The mythology about scaling is often centered on speed. Make sure that the product is market-ready, then pour fuel on the fire. Expand the team, grow markets, then raise the next round before the previous one has settled. The story favors those who are always trying to move forward, always adding the number of employees, always expanding into adjacent industries before an organization's primary focus has actually stabilized and the company has built the internal capabilities it will need to handle the expansion without losing coherence. I am aware of where this mythology comes from. In certain market conditions and certain business models, the first company to scale fastest does genuinely win, and the stories of businesses who were aggressive in their growth and ultimately succeeded are reported more frequently and more vividly than reports of companies who grew rapidly and fell apart. But for every business in which aggressive earlier scaling is the optimal solution, there are many instances where the speed of scaling can be the primary cause of the issues that ultimately kill the business, and those ones that are a cautionary tale do not get all the attention that the cases of success.
Hidden costs of growing too fast isn't the one that shows up in the burn rate calculation or the cash flow forecast. It's the one that shows up within six months after, when the organization has passed the informal coordination mechanisms which held it together while it was still small and before it has crafted solid structures to hold larger organizations together. This gap - between formal and informal as well as between the company you were and the business that you're expected to become is the place where many companies growing actually break. The most evident evidence that a business is being pushed into this space is the fact that it slows down its decision-making while everyone insists it hasn't changed in the fundamentals. The founder's presence is still present in the realm of theory. The team continues to be aligned in theory. The culture is robust in theory. But in the real world, the organisation has grown to the point that informal channels 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 freely now has to be controlled. Decisions that used to be quick now require coordination across various functions that never have been clearly defined as compared to each other. Accountability that was individual and immediate now is slow and sporadic and the organization has begun to display the signs of a system running at the edge of its coordination capabilities.
The absence of any evidence is evident in the metrics that the founders and investors are expected to watch most carefully. There is a chance that revenue could be growing. Customers acquisition may still be taking a positive turn. It is possible that the team is eager and enthusiastic. But under the surface it is becoming apparent that the business has structural issues that can only grow slowly until they can no longer be ignored - at which the time when fixing them becomes significantly more expensive and time-consuming than it would have been if they had been addressed earlier, when signs weren't obvious. These are the invisible costs I'm talking about not the immediate financial cost of scale, but the time-based cost of organization that comes from growing past your own infrastructure, and the recurring expense for putting that infrastructure in place in the form of reactive rather than proactive.
The founders who navigate this change successfully are not necessarily the ones that grow at a slower pace, though an intentional approach to growth may be the solution. They recognize that constructing the structure for governance of their business is just as important than building the product and invest in it with the same dedication and discipline that they bring to product development. This means doing the boring operational task of making clear roles and the rights of decision clearly, creating reporting frameworks that provide the data executives require to make sound decisions designing accountability systems that are specific enough to be meaningful and analyzing what kind of cultural norms your company requires for its present size, rather than following the rules that formed naturally when it was smaller. This isn't an exciting task. It's not likely to garner interest from investors or press coverage. It is the effort that determines if your company you're building will keep the growth you're hoping for.
The companies that fail to complete this process successfully do generally not fail very immediately. They slowly fade. They lose their best employees first, those with enough self-awareness to see exactly what's happening within the company and have the option for leaving before things become significantly worse. Customers are then lost, slow and often invisible, because the level of execution slows down because accountability has changed and accountability has become too vague and deferred to find problems before they are able to reach the client. It is then that they lose their momentum, and before the loss of momentum becomes visible in the figures as structural issues become deep-rooted, the culture damage is massive, and the cost to fix each is far more than it would have been if the investment in governance had been made at appropriate moment. Associating organisational infrastructure with a product, something you develop mindfully, construct carefully and build upon as your business grows is among the most significant shifts in mindset an entrepreneur can undergo as they go from the very early stage to reaching a larger scale. The founders who make it tend to build companies with the potential to succeed. The ones who fail tend to create businesses that do not come even close. See the James Deller for blog tips including why building ai products shifted my priorities about value.
