How Building in Stealth Has Shaped My Thinking About Results

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A Hidden Price Of Scaling Too Quickly What Founders Learn Too Late
The mythology surrounding scaling is all about speed. When you are able to reach the point of product-market compatibility, then put fuel on the fire. Expand the team, grow marketplace, and raise next round prior to the previous one has settled. The mythology rewards the founder who keeps in the process of expanding, adding new employees, always expanding into adjacent industries before the core business has stabilized and before the company has built the internal capabilities required to handle the expansion without losing their coherence. I can see where this mythology comes from. For certain market conditions and certain business models, those who grow most effectively wins, as are the stories about firms who were aggressive in their growth and ultimately succeeded are more often told and more vividly than ones about businesses that grew excessively and then fell. For every business that aggressive prior to scaling up is the best strategy, there are a few where the speed at which scaling occurs becomes leading to difficulties that eventually end the company. In those cases, negative stories aren't getting not nearly as much attention the case studies of success.
A hidden price of growing too fast isn't the one you see in the calculation of burn rate or the cash flow projection. It's what you see at the end of six months, when the company has gone beyond the coordination mechanisms of informal nature which held it together in its early days, and has not yet built institutions that keep larger organisations together. This gap, between informal and formal distinctions between the firm it was and the one you need to become - is where most businesses that grow actually break. The first and earliest indication that a company is moving into this gap is when the speed of decision making slows while everyone maintains that nothing fundamentally has changed. The founder remains accessible in the realm of theory. The team continues to be aligned in theory. The culture is still strong in the theory. But in the real world, the organisation has grown to a point at which the informal channels of communication that used to carry the important information have become clogged but no one has yet constructed formal channels to be replaced. Information that was once flowing easily now needs to be actively managed. The decisions that were fast now require coordination across multiple functions, which have never been distinctly defined in relation to one another. Responsibility that was specific and immediate is now deferred and elusive The organisation is starting to show all the symptoms of a system that is running at the edge of its coordination capacity.

This is not evident in the metric that entrepreneurs and investors typically follow the most carefully. Revenue could be increasing. Customer acquisition could still be going in the right direction. The team may be active and efficient. But underneath those surface indicators, the organisation is developing structural problems that will escalate in a quiet manner until they are unable to be ignored. At that fixation becomes much more expensive and disruptive than it would have been if the issues had been dealt with earlier, when the signs were not as obvious. That is what I'm talking about: not the immediate financial cost of scaling, but more the ongoing cost to your organization of moving beyond your existing infrastructure along with the expense when you put the infrastructure in the first place in a reactive manner rather than proactive.

Entrepreneurs who are able to navigate this process well are not necessarily the ones who scale less slowly, though taking a more deliberate course of growth can be part of the answer. They are the ones who know that creating the right governance infrastructure of their business is just as important to building a product and invest in it with the same care and discipline that they bring to the development of their products. This means doing the boring operations of clearly creating roles and decision-making rights clearly, creating reporting structures that reveal the data necessary for leaders to make informed choices, creating accountability mechanisms specific enough to be meaningful and also thinking critically about the type of norms the company needs to adhere to at its scale, instead of relying on the ones that took shape naturally when it was smaller. It's not engaging. This won't generate press coverage or investor enthusiasm. However, it is the actual work which determines whether the organization it is building can maintain the growth you are striving for.

Companies that fail to complete this process successfully do not usually fail dramatically and immediately. They simply fade. They lose their best staff at first, the ones with enough self-awareness to know what is happening inside the organization, and who have enough options for leaving before it gets much worse. Then they lose customers, slowly and often invisibly, since the effectiveness of their execution steadily declines because accountability has become too scattered and delayed to catch problems prior to them reaching the customer. Then they begin to lose momentum and before the decline in momentum is visible in the figures as structural issues become in deep rooted, and the culture destruction is extensive, and the cost to fix each is far more than it would have been if the investment in governance could have been made at right moment. Making organisational infrastructure a product - something you plan carefully, construct with care, and then refine as the company grows - is one of the most significant shifts in mindset you can make for a founder when they go from the very early stage into genuine scale. It is the founders who achieve this tend to build businesses which can achieve their goals. The ones who fail tend to build companies who are a bit too close. Read James Deller for more tips including how investing in people continues to inform my decisions about scale.



