When should Startups Scale?
A recent HBR article picks an interesting topic. The question is straightforward - in the balance between scaling up early and collapsing under the weight, and scaling up late and losing the market advantage, at what point should the scaling happen?
The authors present a study. They noticed that startups hire their first manager and salesperson when they start to scale up and that the optimum window is around 12 months. Exceptions exist - you have anticipated the growth and have closely monitored and acted according to the growth. Again, this exception is exactly the reason which leads to success or failure of a venture - the commitment risk. If you scale up too early, your concept is not mature enough and you end up experimenting in the growth phase but when you give ample(!!) time to yourself, you have decently refined your idea and you are not confused anymore over whether to go back or what direction to take.
The process of setting up a company is fairly straightforward -
experiment to identify the idea
define the assumptions
hypothesis testing
finalization of an idea
implementation
scaling up
The ask here is to balance out the tension between imitation risk(taking an idea from somewhere) and commitment risk(finalizing your idea and sticking to it) by giving it ample time.
Original paper - When do startups scale? Large-scale evidence from job postings - Saerom (Ronnie) Lee, J. Daniel Kim https://doi.org/10.1002/smj.3596