The Hows and Whys of Scaling
So you’ve started a company which solves a key problem in the market. Now if you’re doing that well for a group of people, you have to think about how to replicate that process to solve the problem more efficiently and for a larger group of people. You’re in the right place. Let’s talk about scaling.
“The ultimate aim of scaling is to take what you’re doing today, and do it ten times faster, and ten times cheaper.”
Scaling will require you to rethink the way your business is run. You might need to start automating processes that you may have previously carried out manually. As a business leader, you might have to start streamlining high-touch processes as well. For example, in a B2B model where sales cycles are typically longer, you typically need to invest time convincing a first set of clients or stakeholders in a large corporation. Scaling will become a challenge because you need to use a large chunk of your sales team’s time to sell more.
When you start a business or are in charge of a certain vertical in a large corporation, you end up getting involved in all aspects of the business. The real test for a business leader is to scale while also making yourself redundant. Scaling should happen without your involvement in the delivery of your product or service. That way, you free yourself up to oversee the entire business, and shape the direction in which the company will grow. If you are involved in the delivery, you will end up being a bottleneck.
That is, if you’re the person doing all the sales, reading through all the paperwork, and signing off on all the marketing campaigns and feature changes, your company may not be ready to scale. Your company should scale when operational decisions are managed by other employees on your team, leaving you – the business leader – with the bandwidth to focus on the direction of the business.
To ensure operations run smoothly, you should hire qualified individuals who communicate effectively, as well as invest in developing the tools and processes to help them succeed. If you’re able to take a two week trip and the company hums along without you, you’re in a good place to scale. If you find yourself checking emails and signing off on decisions every day of your trip, scaling should wait. Don’t scale for the sake of scaling. Make sure you’re ready for it and have the systems in place to support the company.
Validate Before Scaling
Before you begin scaling, another factor to consider is whether or not your actual users are responding positively to your product. A strong validation, to me, is when you talk to your users and they say “Your product really made a difference to my life, or my business. I cannot imagine a time when I lived without your product.”.
Now, keep in mind that a lot of people will absolutely love your product. But are they willing to pay for it? Before you start scaling, think about whether or not people will pay for your product, and at what price point.
In the early days of iflix, we were faced with the challenge of getting users to pay. The TV subscription service model was taking off in the US, and most companies offered new users a 30-day free trial. The idea was to convert these users to paid subscribers at the end of their free month.
Within a few months of launching, we had people using the service but hardly anyone wanted to pay for an iflix subscription. We wondered if payment channels were the roadblock. In most countries in Southeast Asia, Cash-on-Delivery is still the preferred payment channel, because a large portion of the population don’t have credit cards or e-wallets. We decided to experiment with Cash-on-Delivery to collect payments from iflix users who were on trial.
On the 28th and 29th day of a 30-day trial, we offered our users the option of paying the SGD 3 subscription fee by cash. We would send a person on a motorcycle to their homes to collect the cash, which obviously cost us a lot more than the actual subscription fee. Yet we wanted to assess whether this new payment option would impact our numbers positively.
As it turned out, people still didn’t want to pay for the subscription. Payment channels weren’t the issue. When you’re planning to scale, test whether both your product and value proposition are robust enough, as well as whether people are willing to pay for it consistently. Remember that usage is not validation. People may use, and even enjoy, your product, but validation happens only when they’re willing to pay for it.
Not a Numbers Game
When you’re thinking of scaling, there are no absolute numbers of users that you should have before you take the plunge. An e-commerce platform should typically have tens of thousands of daily active users before scaling. On the other hand, a company in the digital therapeutics space IPO’d at over a billion dollars. This company has only 150,000 users after seven years. So in the first couple of years, they only had around 5,000 users.
What you should instead think about is whether your product is fundamentally changing the lives of your 5,000 users. If you have repeat customers who are purchasing your product several times, or B2B clients who are doing phase two or phase three work with you, those are indicators that your company can scale.
