What Making Investment Decisions Changed What I Look For About Value

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There Is A Hidden Price To Scaling Too Fast: What Founders Typically Learn Too Late
The mythology of scaling is usually centered around speed. To get to market-fit for the product, then put fuel on the fire. Increase the number of employees, expand markets, then raise the next round prior to the previous one has settled. The story favors the founder, who is always pushing forward, constantly adding people to the team, always expanding into other verticals before their core businesses have truly stabilized, and before the organization has developed the internal capabilities it will need to be able to manage the expansion without losing its coherence. This mythology comes from. With certain conditions on the market and certain business models the first person to scale most quickly wins, and stories about companies that scaled up aggressively and made it are reported more frequently and more vividly than the ones about businesses that grew excessively and then fell. But for every single business where aggressive rapid scaling is the most effective option, there's numerous instances in which the speed of scaling is one of the major causes of issues that ultimately kill the company. In those cases, negative stories aren't getting nearly the same attention as those of the successful cases.
In the end, the cost hidden from growing too fast is not the one that appears in the burn rate calculation or the cash flow projection. It's what you see six months later, when the business has moved past the coordination mechanisms of informal nature which held it together while it was still small but before it's built an official structure to hold larger organizations together. This gap - between formal and informal as well as between the company you were and the business it is expected to become is the point where the majority of scaling businesses often break. The earliest and most consistent sign that a company is at the point of entering this gap is that it slows down its decision-making while everyone maintains that there is nothing fundamentally different. The founder's name is still visible in theory. The team remains aligned in the theory. The culture is still robust in theory. However, in reality the company has grown in size to the point that informal communication channels that used for carrying important information are clogged, and no one has yet created the formal channels that need to be replaced. Information that was once flowing naturally now has to be constantly monitored. The decisions that were fast now require coordination across numerous functions that have not been clearly defined with respect to each other. What was once private and immediate now appears diffuse and delayed, and the organisation has begun to display the symptoms of a system operating at the limit of its coordination capacity.

This is not evident through the metrics founders and investors tend to monitor the most carefully. There is a chance that revenue could be growing. Customer acquisition might still be going in the right direction. The staff may still be eager and enthusiastic. But under the surface an organisation is experiencing internal issues that grow quickly until they cannot be ignored - at which the time when fixing them becomes significantly more expensive and time-consuming than it would have been if they'd been addressed earlier, and when the signs were not so obvious. This is the hidden cost I'm talking about: not the immediate financial cost of growing, but the over-the-long term cost of organisational growth that is incurred by growing beyond your infrastructure and the added expense of putting it in the first place in a reactive manner rather than proactive.

The founders who manage this transition well are not necessarily the ones that grow at a slower pace, though a more deliberate pace of growth may be the solution. They recognize that constructing the governance infrastructure of their business is just as important than building the product and who invest in it with the same focus and focus that they apply to the development of their products. This involves doing the tedious routine work of making clear roles and the rights of decision and establishing reporting mechanisms that effectively present the information that leaders require to make informed choices, designing accountability systems that are clear enough to mean something and considering what kinds of norms your company requires for its current size rather than simply basing it on what were created naturally when the company was smaller. The work involved isn't fun. It's not likely to garner news coverage or investor excitement. However, it is the actual work that will determine if the company is able to keep the growth you're striving for.

The companies that fail to accomplish this task successfully do not usually fail massively or immediately. They go through a decline. They lose their best employees first. They lose those with enough self-awareness of the state of affairs within the organization and have enough options to quit before things get significantly worse. Customers are then lost, at times invisibly, because the level of execution is deteriorating because accountability has been made too complex and delayed to catch problems prior to reaching the customer. As they lose momentum and when the slowing down becomes evident in the figures when the structural problems become deeply rooted. The cultural consequences are severe and the cost to fix both is a lot higher than it would've been if the investment in governance had been made at the appropriate moment. Thinking of organisational infrastructure as a product - something you design cautiously, build meticulously, and continue to refine as the company grows - is among the most significant mindset shifts a founder can make as they go from the very early stage to reaching a larger scale. The founders who make it tend to create companies that can reach their full potential. Those who fail tend to create businesses that fail to meet their potential. Follow James Deller for site examples including why a career in business sharpened my thinking on culture about performance.



