Will it scale? Questions to consider when assessing whether your business can scale in times of need

The COVID-19 pandemic has brought a once-in-a-lifetime test to the healthcare industry.  We have all been touched by the courageous response of healthcare workers and the broader healthcare ecosystem doing their best to prevent the spread of the virus. They all rely on technology to help them deliver care in the most efficient, cost-effective, and quickest way possible.

As an entrepreneur, former CEO, president, and venture partner, I have been in many discussions where we have a cursory discussion about if a particular company can meet unforeseen circumstances and scale up quickly.

The COVID-19 pandemic has brought this to the forefront in a way never before seen.  After seeing our volume swell as much as 10x from levels just a month ago – I have a new appreciation about why scale is so important.  When your customers need you to perform – will you be ready?  Will you deliver excellence and build long-term loyalty, or will you fail to deliver in the moment when you are needed most?  Are you prepared for a tsunami of scale?

Early on in one of my startup companies, we had an amazing opportunity.  A leading player in the market chose us as their technology vendor.  This brought legitimacy for our brand, significant revenue, and excitement across the team.  Unfortunately, when we hit “go-live” we quickly learned what our limitations were.  Our servers were not ready for the load, our customer support teams weren’t prepared for the surge in new complaints, and our leadership team learned the hard way that our platform simply wasn’t ready.  The next few months were consumed with around-the-clock efforts to fix a number of issues and ultimately, we lost the customer.  Even worse, we wasted precious time that could have been dedicated to advancing other priorities.

As I watch this pandemic unfold – I see a new set of criteria that I will use when discussing scale with future portfolio companies.  Thinking about the implications of the COVID-19 pandemic on a telehealth company and the lessons that any startup can use, here are some of the questions to consider when trying to answer the question of “will it scale”:

Volume: Are you ready for volume to go up 5x or more – not just over 6-12 months as you grow fast or have a successful marketing campaign – but what if that happens in days or weeks?

Supply Chains: If you produce physical products – is your supply chain insulated from critical shocks that disrupt labor overseas factories, slow down shipment times, or potentially furlough dockworkers en masse? Are your third-party logistics partners going to be disrupted with local regulations or work stoppages? What if all of this happens while demand for your products doubles or triples overnight – could you meet that demand?

Software Architecture: Are you ready for a 5x increase in traffic?  How quickly can you meet that demand? Are your licensing partners ready to add licenses as you hit peak volume?  Will that take minutes or days? Will you have access to your data centers?  If there is a run on servers and a shortage of parts – where will you get them? Do you have elastic scaling built into your data plans or automatic mechanisms to increase your capacity in the middle of the night? Think about every part of your backend – you may be able to increase server capacity for web traffic – but what about neglected microservices or features that don’t normally have as much demand such as reporting tools, provisioning servers, or administration portals – what happens if they are suddenly flooded with data?  Have you balanced these processes and optimized computing load so that unanticipated demand in one microservice doesn’t overwhelm another?

People: Can you hire implementation, customer support, or sales resources fast enough?  If you provide specialized services – can you find qualified people in weeks or even days? Have you simulated what happens when thousands of new users suddenly come on your platform – who will train them, set up their passwords, provision their accounts?  What self-service tools do you have? Will they all call customer support?  What if they are all working from home and their kids are using YouTube and their internet is slow? How will you diagnose the issues? Who will fix it?

Regulations & the Market:  What about legal review, contract processing, credentialing? What happens if your business is built around an obscure law that prevents others from having access to your market and then overnight that law is lifted or suspended? How will you deal with new competitors? What about your pricing models?  Your marketing outreach? PR campaigns? How will you quickly grab market attention if there is an opportunity?

Financing: Do you have ample cash to survive if funding markets dry up quickly?  Do you have resources to make strategic moves and acquire competitors or react to new market entrants?  Can you modify or spin up new products as the market quickly demands them?

The COVID-19 pandemic is a case study in ALL of these things happening at once.  If companies are not ready – that once-in-a-lifetime event a company is hoping for, is also one that could, unfortunately, weaken or destroy them.  However, if you are ready, market shocks and unusual events can present an amazing opportunity for technology partners to show their value, have a dramatic impact on outcomes and build lifetime partnerships and loyalty.  Market shocks and demand for scale pick winners and losers – which one will you be?