Also, are you able to define more than one segment or use case for your product? In building Naluri, we worked with corporate employers, but also start receiving interest from pharmaceutical companies and hospitals. That showed us that there was breadth in different revenue models we could pursue. When new segments show interest in your company and you’re therefore able to test new business models, you should think about scaling.
Documenting Decision-Making Processes
In order to scale, you should remove bottlenecks in decision-making processes in the company. By consistently documenting and refining your processes, you will be able to successfully delegate decision making to others in your team.
For example, at the point of hiring someone, you only have 50% accuracy on whether they’re a good fit for the role. Three months into joining, your accuracy will go up to 95%, as you’ve seen the person in action. All the fluff from the interview peels away to reveal their true capabilities.
What you should do is go back to your interview notes to look at the criteria you used to measure their abilities. Which of those were relevant predictors that helped you decide whether someone would be a good hire? Which of the eight or 10 criteria gave you the best indication of a person’s likelihood to succeed in the role?
When you go back and evaluate your hiring decisions consistently, you can make more accurate hires. If you don’t improve your hiring process, it could pose a bottleneck to scaling. Especially if you’re a business leader, you should stop relying on instinct and impulse to make hiring decisions. Rely instead of your statistics and facts. For every decision you make, think about how you can tactically close the loop.
This principle applies even to marketing campaigns. Let’s say you have had 500 successful marketing campaigns. If you don’t know what specific elements of each campaign contributed to its success, you can’t sustainably replicate them. Instead, look at how decisions were made for each of those campaigns, and which decisions ended up playing a big role in the campaign’s success. If you find certain commonalities across various campaigns, you have found powerful predictors of success for future marketing campaigns.
Avoid the trap of on-the-spot instinctive decision making. Refer to a portfolio of decisions that have worked in the past, and you’ll see a difference in the outcomes. This will help you scale effectively. Personally, if I find myself making five decisions at once, it’s a signal for me to document my decision-making process and delegating it to someone else. Business leaders should never hold up the company while scaling.
Scaling in Malaysia
Malaysia has a very diverse, multicultural consumer base. The population consists of Malays, Chinese, and Indians. There are also around five distinct consumer segments for the Malay demographic alone, divided based on socioeconomic and psychographic factors such as how technologically proficient someone is. So if you adopt a one-size-fits-all approach in Malaysia, and just assume that translating your app to Malay, Chinese and Tamil is sufficient, it simply won’t work.
With such a complex, diverse consumer base, you have to cater to each segment differently. Your product should give the impression of being personal. Consumers should feel as though your product is speaking to them. And now, you’ll have to do this at scale.
To scale successfully, you have to understand the nuances of doing business in Malaysia. How you communicate, for example, could be crucial in building your presence in the country. When you’re looking to scale, the first set of employees you bring on – from sales and marketing to product and operations – should have a firm grasp of these nuances. Choose people who are self-starters, unafraid of making tactical decisions without your immediate guidance.
I believe that if you want to serve a new market, the team involved should reflect that market. So get people on board from the various consumer segments you want to attract. This will allow you to have a view into their different perspectives and ways of thinking.
Another lesser known fact about Malaysia is that we rank highest in the world on the Power Distance Index. Power Distance is hierarchy, and surprisingly, Malaysia outranks even Japan and Korea. Malaysian society is very hierarchical; we have royalty and various titles such as Tan Sris and Datuks, and so on. In general, people aren’t as vocal about their problems. In China and India, consumers don’t hesitate to point out when something isn’t working.
In Malaysia, if your consumers, business partners, or suppliers see a problem with the way you’re doing things, their first instinct is to keep quiet to see if the problem will resolve itself. They might even wait for someone else to highlight the issue. In general, Malaysians are less confrontational. As a result, you should know that silence from your consumer doesn’t mean that you aren’t making mistakes. Your Malaysian consumers and employees will be harder to understand than those in other Asian countries. You should account for this while making strategic decisions.
Also, Malaysia is still a cash society. This is one of the reasons Grab was more successful than Uber in Malaysia. So you need to know these local nuances and adapt to them quickly, otherwise you might end up losing out. If people are able to pay for your product or service by cash, they’ll be more inclined to use your product.
