Growth vs. Scaling—What’s the difference and which one describes your organizational trajectory?
Growth and scaling are two closely related business concepts—so closely related, in fact, that they are sometimes used interchangeably. But in reality, growth and scaling are two distinctly different ideas.
Growth is what happens when your company expands its revenue, builds its customer base, or increases its market share, while taking on all the added operational costs this expansion implies. Scaling is what happens when your business finds ways to facilitate this growth without significantly increasing your operational costs.
In other words, it is possible to grow your company without scaling…but it isn’t preferable.
In a perfect world, your organization would grow and scale in total harmony. But in the real world, this type of harmony can be difficult to attain.
In the discussion that follows, we’ll take a deeper look at growth and scalability. We’ll identify the core differences between these equally important business concepts and we’ll describe the increasingly important role of Business Process Outsourcing (BPO) in helping organizations achieve that elusive harmony between growth and scalability..
What Is Business Growth?
First, let’s define some key terms.
As noted above, business growth usually involves an increase in revenue, customers, and/or market share. Typically, as a business grows in these dimensions, it must also increase the size of its staff, the scope of its operation, and the sum of resources allocated to business activities.
Growing means expanding your company’s footprint, whether geographical, economically, or both. This is, of course, the primary goal for most business enterprises. But growth can also bring practical challenges. As your business grows, you will face rising expenses, added logistical complexities, intensified compliance responsibilities, and more.
A business that does not adequately prepare for these realities will experience growing pains, and perhaps even the peril of failure. This is why scaling is so critical.
What Does Business Scaling Mean?
Scaling describes a pathway to growth that can help mitigate the growing pains and risks that come with expansion. Scalability is the quality of being able to increase your company’s revenue without substantially raising your operating costs. Scaling your business means implementing strategies to handle increased demand, more customers, additional transactions, and a heightened rate of production without taking on a commensurate increase in operating expenses.
How is this possible?
The key to effective scaling is optimizing processes, leveraging rapidly advancing technology, identifying and eliminating inefficiencies, and taking other strategic steps that can improve revenue without raising costs, reducing the quality of your output, or straining your existing resources.
For example…
Replacing a manual inventory management system with a tech-enabled solution may give your business the ability to automate stock level monitoring and reordering. In addition to reducing the burden of monitoring and reordering on your team, this strategy also reduces the risk of stockouts and reduces the capital that your company might be wasting by carrying excess inventory.
By automating inventory management, you can free team members up to focus on core business activities, improve process efficiency, and reduce waste. These are the kinds of strategic improvements that can ultimately help your business scale upward without investing in more labor, resources, or equipment.
This is just one example of how scaling might be possible. In addition to improvements in automation, major developments in AI, machine learning, advanced data analytics and other data technologies all offer the promise of scalability if leveraged properly. This promise may even be magnified through partnership with a third-party provider, one that offers access to technological innovation without the costs of implementation.
Growth vs. Scaling: The Key Differences
Just to recap before moving on, the following are a few of the key conceptual differences between growth and scaling:
Resource Allocation: Growth typically requires an increased allocation of resources such as labor, materials, and facilities. By contrast, scaling typically indicates increased output or revenue without a significant increase in the allocation of resources.- Operational Costs: As noted above, growth typically means an increased allocation of resources, which also means an increased allocation of capital. This can cut into profitability even as your business grows. Scaling, by contrast, indicates a strategy for growing revenue that does not substantially raise operational costs, and which consequently allows for maximal profitability.
- Business Impact: While growth and scalability both imply greater revenue, the impact of growth is likely to be more incremental. Growth requires regular and ongoing system inputs (materials, labor, facilities, etc.), and may therefore take place at a gradual and linear pace. Scaling, by contrast, implies the implementation of an initiative or innovation that consequently allows for rapid and exponential revenue expansion.
The Role of Business Process Outsourcing in Improving Scalability
As noted above, a growing number of businesses are turning to third-party providers for scalability support. Business Process Outsourcing (BPO), in particular, can be a powerful solution for companies looking to scale without investing in additional time, labor or technology.
BPO refers to a specific mode of outsourcing in which third-party providers are contracted to execute non-core business processes such as data mining, data analysis, marketing, content development, customer support, and more. These providers can create access to rapidly advancing technology, cost-effective labor, and global talent pools at a minimal upfront cost to your business.
So how exactly does BPO enhance scalability?
Cost Savings: One of the primary takeaways from this discussion is that scaling requires minimization, or even neutralization, of the costs typically associated with business growth. Business Process Outsourcing (BPO) has become an increasingly preferred way of offsetting the high costs of recruitment, hiring, onboarding, training, and long-term employment. Outsourcing non-core labor activities makes it possible to scale up your company’s reach, production, and pace without a significant increase in operational costs.- Focus on Core Competencies: One of the most direct pathways to scalability is innovation—a breakthrough in your process, product, or market position that changes the equation for your company. But these kinds of innovations are only possible when your in-house team has the freedom and flexibility to make the most of its expertise. The right BPO partner can take the burden of non-core activity off of your in-house team, allowing your team members to focus on the kinds of core activities that lead to innovation.
- Access to the Global Talent Pool: For many businesses, the route to scalability leads overseas. Offshoring can open up access to larger talent pools as well as specialized skill sets that may be less readily available in your local labor market. Today, many BPO providers offer a balance between local project management and access to cost-effective, diverse global talent pools.
- Flexibility and Risk Mitigation: Scalability is about more than just growing your revenue. Risk mitigation remains an important consideration, even for companies who aspire to growth. In uncertain times, where labor costs are rising and economic indicators are difficult to read, BPO makes it possible to scale production upward and downward. In-house staffing carries high costs and a long-term commitment that can be risky in the face of a possible economic downturn. A BPO partnership offers risk-free labor flexibility, and the agility to respond quickly to changes in demand, business expenses, or the broader economy.
- Technology and Innovation: We’ve emphasized the important role that technological advancement can play in making scalability possible for your organization. Automation, AI, and other innovations have the potential to be force multipliers for your business. But internal implementation can be costly, and early adoption can be risky. Partnering with the right BPO provider can provide access to this leading edge technology without the risk or operational disruption.
As business owners, it’s only natural for us to think in terms of growth. But today, more businesses than ever before are also thinking in terms of scalability.
We’re asking ourselves—how can we be even better at the things we do best? The right BPO partner can help your business answer that question.
Not sure where to start? Reach out to TechSpeed today for a free consultation!