ExecuSpeak Dictionary: Scalable
PHILADELPHIA ( MainStreet) -- Scalability is essential to the growth of a business. For a company or product or service to be scalable means just that, that it has the ability to grow ... to increase, expand or upgrade to meet demand.
The concept is easier to understand than it is to do. It is the "make or break" of product and service development.
Typically the word describes computer systems, but the concept transfers easily to other industries and the word transfers too. There are lots of ways to invoke "scalability." Let's try a few:
- In production, such as for a factory making widgets, scalability means there is a way to increase production of the widget to take advantage of opportunity. What if after selling, selling, selling, a large order actually comes in -- then what? If there is scalability, it means the company easily increases production to fulfill that large order.
- For computers and transmission services, scalability refers to the technical capacity to manage more customers, more bandwidth and/or more computer operations. Companies such as Verizon (VZ) and AT&T (T) providing services via fiber, with its near infinite bandwidth capacity, are ready to scale up their bandwidth capacity to meet customer needs.
- When referring to software, it's the ability to upgrade features quickly and increase functionality while continuing to serve more and more users.
- To a financial analyst, scalability means the company appears to have economies of scale. The larger the company gets, the bigger the profits. And as sales increase, the management team has the resources to respond to the increased activity, not just the additional costs and expenses but the behind-the-scenes systems and personnel. The opposite of scalability just might be Trouble with a capital T.
- Think about a Groupon (GRPN) deal gone bad, when a business becomes overwhelmed with increased sales activity and instead of creating satisfied customers the result is just a lot of headaches for all involved. When that happens (as it does), the company has demonstrated the exact opposite of "scalable."
This might imply that the opposite of scalability is failure. But the opposite of scalability isn't out-and-out failure. That is far too harsh a pronouncement. It just means the business plan must change. If the product, service or whatever, isn't scalable, perhaps the corporate objective is prestige, cache or a premium price based on scarcity.Carol Heiberger is the author of ExecuSpeak Dictionary. Her industry experience includes positions with Ford, Bell Atlantic (now Verizon) and a large energy utility. Her clients have included government entities, not-for-profits and businesses of every size. She has served as the COO of a start-up CATV/ISP company, director of operations and as an adjunct assistant professor for an MBA program. Her volunteer work includes service as a SCORE business counselor and on the loan committee for a microlender. Her education includes an MBA from Wharton. ExecuSpeak Dictionary is the result of her experience in industry and consulting and teaching. She can be contacted at Carol@execuspeakdictionary.com.
Check Out Our Best Services for Investors
Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
Check Out Our Best Services for Investors
David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
Every recommendation goes through 3 layers of intense scrutinyquantitative, fundamental and technical analysisto maximize profit potential and minimize risk.
Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.