Hypergrowing pains

Words by Tom Robinson
Date 2022-05-25

The pandemic shook the foundations of the global marketplace. Consequently, for most businesses, the short term picture remains very much focused on recovery, rather than growth. Even before the pandemic, low growth rates were commonplace. But now margins are fine and competition is rife.

That is unless you are a unicorn.

A term coined in 2013 by venture capitalist Aileen Lee, ‘Unicorn’ denotes a rare type of company: a privately owned business valued above $1bn.

In 2013, there were 39 of these mythical businesses. By 2018, that figure had risen to 279. In 2020, 524. This year we are likely to see 1,000 unicorns roaming freely around the pastures of business.

This increase in quantity has come alongside an increase in diversity. Geographically, the US leads the way, followed by China, India, UK and Germany.

They also reflect a broad spectrum of activity. While most unicorns operate within areas such as technology, finance and e-commerce – there has been a notable rise in sectors such as data, healthcare, pharmaceuticals, fast moving consumer goods, and education.

This is the age of the unicorn. And there are more of these spectacular hypergrowth businesses ready to emerge from their incubators: chambers of research and development designed to attract early-stage capital investment, as opposed to driving short-term profitability.

What are the characteristics of hypergrowth?

Though their sectors are diverse, unicorn businesses tend to share similar traits. By their nature, they are here to disrupt strategies, business models and cultures.

They are created with a sense of purpose and ambition. They prey on lack of vision and complacency. They have identified a pain point and therefore an opportunity. They are forward focused and define themselves by where they are on their journey, and not by the standards of legacy markets. That sense of direction and purpose helps them to build communities, aligned with a sense of loyalty that bewilders the more established.

From Bytedance, to Stripe, to AirBnB or SpaceX – these businesses share ideals and strategies, even if they do not share a sector.

But hypergrowth comes with ‘hypergrowing’ pains. When you move fast and break things, there is always a chance you can break yourself. These pains typically occur during the second or third round of investment. They often stem from:

- Loss of founder focus

One of the things that doesn’t scale is the founder. Their time is now stretched by the demands of a wide group of stakeholders and is increasingly spent beyond immediate operational realities.

- Lack of systems and structure

The business has grown, but the skeleton that holds it together has not. Roles have rapidly expanded beyond the original brief and various skills and experiences are missing internally.

- Brand dilution and confusion

Rapid growth has stretched the brand beyond its original form. Businesses that have spread into new areas can start to see brand architecture issues. Customer facing propositions and product development start to conflict, especially across international markets.

So how can Unicorns re-establish stability?

Most of the issues centre on balancing growth with control. Imbalance creates anxiety. The goal is to build a foundation that supports, rather than constrains, further growth. Here are some ways to achieve this:

- Planning and playbooks

Scale can inhibit a sense of clarity and purpose. What was second nature becomes second hand. Develop appropriate tools that redefine, codify and apply core principles. These bring back focus and structure, and realign people with the vision and direction of the business.

- Training and development

The business isn’t the only thing growing. Career trajectories can accelerate rapidly in a hypergrowth environment. To support key staff, and ensure they want to continue developing with the business, it is important to offer proper training.

- Research and insight

Target audiences have been identified and there is rich customer data from those acquired within the primary market. However, the approach to data and insight now needs to evolve from exclusively customer centric models to incorporate broader market insight that can identify secondary growth opportunities.

- Long term brand build

Focus needs to shift from performance marketing and low funnel conversion to high funnel growth metrics that support the development of a more appropriate brand platform. This is especially true when expanding into new or adjacent markets where there is little or no brand awareness. Growth also brings complexity in audiences, channels and geographies, all of which needs coherent systems and management.

- The long haul

Unicorns change markets. But no matter the market they are in, hypergrowth often means these businesses face similar challenges. They often have to build the car whilst it is going down the highway.

Going fast is good – but going long is better. Unicorns must ensure they are putting the right structures, people and processes in place to ensure that the next phase of growth doesn’t derail progress.