Why Most Public-Private Partnerships Fail In The Beginning, And How To Fix Them
Public-private alliances have a reputation issue that's, in major part due to the fact that they are earned. The history of these partnerships is filled with initiatives that were announced with real enthusiasm, and substantial political capital behind them, taking up huge amounts of public and private resources for long periods, and finally produced outcomes which bore a mere analogy to what was stated when the partnership was in place. The academic literature as well as postmortem examinations that governments as well as institutions perform following failed projects are extensive, and they concentrate, for majority of the time, on the technical and contractual aspects of what went wrong: inappropriate alignment of incentives, insufficient risk allocation between public as well as private organizations or the governance structures designed in theoretical terms however failed in practice, and the procurement frameworks, which were designed to prioritize the wrong things. What this approach tends to overestimate, repeatedly and subsequently as well, is the culture and operational aspect of the issue - that private and public enterprises are fundamentally different kinds of entities, formed via different incentive models, operating on fundamentally different timescales, accountable to distinct people, and measuring success in ways that's far from being the same in all respects however, they differ in the way. When you bring those two kinds through a formal collaboration without undertaking the work upfront and in a clear manner, to recognize and work with those differences, you're not making the right partnership. The conditions are set for a collision in slow motion that will become apparent at most untimely moment.
I've participated in advisory work for institutions modernisation efforts, many of which involve public-private partnerships of various levels of complexity. The most consistent insight I can make from that experience is that the ones that worked well - and actually met their stated goals and maintained a dependable partnership between private and public partners throughout and beyond - were not distinguished from the ones that did not work due to the sophistication of their legal structures, the strength of their risk management frameworks or the age of the management teams that initiated them. In the end, they were defined by the fact that the people from both sides of the group had made the effort to genuinely understand how the other party functioned prior the formal partnership arrangement was negotiated. What this means in the real world is understanding the process of decision-making that each organisation operates under accountable structures that determine what each partner can determine and the speed at which it can be reached each party can achieve its goals, the definitions for success which each side will be able to measure against, and the points of likely tension between these definitions. The understanding of these concepts is not difficult to come up with. All of it is routinely avoided in favor of easier to see and evidence-based work of contract negotiations and constructing governance frameworks.

The typical public-private partnership starts with an initial plan and then a executed agreement with almost no time and effort being paid to the concern of if the two parties involved are capable to effectively work together over the course of the partnership. Legal teams negotiate the contract. The finance team analyzes the economics and the risk allocation. The communications team creates the announcement prior to the time of signing. The implementation team starts planning the task. In the middle of that process the discussion will turn to compatibility of the operations and culture - concerning whether the people needing to be working together daily across the boundary between the two organisations share enough common ground to make work more collaborative opposed to antagonistic - fails to be carried out in a formal manner. The assumption is, typically but without explicit mention, that the formal agreement establishes the conditions for collaboration to be effective, and that any operational or cultural disagreements will be dealt with informally as they occur. This assumption is usually incorrect and the cost of this tends to increase depending on the goals and complexity of a partnership.

What this means in practical analysis is that perhaps the most worthwhile investment a public-private partnership could make - before the legal structures are in place in the first place, before the governance plan is agreed on, before any announcements are made - is in what I think of as operational alignment. By this, I mean specific, structured, supported work that helps to reveal possible areas where both partners' operational assumptions diverge and to be able to agree as to how those differences will be handled before they turn into operational problems after implementation. What matters most are typically the same for various types of partnerships. Decision-making speed and authority is almost always one of the main differences. Public institutions are set up to make decisions slowly, and through several layers of scrutiny and approval, with reasons that are legitimate and frequently legally mandated. Private enterprises - particularly tech companies that have been built around speedy iteration and rapid decision-making – often view this speed as a fundamental challenge to progress. lacking a consensus on why this is the way it is, and what's truly be needed to change it, the discontent caused by this on the public side can cause a rift in the relationship long before it is able to establish its foundations.

Success indicators and what counts as progress is another constant and significant source of disagreement. Institutions of the public sector are typically evaluated by their compliance with processes, the equity in the outcomes among stakeholders, as well as the prevention of failures that get media focus. Private partners are typically assessed for efficiency, tangible progress in achieving targets, as well as the financial return on investment. The measurement frameworks can be designed to be compatible with one another, but doing so requires careful planning, not just good intentions, and the partnerships which don't invest in this type of design often encounter, at crucial places, with two groups that are assessing the same collaboration in differing ways, leading to inconsistent conclusions about whether it is achieving its goals. My experiences with partnerships that which failed the most was ones where this misalignment was taken as something that would get better over time. The ones that did well were those where the problem was clearly identified from the beginning, and where setting up a shared accountability process that met both parties' legitimate measurement needs became a piece of actual work rather than an aspect of a list things to come to.}