What is scalability of an IT system Why is it essential to the success of the modern business firm?

What is scalability Why is it essential to the success of the modern business

Scalability is one of a company's most essential traits. However, even though it’s a widely used and frequently used term in planning, not every company's ideas have scalable potential.

The concept concerns a business’s capacity to grow – whether in a system, product, project, or globally – meeting new demands, but without losing its valuable qualities.

In this article, you will learn what scalability is, why it’s so important for companies, what types there are, the characteristics of a scalable business, and, lastly, how technology can help.

What’s scalability?

Scalability can be defined as the ability of a business to adjust to market changes without losing value.

The primary goal is to increase the volume of manufacturing activities without increasing costs.

This means that a business with good scalability increases revenue without proportionately increasing expenditures, resulting in high growth potential.

Horizontal scalability (out)

In horizontal scalability, companies aim to become the best in their industry in general.

The idea is to have sufficient breadth to be a market leader. An example would be an e-commerce business offering several product segments.

Horizontal scalability seeks to roll out actions aimed at the growth of all these areas, taking full advantage of the brand's potential.

Vertical scalability (up)

In contrast, vertical scalability seeks specific improvements in a company's growth, with efforts more focused on a certain point.

Using the same example, the company must invest in a certain type of product and develop labor strategies to deliver the best products or services in that market.

Also read: how are company goals defined?

How important is scalability?

Understanding a project's scalability is crucial to ensuring the company's future viability. Having a scalable business and deep familiarity with your business’s potential allows you to better define strategies and even objectives for growth.

Below, we've compiled a list of reasons why your company should pay attention to this issue.

Flexible processes

One of the main points of scalable business is granting more flexibility in processes. This is because systems can be replicated as the company grows, without increasing the effort invested.

This way, new investments are less labor-intensive, since the base is already ready to be applied and adjusted as needed.

Greater profitability and cost optimization

Making a firm scalable is a concept arising from the necessity to design strategies for a company's expansion without having to raise costs accordingly.

A scalable business maintains company profitability while reducing costs and investing in automation technology, network tools, and other modern tactics to make the company's day-to-day more efficient.

More productivity

A scalable business allows for more flexibility in operations and streamlines various stages of the business, as well as expansion as the company grows.

Firms become significantly more productive by not having to create processes from scratch whenever anything new is started.

In addition, it becomes possible to invest in business process optimization tools to add agility and prevent errors.

Value creation

More than having a financial return for the business, it’s important for a company to generate value, both in the production chain and in the perception of the end customer. A scalable business contributes to this effectively and with low financial impact.

Business expansion

As a result of technological advancements and industry expansion, companies are finding it increasingly challenging to achieve a prominent market position.

While some companies arise out of nowhere and quickly dominate their market, others fade away due to a failure to invest in their potential correctly.

Knowing your growth potential is essential to expanding your brand intelligently, strategically, and at a low cost.

What are the characteristics of a scalable company?

To be considered a company with good scalability, it’s necessary to present some basic requirements related to market demand, and billing, among other points.

Take a look at the main attributes of scalable companies and see whether your business meets these guidelines.

Growing revenue with a single system and investment

A typical scalable business offers specific services without needing additional raw materials or work to scale the number of customers.

In general, all that’s necessary is to ensure service is maintained and to invest money in keeping it running.

Food apps are one example of this type of business. This form of business is entirely reliant on servers’ functionality and consumers’ desire to continue using the product.

Comprehensive horizontal scalability

Highly scalable businesses can increase their variety of products and services without requiring large investments to make it happen.

We have already mentioned the example of large e-commerce stores that are able to add new products and even new categories to their site in order to attract new consumer profiles without creating a new sales structure.

High market demand

Products and services must have one of two characteristics: be highly innovative, or solve an existing bottleneck in the market that no other company can meet.

Having solutions that are attractive to the consumer – in the medium and the long term – is a must for a scalable business.

Expandable business model

One of the points that need to be observed from the beginning of the business is how much it can be expanded over time.

It’s important to conduct a market analysis and understand the competition's ability and potential to outperform customer needs.

Replicable knowledge

Restaurant chains, fast-food outlets, and other franchised businesses can be found nationwide, selling the same products. This is because the manufacturing process is teachable.

To put it another way, a company must be able to deliver the same goods to its locations, regardless of where they are.

Consequently, with the standardized product, employees must be able to be taught clearly and easily to replicate its production.

Automated processes

Currently, with advances in network technologies, machine learning, and artificial intelligence, among others, a company can automate its processes.

