Staying Small To Focus on Innovation

Staying Small To Focus on Innovation

Innovation in business is possible only when you stay small. When you scale things, every variable that you add to your product, service, marketing, delivery, and so on, will have a huge impact. Experimentation with new ideas becomes difficult.

When something is done in a certain way, you need to add a variable to it to change it. The change might be positive, or it might backfire. If the variable changes the system in such a way that it backfires, it is possible to control it at a small scale. You can think on your feet, and solve the problem.

However, as you scale something, you end up making the system more resistant to change. The cost of disrupting the existing system is more than the possible benefits of new ideas giving a fresh lease of life to the product. That's how large companies fail.

Juggernauts in the industry collapse because they became too big, couldn't afford to disturb the status quo, but the nature of time and people's psychology doesn't like that status quo. Things change, new trends come up, and the business is not able to catch up.

For example, we were selling self-paced courses in 2019, we could have tried to scale the same system. We had some investor interest. If we tried to scale, from let's say 10 courses to 100 courses, then we would've been spending most of our time managing it at that scale, and that would've hardly given any time for innovation.

Because we were on a small scale, remained small scale, I was able to experiment with new products. The first product that really took off for us is the Internship+Training program. We experimented with gamification. We rewarded people with cash for course progress. We were able to enroll 500 students in the very first batch.

Right now we are at the 20th cohort of the program and we've been optimizing the product perpetually. We iterate a few things in every batch. For example, we started with having a community on Facebook, then we made Telegram groups, then we made Slack groups, then we used a tool called Circle, and finally settled on Discord where we feel that it has been optimized to the best possible extent.

We have been experimenting with:

  • The assignment timelines
  • Assignment ratings and approvals
  • Different ways to withdraw money
  • Possible upsells for the front end customers
  • Team structure
  • Delegation of responsibilities internally
  • Additional social hang out sessions
  • Rewarding top students with cash/recognition
  • Connecting students with corporates for placements
  • Creating offline meetups
  • Creating graduation events
  • Issuing Certificates on different platforms
  • Live Q&A sessions
  • Live chat for query resolution
  • Communication channels (WhatsApp, Calls, SMS, Email, Notifications, etc.)
  • Bonuses for enrolling in the program
  • Personal mentorship for students on demand
  • Giving access to certain tools for the students at a certain cost

And these are just the ones from the top of my mind. We have experimented with a lot more variables.

All this is possible because at a certain point we decided to start cooling down, stop scaling, and focus on optimization. As long as we are all getting paid with the monthly cashflows of the existing system at a small scale, we have all the time in the world to optimize our product to the best possible extent.

At a certain point, we were scaling from 400 students a month, to 500 students a month, and we even had a batch with 1150 students! During that period of scaling up, we were not able to innovate. The additional scale brings madness into the system because the existing systems were built only for a certain scale and the systems break. So the time, effort, and money go into fixing the breakage of the system due to scale, then adding new variables to the system.

Most of the innovation in how we create and deliver our product has come in the past six months of the cool-off period. We scaled back down to 200-250 students a month, this has given us the breathing space to add new variables into the system. And if the new variable disrupts the system in a negative way, we are able to manage it by adding the human element into the fixing the problem.

For example. we have a career counselor who does calls to students/customers when they are pissed off because something didn't work the way it was supposed to work. This is possible because the scale is limited. We can't scale 10x and have 10 career counselors to do the fire fighting. And that's something that is not required to scale.

As we fix the broken parts of the system, the number of students getting pissed off because something didn't go well will become less as we scale. We might not need 10 career counselors, but maybe 2 or 3. Too many startups end up throwing money and people at the problem than taking time to fix the system that creates the problem in the first place. Symptomatic treatment is what most people do when they keep scaling without slowing down.

Scale happens when there is a great product-market fit and every aspect of marketing, nurturing, sales, conversion, onboarding, product, service, delivery, after-sales support has been ironed out to an extent where you feel it is the right time to scale. The scale will happen like an invisible push into the growth because you keep reinvesting the profits into new customer acquisition, and it will be sustainable because you have a great product that has been carefully crafted to perfection over the years.

The new phase of growth will also add entropy to the entire system and after a period of scale, a cool-down period is required to pay off the debt of making a mess while scaling. Fix it, make it stronger, scale again. At that level, what is small scale and what's a big scale will be relative and a period of small scale is required to fix things and start innovating again.

That's one of the reasons why I am shying away from venture capital investment because I believe many investors do not have the patience and would expect us to keep growing continuously. The luxury of time that comes from deciding to scale down is stripped away from the founder. That time is required to innovate in phases scattered between periods of growth.

Imagine you are driving a manual car. If you have to switch from one gear to another, you need to pause for a second, lose acceleration, and change gears. If you try to increase the speed in the same gear, the engine will red-line and you will burn out the engine. And then you have to stop the car and lose a lot more time compared to the people who changed gears at the right time.

Beyond this, if we still find great investors who will have the patience to understand how we navigate, then we would welcome them.

Deepak Kanakaraju