Many entrepreneurs dream of rapid expansion, but it comes with major challenges. Should businesses scale at all costs, or is it wiser to pursue controlled growth? Here’s an analysis with expert advice.
In the entrepreneurial world, growth is often discussed in terms of the unicorn phenomenon. The term refers to a young company valued at over a billion dollars that is experiencing rapid growth and is backed by venture capital. According to the latest investment report published by the Swiss ICT Investor Club (Sictic), around fifty companies in Switzerland have achieved unicorn status in the past twelve years – half of them since 2020.
However, for a startup to become a unicorn, it must have a scalable business model – one that allows for exponential growth in both operations and organization. To navigate this scaling process successfully, researchers from the University of St. Gallen published Scale Up Navigator last year. "It’s a guide designed for both entrepreneurs and investors, offering key insights on how to structure a scale-up," explains co-author Dietmar Grichnik, a professor of entrepreneurship at the University of St. Gallen.
The framework of a scale-up
Four key stages define a company’s growth trajectory and determine the success of a scale-up.
The first step involves a thorough analysis to assess the project’s potential before securing investment. "Many entrepreneurs achieve 'product-market fit' – the alignment between a product and its target market. However, to ensure strong growth, the crucial question is whether the product or service is sustainable and scalable. This is assessed through various indicators such as team expertise, business model, and target markets. At this stage, the company must already demonstrate a clear competitive advantage that it can defend against the competition," explains Dietmar Grichnik.
Next comes the activation of the growth engine through structured processes, with a strong focus on customer relationships, marketing, and sales.
In the third phase, the company must organize its resources and process to support expansion. "This is where many scale-ups fail – lacking the infrastructure or the ability to effectively replicate their model. For instance, despite having enough customers, they struggle to meet demand quickly enough."
Finally, the last stage focuses on impact scaling – the strategy for ensuring the project's long-term viability. This can be achieved through new funding rounds, competitor acquisitions, or a potential IPO.
Value proposition
"The core element of any business model is the ‘value proposition’ – the problem that the entrepreneurial project aims to solve," explains Kim Oliver Tokarski, professor of entrepreneurship, strategy, and business management at the Bern University of Applied Sciences (BFH). "It’s not just about the product itself because, as the saying goes, ‘the customer doesn’t want a drill, but a hole in their wall.’"
Before scaling up, a business must first prove its model works on a smaller scale, the expert emphasizes. This is particularly important since most models require numerous adjustments before becoming viable. Moreover, a solid grasp of finance, marketing, and organizational management is essential. "Growth also brings tensions and internal conflicts within teams, making it necessary to prepare employees, establish strong structures, and secure funding. The challenge is to scale without compromising quality or the original value proposition."
Pitfalls along the way
Expanding without first validating a solid business model is one of the most common mistakes startups make when trying to scale too quickly. "Many also underestimate the level of investment required to sustain their growth," notes Kim Oliver Tokarski.
Another critical mistake is neglecting the necessary adjustments to organizational structure and processes, which can lead to inefficiencies and bottlenecks. "Moreover, the impact of rapid growth on company culture and team dynamics is often underestimated, even though expanding too fast can weaken internal cohesion. Lastly, failing to anticipate needs in human resources, technology, and financing can quickly slow down – or even jeopardize – the company’s development."
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Choosing moderate and sustainable growth
Some companies deliberately choose not to scale, even when faced with high demand. Is that a mistake? "Not scaling can be a perfectly rational decision. We hear a lot about scale-ups, but they are the exception," says Dietmar Grichnik, professor of entrepreneurship at the University of St. Gallen. "For most businesses, the norm is moderate, sustainable growth. The key to success is long-term viability."
He adds that he prefers the image of a camel over that of a unicorn. "A camel is a real animal – it can withstand tough conditions while still accelerating when the time is right. Right now, the venture capital market is cautious, so it’s crucial to focus on sustainable growth with self-financing power."
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Last modification 05.03.2025
