective Scale-Up. One important concept is that CDTM alumni can participate in the courses alongside active CDTM students. This way, alumni that currently scale their own companies could participate, and class discussions were enriched by their real-world examples.
In order to reliably scale a company, we got introduced to the Scale-up framework. We were happy to have Nikolai Ladanyi conduct the interactive workshop who, with his team, adapted this framework from the US to the European market. Nikolai is a serial entrepreneur, investor, book author, and co-founder of scale up Germany, a company that helps startups cross the second valley of death.
Nikolai explained that scaling a company boils down to four core areas: people, strategy, execution, and cash. Unfortunately, there was so much content that we can’t tell you about everything here, but we picked two of the most important aspects to tell you about.
Arguably the most crucial area in scaling up is people. As companies grow, the founders will at some point not know every person in the company. That is why it is important to establish a strong value-based culture so the employees will be able to continue working together in harmony. The first step to creating a value-based culture might be obvious but is often neglected: being clear on what values define the company. There are many approaches to this but we want to share a top-level approach with you that we learned and found particularly useful: The “Mission to Mars”.
Pick the 5–7 people in the company that you would send on a mission to Mars that best represent your company culture. This exercise can be done together with your leadership team but there is a catch: you are not allowed to pick yourself or any other person that is doing the exercise with you! Having settled on the names, you then write down the positive actions and characteristics of the person that distinguish them most. These can then be reframed into concrete values of your company.
We would like to encourage you to try the exercise yourself! No worries if you don’t have a company – you can also do this to become clear on your own values and use friends, family members, and celebrities as crew members of your mission to Mars.
Of course, there is much more to the area of people in order to answer the question, “Would you rehire every single employee enthusiastically?” However, here we want to dive into another aspect – company strategy.
According to the scale up framework, the whole strategic planning of scaling companies should be based on the BHAG, the Big Hairy Audacious Goal. Depending on the company size and growth rate, the BHAG should be the perfect outcome you would like to achieve in 5–10 years. It is rather a stretch-goal that you would consider approximately 30% likely to reach.
Based on this audacious goal, you can then break this down into an issue tree and construct mid- and short-term goals. For example, you might set a goal on the number of customers you would like to serve in 2030. This might imply that you need to expand internationally which, in turn, could lead you to set the goal to expand to the UK within the next year and already start with the first step towards reaching the BHAG.
These are only two of the many aspects of scaling a company that we learned about and actively discussed during the workshop. With many more practical exercises other than the Mission to Mars, we could experience the framework in practice and apply this to our own cases. If you want to learn more about scaling a company, make sure to check out the scale-up Germany website or have a look at the scale up book where Nikolai presents the framework in-depth. Also, if you are still studying at university and are passionate about entrepreneurship, make sure to apply at CDTM to learn about various aspects of entrepreneurship in our hands-on study program!
In the end, we would like to again thank Nikolai for conducting the workshop and explaining and discussing the scale up framework with us! We not only learned a lot but also had great fun!