A Stanford recipe for bloat-free expansion

February 12, 2014 3:56 pm

A Stanford recipe for bloat-free expansion

Review by Andrew Hill

Scaling Up Excellence: Getting to More Without Settling for Less, by Robert Sutton and Huggy Rao, Crown Business, $26

How to get big without getting bloated is one of the greatest challenges facing growing businesses. Start-ups want to know how they can expand without adding layers of deadening process. At the same time, large companies want to know how to replicate the creativity and in­novative prowess of start-ups without triggering an anarchic free-for-all. Drawing on the authors’ own and others’ insights, Scaling Up Excellencepromises many answers to those pressing questions.

To the authors’ credit, they do not shy away from the messiness and difficulties of the task of expanding an organisation. Stanford professors Huggy Rao and Robert Sutton point out that too many growth plans are laun­ched with fanfare by grandstanding chief executives who then turn out not to have the “grit re­quired for a prolonged ground war”. Scaling, they say, “requires grinding it out, and pressing each person, team, group, division, or organisation to make one small change after another”.

Unlike more simplistic accounts, Scaling Up Excellencealso makes clear that there is no definitive prescription for growth. For instance, organisations are neither wholly “Buddhist” (guided by an underlying mindset, with the specifics left up to individuals) nor entirely “Catholic” (adhering to preordained practices and beliefs).

Similarly, it is tempting to think that growing companiesshould shun rules, or that large companies should scrap all bureaucracy in the interests of innovation, but the authors point out that no company will scale up successfully if it does not impose a few non-negotiable constraints. “Guard-rails” is the attractive concept they highlight.

They also suggest that companies may need a bit of scaffolding – over-complex but temporary systems – while they are building. The key is to ensure the scaffolding can be dismantled later.

This is not just a book for ambitious start-ups, however. It also demonstrates how big companies such as Tata Consultancy Services and Google avoid “Big Dumb Company disease” by constantly sub­dividing into smaller teams and using hierarchy to encourage communication and reduce friction.

Unfortunately, Sutton and Rao are sometimes guilty of imposing on their readers the sort of cognitive overload they warn is one of the main threats to fruitful expansion. Growing organisations “often pile on so many metrics, procedures and chores that people lose the capacity and willpower to do the right things”, they write. That is roughly how I felt when I was trying to absorb five “key elements” that make up one of seven tools, within one of the six subsections of Chapter Six, halfway through the book’s second part.

My advice is to start with the final chapter, where the authors sum up their argument and expand on Daniel Kahneman’s favourite idea for testing out big decisions. Divide your team into two groups and make them imagine that, a year later, they are reporting back on the outcome of the yet-to-be-taken decision. One group must pretend it was a disaster; the other, a success. The ensuing discussion will unearth doubts and suggest new paths to success.

“Prospective hindsight” may even prompt entrepreneurs to reconsider their growth plans. The last chapter introduces Hank Jotz, a San Francisco sailmaker, who took on five employees but reverted to a one-man operation when he found he was making no more money and “realised [he] was just running a hippie support system”. A bit like the Vietnamese developer, who this week withdrew his hugely successful Flappy Bird games application from stores because it “ruins my simple life”, the tale of Jotz Sails is a valuable counterpoint to the dominant theme that growth is usually worth the trouble.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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