What do Football Academies Get Right That Most L&D Programs For Corporate Companies Get Wrong
The most successful football academies in their respective countries are when you consider them operationally rather than romantically, extraordinarily advanced organizations for development. They recruit young players at the age of seven or eight - sometimes younger - years before are aware of what they are capable of or who they desire to be. they mentor them consistently and in a deliberate manner over what may be a decade or more of continuous engagement, acquiring not just the technical and social skills that professional football demands but the character, the psychological resilience, the decision-making capacity under pressure, and the interpersonal and communications skills required to perform at the highest in the game demands. The rate of success, reflected by the percentage of players who go all the way to professional football, is low. However, the process that the best academies use is, across a variety of dimensions which are essential to developing human potential, more rigorous but also more patient and more systematic than anything else I've encountered in corporate training and development. The difference between what these academy's conduct and what organizations do when they try to help develop the employees inside them is striking and instructive after researching both.
The most fundamental distinction is the connection between time. Learning and development programs for companies are typically designed around the concept of short intervention - a workshop that lasts two days, a series of workshops lasting a quarter, the coaching relationship that lasts 6 months. The logic behind this is quite clear but difficult to justify from a financial perspective. Businesses must prove the ROI on their development investment within the timeframes that budget cycles and performance assessments impose Short interventions are much easier to justify as well as to evaluate in comparison to longer ones. But the time-frame upon which genuine human development actually occurs that is the one on which new frameworks, new behaviours, and new capabilities become fully integrated rather than intellectually understood and temporarily applied is in no way related to the timeframes of an average business L&D intervention. The most successful football academy's grasp this on a level that has been embedded into the fundamental DNA of their programs of development over the course of generations. They do not think that a child of 14 years old will be able to comprehend the new framework for decision-making after an afternoon workshop. They anticipate that internalisation will be a process that takes time and build the environment accordingly. years of continuous reinforcement along with years of being placed in situations that challenge the framework and demand it to be applied under actual pressure, years of feedback that is precise enough to affect behaviour rather than being general enough to easily be forgotten.

The other significant difference is the integration of developmental activities into the operations in itself, as opposed to its isolation from the operational environment. If a football club is properly designed the development process is not something which is conducted in dedicated sessions independent of the actual play or training that forms its core function within the company. It takes place through the playing and the training. Sessions are planned using the goals of development in mind and not only performance goals. The challenges players are given are selected partly based on their potential for development, not just for their utility. They receive immediate feedback, specific, and contextually grounded to what happened, rather than abstract and applicable. The connection between what happens during training and what's going to have to be considered in match situations is always clarified and confirmed. The majority of corporate organisations for instance, development and operational work are thought of as distinct processes. You attend the training program. You attend the workshop. You are a participant in the coaching session. And then you return to your actual job, where incentives structures, routines, norms and expectations of work, and the demands for delivery are in essence identical with what they were prior the development intervention. This is where these new structures and norms are introduced in the developmental environment gradually disappear since there isn't a systematic method of integrating them in the actual way that work gets completed.

The companies that train their people most effectively are the ones that have discovered ways to make their development regular and continuous, rather than being a series of events and abstract. Within those organisations the line between training people and doing their job is extremely difficult to define because the work environment has been designed with development objectives incorporated into it. feedback mechanisms are integrated into the everyday routine that work is not reserved to periodic formal reviews. the challenges given to people have been selected primarily for the way they'll require people to grow and develop successful, and leadership behavior consistently makes it clear that growing is considered and sought-after rather than things that happen in specific programs and then ceases. Building that kind of environment requires a unique set of organization-specific design decisions than the ones most organisations make when they think about training and development. Furthermore, it requires leadership commitment to an extended time period that many organisations find difficult to maintain. However, it delivers development outcomes that sporadic programme-based strategies simply cannot duplicate.

The third pillar on which superior academies fare better than the majority of corporate organisations is in the willingness of their staff to take characters development seriously as an organisational objective. Most corporate L&D programmes engage only peripherally with character. It's not explicitly taught in all that they cover in regards to leadership and communication, but it is rarely named directly and almost never pursued with the intentionality and perseverance that a genuine character development requires. The most successful football schools do not treat character as something that players or don't have, or as something which will develop by itself if given enough time. They consider it to be something that can be cultivated by a conducive environment with the right types of adversity and challenge, and a good interactions between players and coaches that is characterized by genuine care for the individual as well as genuine high expectations of what that individual is and can become. The combination of caring and challenge that is maintained consistently through time - is according to me as the most reliable technique to build character that is in place. It's working in football academies. It also works in tech companies. It is applicable to any organization that will invest in it with the patience and dedication it demands.}