A new way to score your ability to scale new ventures

Why do so many great ideas just fail to take off? For all the importance of business building—it’s a top three priority for 52 percent of companies, up from 30 percent two years ago—companies struggle mightily to get a good idea over the hump so that it becomes a big-time success.  Only 22% of new businesses launched in the past ten years have successfully scaled. That’s a big problem, because two-thirds of the value created in new-business building is actually created in the scale-up phase.

Leaders do the basics across the board and then excel in a few core areas In our experience at Leap by McKinsey (see sidebar “Leap by McKinsey”), executives have plenty of explanations for why their new businesses fail to scale, from poor operations to insufficient talent to simply bad luck. But in many cases, these explanations are based on gut feeling or frustration looking for an outlet, not on a deep understanding of the facts. So we have reviewed more than 200 scaled corporate new businesses around the world to understand what the issues are. The analysis provides four important lessons:

1. There are seven core-business scaling dimensions and 28 practices that determine the success of scale-ups. Organizations that perform well across all dimensions and their practices are three times more likely than the average to scale their new business. Overall, companies perform best in the “product and strategy” dimension, with 63 percent meeting the bar. Conversely, companies score lower on the “go-to-market” dimension.
2. Getting to scale requires companies to hit a baseline of competence in every dimension and practice. Doing well in six of the seven dimensions is not enough. Indeed, failure in even a single practice within a dimension can be enough to torpedo a company’s scaling ambitions. We find that 70 percent of the analyzed scale-ups don’t meet the bar in at least one dimension. A new venture launched by a media company, for example, met or even exceeded the base level in the majority of the practices across the seven dimensions. However, lagging in five of the practices was enough to doom its efforts.
3. The best performers hit the bar across all practices, and they excel at a number of them. Overall, four practices stand out: architecture (that is rigorously scalable), operating model (supported by processes that scale), customer insights (that are targeted and applied to product development), and talent and performance management (grounded on entrepreneurial talent). Which practices matter most can vary based on the business itself. If a company is launching a commodity, then it needs to especially excel at go-to-market practices. But for a company with a more complex product or service, excelling at customer insights to drive product development and feature building are essential.
4. Companies tend to have a poor understanding of their own capabilities. While 80 percent of the surveyed scale-ups address the practices to some degree and conclude they are doing a decent job, a more rigorous analysis shows that only 20 percent meet best-practice standards.

Source: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/how-good-are-you-at-business-building-a-new-way-to-score-your-ability-to-scale-new-ventures?cid=other-eml-dre-mip-mck&hlkid=750742a6b0154bc582ad40f7027d9065&hctky=11705927&hdpid=a89e9bb7-9b64-48ad-8e32-95207a885458#