What Causes Most Public-Private Partnerships To Fail Before They Even Start - And How To Resolve Them
Public-private partnerships suffer from an image problem that's, in the majority of cases of the time, earned. The history of these partnerships includes many projects that were proclaimed by genuine enthusiasm with substantial political capital behind them, involved significant public and private funds over prolonged periods, and in the end, produced results with only a fraction of a recall of what was stated when the partnership was created. The academic literature and postmortem analysis that governments and institutions undertake following the mistakes are extensive, and they concentrate, for most of the time, on technical and contractual aspects of failures: misaligned incentives, the inadequate risks shared between public and private actors and the governance mechanisms that were designed in the theory but were not able to work in practice, and the procurement frameworks that opted for the wrong items. What these analyses tend to overlook, over time and with a consequential effect it is the cultural and operational aspect, namely the fact that private and public organisations are really different kinds of entities, formed by different incentive structures that operate using different timescales and being accountable to different people, and measuring effectiveness in ways that's not just different in extent but are also different in character. When you bring those two kinds of organizations together as a formal alliance without doing the work, upfront and in writing, to fully understand and work with those differences, you are not creating partnerships. You're creating conditions for a slow motion collision that is likely to be noticed at the most unfortunate time.
I've been involved with advisory services to assist institutions in their Modernisation initiatives, several that involved public-private partnership structures that vary in terms of complexity. The most dependable conclusion I've made from my experience is that the ones with a positive track record - ones that did indeed meet their declared goals and maintained a stable collaboration between the private and public parties throughout was not distinguished from those that did not succeed by the sophistication of their legal structures, or the quality of their risk management frameworks or the experience of their groups that formulated them. Their distinction came from whether the people who were on both sides of the table had been able to understand the way in which the other party operated prior to the formal partnership arrangement was negotiated. What this translates to in practice is understanding the decision-making processes that each organization operates under and the accountability structures which limit what each side can accept and when you can reach agreement on the definitions of success which both parties will be able to measure against, and the possible points of tension between these definitions. It isn't difficult to establish. Most of it is skipped in favour of the easier to see and documents-able task of negotiating contracts and creating governance frameworks.
The usual process for public-private partnerships goes from the initial idea to a executed agreement with almost no focused attention given to the question of whether or not the two entities involved are capable of working well together over long periods of time. Legal teams negotiate the contract. The finance team model the economics as well as the risk distribution. The communications team prepares the announcement to be made at the time of signing. The implementation team is beginning to plan the tasks. In that order then comes the discussion about operational and cultural compatibility begins - about whether those that will be required to collaborate day-to-day across the boundary between the two organisations share enough in common to ensure collaboration more so instead of antagonistic - doesn't seem to be conducted in a structured manner. It is often assumed, without stating it, that the formal agreement creates the prerequisites for effective collaboration and that any cultural or operational issues will be handled informally as they develop. This assumption is nearly always false, and costs will increase depending on the goals and complexity of the partnership.
The practical result of this analysis is that the best investment a partnership that is public-private can take - even before the legal structures are formulated prior to the governance framework is agreed upon and before any announcement is made the partnership is in what I call operational alignment. This means specific, organized, and facilitated work to surface areas where the two organisations' operating assumptions diverge and to come to an agreement on how the divergences can be handled before they turn into operational issues during the implementation. Most important, the divergences are usually the same across different kinds of partnerships. In terms of speed of decision making and authority, they is usually one of these. Public institutions are set up to make decisions slowly, and through various layers of examination and approval, for reasons which are legal and frequently mandated by law. Private enterprises - particularly tech businesses built on rapid iteration, and swift decision-making, often perceive that pace as a key roadblock to progress. without a clear understanding of how the pace works it is and what will need to be changed to improve it, the discontent generated by the private aspect can affect the working relationship before the partnership is able to establish its foundations.
Success metrics and what constitutes as progress are yet another recurring and important source of discord. Public institutions are typically evaluated on their process's compliance, equity of outcomes across stakeholders, as well as the evitance of public failures that draw media or political focus. Private sector partners are primarily evaluated by their efficiency, the amount of progress they have made towards targets, as well as financial return on investment. The measurement frameworks can be integrated with one another However, this requires thoughtful design, not only good intention, and partnerships who do not make the effort to invest in that kind of design usually have to find themselves at critical junctions, with two parties who are measuring the same collaboration in different ways, and thus coming to non-congruous conclusions about whether the partnership is working. The partnerships I've observed do not succeed the most one where the misalignment in measurement was accepted as a problem that would resolve itself over time. They that succeeded were those where the inconsistency was explicitly disclosed at the beginning, and the creation of a shared accountability framework that accommodated both parties' legitimate measurement requirements was an aspect of actual work rather than an element on a list of things to be able to.}