Consumers in Malaysia are price sensitive, but much less than their Southeast Asian counterparts.
The moment you try to tailor prices to your consumers, you are creating arbitrage opportunities. If you’re an internet TV service that charges a cheaper price in Malaysia, someone in the US can simply use a VPN to sign up for a Malaysian account. That way, they end up paying SGD 3 for a subscription that should cost then SGD 10. So that's one of the big challenges of trying to differentiate by price for digital products. If you are selling physical products, then it’s a more relevant opportunity.
However, like any other market, there’s a great deal of variety in the types of consumers in Malaysia. Some segments in Kuala Lumpur are completely price insensitive, focussing more on the quality of the products they buy. Some people refuse to pay for content, even if they have the means to do so. They would rather consume free pirated content. For such people, no price drop would be convincing enough to get them on board.
You can use bundling to make things interesting. The airline industry, for example, is notorious for being price sensitive. No low cost airline will encourage people to buy last-minute tickets at a discounted price. Technically, the airline loses revenue on the seats in isn’t able to fill. But if people are aware of the option to buy last-minute tickets at a fraction of their costs, most wouldn’t buy their tickets ahead of time.
So suppose the airline knows that half of the seats on a particular flight are empty. How do they fill these up while protecting their high prices? The airline could bundle the flight ticket with a hotel room. The customer doesn’t see the actual breakdown of the flight component in that deal. All someone sees is an attractive price for the bundle. As a result, the airline has created pricing flexibility without the trade-offs of massively dumping prices.
Think about how your product could be paired with other local products in a way that makes sense for your consumer. Initially, it is important to lower your prices to get people to try your product. In a market like Malaysia, you shouldn’t start by charging SGD 1, because even if people love your product, it will be hard to get them to buy if you raise your price to SGD 2.
So if you bundle your product with another popular product, you can position it as an ‘introduction’, for which you charge a small additional fee. For the consumer, the price of your product doesn’t become a standalone decision. Strategic partnerships like these will help you scale without devaluing your product in crucial stages of growth.
One key way you can accelerate your growth in Malaysia is by finding potential partners who have a large existing consumer base. These could be banks, telcos, or even companies like Grab. If you can make a strong case for why your product could be relevant to their audience, they would want to partner with you, because you would add value. Instead of trying to grow your user base organically, you are tapping into existing networks, allowing you to scale much faster.
The tricky part, especially for smaller businesses, is how to strategically approach these big players without getting lost in the crowd. Unless you’re careful, big companies will either dismiss you for being too small, or they’ll claim not to have the bandwidth to partner with you.
When we started iflix, we decided that telcos were a way for us to grow rapidly. Yet if we approached a telco as just a digital application, we’d be asked to meet the Head of Digital Services, whose job is to create an ecosystem of applications. To them, we’d just be one out of 100 apps, and we wouldn’t get priority.
Instead, we decided to approach the bigger decision maker – the CEO. Can your product be positioned to fit the CEO’s strategic priorities? Back in 2015, the CXOs of telcos were worried about the threat digital apps were posing to their traditional revenue models. Where previously they earned their revenue charging consumers for phone calls and SMSs, WhatsApp was allowing people to do all of that and more for free.
So we approached the CEO of a telco, explaining that we knew that their main source of revenue was through mobile data. What kinds of applications can tenfold a consumer’s use of data? Video. It’s the most data-intensive application out there. This proposition makes people sit up and take notice. iflix was no longer just another application in the ecosystem, but a way for the telco to solve a key business challenge. When you’re scaling, think about the biggest advantage you can provide to companies with millions of customers. With the right connection, the sky’s the limit.
If you’re a young business leader, you might wonder how you can win over the CEO of a big company. Something that helps is if you can hire someone of that seniority to join your team – first on a project basis, and then hopefully full time. This might leave a good impression on the CEOs you meet; they might already know of your teammate, or be impressed by their professional experience. Hiring people more experienced than you will help facilitate these early conversations with key stakeholders. Don’t let ego get in the way: don’t fixate on being the smartest person in the room when you want your company to scale.
