May 2024
By Andrea Boeri
A scale-up is a company that has already validated its business model and achieved a product-market fit. Based on our experience, we would say that when a company reaches an annual turnover of approximately $ 5 -10 million, it starts shifting from finding its product–market fit to aggressively growing. This stage requires organizations to be extremely determined about building commercial excellence.
In our work with many start-ups and scale-ups in B2B businesses, as well as with venture capitalists, we have found several common myths that hinder the development of commercial excellence in these ventures. In particular, we have seen five myths that can deliver results inferior to expectations.
Myth #1: white spaces can be conquered with the existing go-to-market
When a scale-up has successfully implemented a sales model in its existing business, it may be tempted to replicate the same model in other businesses it finds attractive, because of the perceived superiority of its product and the lack of powerful competitors. This means replicating the same go-to-market and the same metrics, for example assuming that the size of the sales team required to generate a certain sales volume is the same as it is in its current business. By doing so, the scale-up risks to fall into the “white space” trap.
In business strategy, a “white space” refers to opportunities in the market that are currently unaddressed or under-served by the company and other providers. These opportunities represent gaps where a company can potentially introduce new products to meet unfulfilled customer needs. Examples of white space opportunities include introducing a new product in a market segment that has been overlooked, expanding into geographic regions that competitors have not yet targeted, or creating a new business model that addresses a pain point not currently being addressed by existing solutions.
We have seen successful entrepreneurs assuming that entering white spaces to achieve further growth only requires a ramp up of the current sales effort. Unfortunately, a different go-to-market strategy is often required. For example, entering new geographic markets is often not viable with direct sales, particularly if a strong after sales organization is needed in the local market. In this case, a local partner may be needed, which entails a totally different playbook.
Myth #2: scaling does not require hierarchy and processes
It’s no surprise that people working in scale-ups don’t really love hierarchy and structured processes, especially if they joined the company in its early stage. In hierarchical and process-driven organizations, decision-making slows down, and many teams must overexplain their contributions to deflect blame or just to keep the senior management apprised (1). Moreover, hierarchy conflicts with the egalitarian principle that everyone is equal, suggesting that some individuals are more deserving of power and autonomy than others. It compels people to adopt narrower, specialized roles, which can lead to dissatisfaction among those who appreciate variety in their work.
The contrast between an unstructured and a hierarchical work context is well illustrated in the 2023 Canadian movie “BlackBerry”, which is a fictional account of the creation of the BlackBerry line of mobile phone by Research In Motion co-founders Douglas (Doug) Fregin and Mike Lazaridis, and investor and co-CEO Jim Balsillie. Here, the film shows the contrast between the playful, people oriented and totally un-hierarchical character impersonating Doug, on one extreme, and the top down, objective oriented and no-nonsense hierarchical character impersonating Jim, on the other extreme. By the way, before crashing down (in good measure because of a wrong reaction to the iPhone) RIM was an extremely successful venture where Doug and Jim effectively worked together.
However, it is possible to benefit from the positive aspects of hierarchy in a growing scale-up without falling victim to excessive bureaucracy. Experience shows that flat organization experiments fail once a company reaches a certain (small) size, and that a healthy hierarchy and structured processes can reduce operational ambiguity. This approach helps align the team around shared goals, resolve conflicts, accelerate progress, and ensure the development and well-being of team members. This is true for sales processes as well. Furthermore, effective hierarchy and processes are an antidote to myth #4.
Myth #3: one size fits all
One enduring stereotype revolves around the sales leader persona: an exceptionally extroverted individual capable of performing seemingly magical feats in convincing customers to purchase the company’s offerings. While this may have held true during the startup phase, typically spearheaded by the founder, the landscape becomes significantly more intricate as the company expands. Depending on its size and the complexity of its product portfolio, a scale-up may adopt various sales tactics simultaneously. Among these tactics are at least four key approaches (2).
Inbound sales: From a sales standpoint, this tactic is relatively straightforward, requiring adeptness in efficient order processing, pricing strategies, and planning. Sales reps operating within this framework must be process-oriented and possess robust communication and qualification skills.
