The SCALE formula and the Lean Scaleup

This is the second article in an article series about excellence in the early stages of new business-building. Please find the first part, which outlines our mission and who we are, here. This post shows you the key formula for success and the framework that helps you to ensure that your innovation is set up for success.

To succeed in innovation, the company must make sure that

• the envisioned new business aligns harmoniously with the broader corporate environment,
• there is a strong foundation for the new business, incorporating validated assumptions and a proven winning strategy,
• the corporate startup successfully launches its initial product with the intended business model to the desired target market, and
• the corporate startup subsequently scales the new business into a lean, high-growth company.

The formula for success

When we walk our clients through this thinking, we usually condense the main thoughts into one easy-to-memorize formula. For building new sizable and profitable businesses, the formula is:

The letters in this formula spell out as follows.

• S stands for success, i.e., a new sizable and profitable business.
• C stands for the corporate context. Only when the corporate startup is firmly embedded in the corporate context, it receives the necessary support – above all, funding, and access to corporate as-sets.
• A stands for a set of validated assumptions about the business model, the growth strategy, and the technology stack.
• L represents the initial launch, i.e., the corporate startup’s ability to drive the development of the product and the commercial activities to a point where it can launch the product and the business model.
• E stands for the corporate scaleup’s ability to expand the initial footprint to a scaled-up business with all its operations in Marketing, Sales, Distribution, Production, Supply Chain Management, HR, Controlling, etc.

Success in building a new business from innovation is the product of the four factors C, A, L, and E. If there is a failure in one of these factors, there will be no success. All four boxes need to be ticked to create a sizable and profitable business. No factor can over-compensate for failure in another one. Excellence in engineering does not over-compensate for having wrong assumptions.

New-business building initiatives rarely fail because the underlying products do not work. When they fail, it is more often because the number of customers who are willing to buy the product at the right price, at the right time and in sufficient nThe umbers, is tToo small. Very often, the root cause is guessing how customers think and how they will behave, without bothering to check with them – an ‘A failure’ in the terminology of the SCALE formula.

This series of posts shows you how to avoid C- and A-failures in the early stages of out-of-the-box innovation.

The Lean Scaleup

We build on a solid, battle-proven foundation. Together with more than 20 industry-leading companies and two globally leading business schools, Frank co-created a Best Practice framework to solve one of corporate innovation’s biggest problems: how to create new businesses in parallel to running the established business.

The framework is called the Lean Scaleup. It has helped companies from industries as diverse as Oil & Gas, MedTech, Automotive, Software, Pharma and Industrial Services to get better in new-business-building. The next edition of the framework is currently being co-created by more than 100 corporate practitioners and half a dozen business schools and will be published later this year.

The framework’s Best Practices guide the corporate innovator how to create a solid foundation for a new business in the corporate context, with scalability built in right from the start. The Lean Scaleup brings six new, big ideas to the world.

Six big ideas

1. Corporates are primarily interested in new businesses, not in new products. You must think wider – you must think in building businesses, not products. Hence, the Lean Scaleup adds a new dimension – Contextuality, representing the corporate context – to the familiar dimensions of Desirability, Viability and Feasibility.
2. A corporate startup has a 3 percent chance to become a USD-50-million business. The problems occur not in the early stage. The problems surface when you want to scale validated ideas. Hence, you must think end-to-end, from ‘meaningful search fields’ and ‘meaningful ideas’ to a scaled-up business.
3. Nobody can pick the winner, i.e., predict which idea will become a sizable business. Corporate innovators need to think like a VC in portfolios and not in ‘big bets.’ To establish an effective portfolio management, you need a solid progress monitoring. Hence, the Lean Scaleup comes with scorecards that help to track the individual venture and the health of the portfolio.
4. The health of the innovation portfolio must be judged on a defined business graduation scheme with a defined lean governance and a defined funding scheme. Hence, the Lean Scaleup bases progress monitoring and portfolio management on defined maturity steps. Additionally, it uses business language to ensure that managers from the day-to-day business and corporate innovators understand each other and find the best solutions for inevitable prioritization discussions. ???
5. Building a new business is a complex thing. You can’t build a new business with a few canvases and a business case. To beat the 3 percent chance, you need to have Senior Management alignment on how to balance the NOW and the NEW, a solid process methodology and a defined model how today’s Core and the scaleup should work together. Hence, the Lean Scaleup is built on guiding you how your company should arrange these three dimensions.
6. Most corporate innovators have detailed frameworks for validating new ideas (although most are product-centric, not business-centric). But then they assume that almost like a miracle the company is prepared to scale up validated concepts. Of course, this is not so. Hence, the Lean Scaleup has a dedicated ‘Transitioning to Scaling-Up’ stage in which the scaleup ambition is aligned with corporate functions.

What comes next

We have mapped out an 8-part series that provides you with the insights into excellence in early-stage new-business building. Issues that we plan to cover comprise, for example:

• How to define ‘meaningful search fields’
• When is an idea a ‘meaningful idea’?
• What is needed to have a solid business foundation?
• How to validate a ‘meaningful idea’ in a corporate context?
• What to consider when arranging structures, funding and governance?
• What exactly is the role of Leadership in the new-business context?
• How could we handle the main objections when we call for a change?

We need your backing

We are innovators like you are. Hence, we want to create only the things that your readers need and want. To paraphrase Ash Maurya, life is too short to create content that nobody reads.

So please show us that you support your ambition. Repost and reshare this post. Tag your business friends and colleagues that should read this as well. Let us know which of the topics above are of particular interest – or which other ones you want us to consider.