When hiring ahead of scaling, identify the kinds of skills and networks your company should have on board to give you a 10x boost in efficiency. When you identify people who can help you, how do you select people who align with the company’s vision? When you’re hiring senior management, you should make sure that they’re bringing a good energy and a leadership style that gels with your employees. You may be a great and inspiring leader, but if your employees don’t care about the managers you hire, scaling effectively will be a challenge.
When iflix scaled from a small team in Malaysia to a team of 700 across 30 countries in Asia, the Middle East, and Africa, it was one of the biggest challenges we faced. We focussed on documenting how critical decisions were made, so that our processes could be streamlined and replicated. We documented hiring as well, defining our assessment parameters clearly so that business leaders wouldn’t need to be too involved in the process.
When you’re scaling, you’ll need to connect with senior leaders who can help you grow your business. First, identify the people who can actually move the needle for your company. This isn’t usually the difficult part. What most people stumble on is how to connect with senior leaders and ask for their help. There are two principles that could help you.
First, instead of asking for favours right off the bat, try to add value first. In order to be helpful, you should spend some time understanding what their issues are. Talk to people, or look up articles about them online. Usually, this would give you a sense of the issues they’re wrestling with at the moment. Then, you could forward them relevant content that they would find interesting or helpful. Focus on giving first before asking for help.
Second, you should ask for personal introductions.
“Warm introductions are always more effective than cold calls, especially in a relationship-driven country like Malaysia.”
Use LinkedIn to find someone with great connections, and find a way to add value to them. Once you’ve established a good relationship, ask them to introduce you to a senior leader they might know. But it’s important to be seen as someone who helps first. In Malaysia, you’ll find that relationships are key to building businesses, and people tend to know each other.
I’ve found that getting that first introduction is usually the most difficult part. After that, if you’re able to make a good impression on influential business leaders, they’ll be more than happy to refer you to others. Trust becomes easier to earn because you’re associated with people who are already trusted.
Foreign Companies in Malaysia
The big advantage Malaysian companies have over foreign companies is their deep understanding of the complex market: cultural nuances, language, and key players, for instance. But the Malaysian government is eager to facilitate foreign direct investment and market entry, so foreign companies have a unique advantage.
There are a lot of government agencies that can help you if you want to know how things work in Malaysia. InvestKL, MDEC (Malaysia Digital Economy Corporation), the Malaysian Trade and Development Enterprise, or even the various Chambers of Commerce, are some examples of government bodies you can seek help from, as a foreign company in Malaysia.
Breaking the Ice
If you’re not from Malaysia but looking to build your business here, nothing beats actually meeting people. A lot of successful people have started with zero relationships in Malaysia. They come here cold and set up a business from scratch. These people invest time and energy to meet people and build strong networks in the country.
Leverage on networks you already may have. Many organisations have global chapters in Malaysia, which would give you access to a network of people with similar interests. There are entrepreneurs’ organisations, or even YPO or CPA Australia, which would be a great start to building business contacts. There are unfortunately no shortcuts. If you want to scale to a new market, you will have to pack your bags and move there.
Especially if you’re scaling in Malaysia, spending time with locals is critical. Every province in Malaysia is like a country in itself. Demonstrating that you resonate with local nuances will set you apart from the rest. And you don't even have to be a new entrant to the market. McDonald's has been in this market for decades, but in a recent campaign they incorporated their burgers and fries into iconic Malaysian tropes. The campaign really connected with people, because it showed that McDonalds understood local humour and context. That's a great way to break the ice in Malaysia, or any other country.
Steps to Take in 24 Hours
- Hire the Right People
The team you hire on the ground will turbocharge your company as it scales, or drag it to the ground. Find people who understand the nuances of the Malaysian market, or even have strong business networks of their own.
- Leverage on Government Bodies
If you’re a foreign company, leverage on the various Malaysian government bodies such as the MDEC to make business connections and get an understanding of how things work.
- Identify Strategic Partners
Choose one or two companies with a large presence in Malaysia, who could benefit from a partnership with you. Align your product with a key business challenge they’re facing to set yourself apart.