Outbound sales: Companies employing an outbound strategy need more seasoned business development representatives and account executives capable of persevering in the face of rejection and disinterest. Proficiency in leveraging data and implementing personalized outreach at scale is essential. When opting for an outbound-focused sales tactic, a pivotal decision arises between utilizing agents or hiring in-house sales reps and account executives.
Agents offer broader market reach and operate on a variable cost basis, yet entail less control over the client portfolio. Conversely, sales reps represent a fixed cost but can offer deeper product knowledge (if properly trained) and foster stronger brand loyalty. Especially in scenarios involving large, complex or customized products, sellers need to be able to help individual users create business cases for solutions, and they should also be able to speak effectively to executives. The choice between employing agents or in-house sales reps hinges on the company’s strategic objectives, prevailing market conditions, and specific business requirements. Usually, a hybrid model that amalgamates the strengths of both approaches may prove most conducive to achieving commercial excellence.
Event-driven sales: Representatives tasked with representing the company at events must exude confidence, charisma and often sheer scientific authority. The demands of travel and the specialized skills necessary to develop relationships and facilitate deals in such settings typically elevate the seniority of these persons.
Partner-led sales: Partners may take various forms, including distributors, value-added resellers, or local operators in foreign markets. Sales reps focusing on partner-oriented growth require heightened charisma and relationship-building skills.
In summary, the sales leader plays different roles in different sales tactic scenarios. The leader may even not be the person who physically “sells”, but nurtures relationships with key accounts and leads different team implementing different sales tactics. This may be the case with the “Chief Revenue Officer” or “Chief Commercial Officer” positions.
Myth #4: selling is just sustained heroics
Start-up founders often revel in the heroic efforts required in the early months, when the cofounders and initial hires faced immense pressure. These heroic feats are celebrated as they embody cultural values like hard work, creativity, and resilience. Consequently, it’s common for some leaders to attempt to maintain over the years this level of intensity, especially when it involves selling the product. However, consistently relying on such heroics is dangerous (3).
Heroics create a single-point dependency that sooner or later is bound to fail. When one person constantly saves the day, it diminishes the motivation for colleagues to develop their own skills and take ownership. Over time, persistent heroics prompt “underfunctioning” among colleagues: they become passive and increasingly rely on the hero. This dynamic frustrates the “hero”, often resulting in burnout, and the outcome can be inefficiency, mutual resentment, underskilled teams, and unreliable systems.
In a sales team, it is typically more effective to focus on improving the average performance of all team members rather than depending on the abilities of the top performer. This can be done by providing all the sales team members with adequate training, incentives, support processes and analytics. In other words, also in sales operational effectiveness usually performs better and is more sustainable than relying on heroic efforts by one or few individuals.
Myth #5: hiring people one feels safe with
When it comes to finding a sales leader, two approaches are most popular among scale-ups. First, experienced founders sometimes prefer hiring a seasoned leader early on who has managed an organization with much larger sales and can drive accelerated growth, while also being more hands-on than they are accustomed to. However, finding and on-boarding this type of talent can be challenging.
Alternatively, some founders hire a less senior individual or promote an internal team member with the right attitude and confidence to learn how to become over time an experienced sales leader. This approach has the advantage of being someone the founders’ team feels comfortable with, viewing this person as an equal or easy to manage. However, as the company grows, this might not be the best choice if no less senior or internal candidate is up to the task. In such cases, it’s crucial to set aside egos and hire up, albeit difficult it is.
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In conclusion, once a scale-up has achieved a product-market fit and reached a certain turnover, to accelerate its growth it needs to aggressively build commercial excellence, and identify and implement the right go-to-market models. We have exposed in this article a few common pitfalls to avoid while doing that.
(1) Martin Gonzalez and Yosh Yellin, “3 Management Myths That Derail Startups”, Harvard Business Review, May 10, 2024
(2) Sangram Vajre and Lindsay Cordell, “A New Way to Compensate Sales Teams”, Harvard Business Review, March 15, 2024
(3) Gonzalez and Yellin, op. cit.
Andrea Boeri is an Associate Partner of Eendigo in the Milan office