Using this type of technology ensures an increase in productivity without the need to spend more on labor.

In addition, automation improves employees’ performance, who will have the technology to streamline day-to-day company tasks.

Examples of scalable companies

Currently, there are many scalable companies on the market. Many of them are leaders in their segment and operate globally.

Airbnb

Airbnb is a platform that connects travelers and users with spaces available for rent in different countries.

The cost of Airbnb is only in maintenance of the platform, since the brand doesn’t own any hosting.

With high growth potential – after all, someone only has to offer their house for rent – ​​the brand bills for rental fees, without having to invest in the infrastructure and maintenance of these buildings. And you can still operate anywhere!

Uber

The world's best-known carpooling app connects drivers and riders with a smart and innovative system. It functions similarly to a taxi service, with the exception that Uber doesn’t own any vehicles.

Uber only incurs costs to maintain the app while making money from the fees for each ride taken.

Netflix

The streaming platform has thousands of movies and series in its catalog. Users have access to a world of options and recurring payment.

The brand continually invests in its productions. But it's a small price compared to the volume of people who can subscribe to the platform and watch movies and series that are already available.

Amazon

Amazon provides a range of services aside from e-commerce. Online shopping accounts for a significant portion of the company’s sales, with a wide array of products ranging from cleaning supplies to electronic equipment.

Costs span website maintenance to the logistics of delivering items, including those sold through the marketplace.

In addition, Amazon offers a Prime service, which provides customers with books, games, and streaming content in a similar manner to Netflix.

How do you scale a business?

If you want to make your business scalable and increase sales exponentially, know that it‘s possible to be among the most innovative companies in the world. To scale your business, you need to follow some important steps that are essential for the company’s health and success. Read up on a few major tips:

Process organization

To grow, you need to have business processes. The smartest way to ensure this is with workflow automation.

An automated environment adds agility to process execution and reduces the chance of errors, making all stages safer and faster.

Planning for business scalability

To ensure business scalability happens safely and successfully, you need to invest in strategic management.

Strategic planning bases company operations on short-, medium-, and long-term goals, always focused on a common objective, which will make the company take the right path to results.

In addition, solutions to manage crises can be predicted, and thus growth can be maintained, even in the face of risk scenarios.

Cloud solutions

Cloud solutions are essential for modern businesses. The cloud goes away with storing information on physical equipment, which generates huge savings, including storage.

Efficient cloud storage software ensures data security yet always allows for expansion of storage as a business need.

Increase technology adoption in everyday business

The higher the number of technological solutions available to a company, the better. The use of digital technologies is a key aspect in the success of all of the significant organizations listed thus far.

There are solutions available for every type and size of business nowadays. Even in small businesses, specific tools can be installed to make tasks easier, and can even be customized.

Innovative work model

It’s also critical for a company to innovate its work model to stand out from others in the same industry.

Adoption of the home office, strategic outsourcing of specific tasks, and the establishment of smart partnerships are just a few instances of the new dynamics.

Continuous improvement

Finally, it’s worth highlighting the role of management in developing a scalable business. Keeping your eyes open to the market and working with a focus on continuous improvement is essential.

Management must be oriented toward a 360º view of the business, with global growth objectives in addition to strategic thinking.

The role of automation in scalability

Automation plays a key role in the scalability of a business. Automated processes ensure time optimization, which in practice means savings on resources and ongoing expansion.

Cloud computing

We've talked about the importance of cloud computing before, but it's worth highlighting the role of the cloud in a scalable business a little further. A system in a virtual environment allows access at any time, from anywhere, without requiring investments in physical spaces.

Business Process Management (BPM)

Business Process Management (BPM) can be understood as a set of strategies seeking to help in the administration and organization of a company.

The platform ensures improvement of procedures, resulting in safe and risk-mitigated growth for the company.

For firms seeking scalability, investing in BPM tools is an almost obvious step. After all, the system must manage operations automatically while teams plan new expansion initiatives.

How does a single platform make your business scalable?

Regardless of industry, a corporate environment needs to be functional and results-oriented.

Even though many firms still prefer a work dynamic that separates sectors, integrating areas is a means to boosting performance and gaining competitive advantage.

Businesses that want to scale up must consolidate their processes, improve their decision-making, and promote expansion.

To improve such integration, an all-in-one tool is an important acquisition for a business.

In this type of tool, companies have:

• CRM (Customer Relationship Management)
• E-commerce
• ECM (Enterprise Content Management)
• BPM, and other solutions in one place, adding agility to operations.

Want to know more? Learn how an integrated management system optimizes the strategic management of you business: