Scaling Up: Why 96% of firms fail?
- Srikant Gokhale
- 2 days ago
- 13 min read
Blueprint to a Billion: Lesson from Retailers
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“Only those who will risk going too far can possibly find out how far one can go.” – T.S. Eliot
Scaling a business from a single store to a billion-dollar enterprise is like climbing a treacherous mountain: exhilarating, perilous, and reserved for the relentless. Small and medium enterprises (SMEs) are economic powerhouses—generating 45% of U.S. GDP and 48% of jobs, 60% of China’s GDP and 75% of employment, and 30% of India’s GDP with 40% of jobs. Yet, a staggering 96% never reach $1 million in revenue, stalling job creation and prosperity.
Retailers like Tesco, Best Buy, IKEA, 7-Eleven, UNIQLO, Williams-Sonoma, Walmart, and Home Depot defy the 1-in-20,000 odds of hitting $1 billion (Blueprint to a Billion). Their journeys reveal a blueprint for scaling up, offering leaders a framework to navigate the “valleys of death” and to summit the billion-dollar peak.
Why Scaling Matters
But unless you have scale, you may not be able to stay alive or competitive. Unless you have scale, someone else can buy you, or you may go bankrupt. Remember, I have seen so many industries dying out.- Tadashi Yanai, Founder-UNIQLO
Scaling is hard. It requires focus, determination, and discipline. But most important, it requires a commitment to the customer and the humility to understand that early success doesn't translate into future success. Most businesses dream of scaling their company, but the harsh reality is that 96% of startups fail.
SMEs are the lifeblood of global economies, but their failure to scale destroys as many jobs as they create. In the U.S., 5 million mom-and-pop shops, 7 million in China, and 13 million in India dominate retail, yet most cling to survival rather than growth. Scaling up isn’t just about revenue—it’s about fueling employment, innovation, and national prosperity. David G. Thompson’s Blueprint to a Billion reveals that only 5% of public companies since 1980 have hit $1 billion, with just 30 of 4,000 firms achieving this annually. Doubling that rate could reshape economies. Consider Pizza Hut: in 1958, Frank and Dan Carney borrowed $600 from their mother to open a Wichita pizzeria, envisioning a social hub. That single store scaled to a billion-dollar brand by prioritizing customer connection. The question isn’t why scale, but how do the few succeed where 96% falter?
The Pitfalls: Why Most Fall
Scaling is a gauntlet with four stages: under $1 million, $1-10 million, $10-50 million, and beyond $50 million. Each stage introduces a “valley of death” where old strategies falter. Of 28 million U.S. firms, only 4% hit $1 million, 0.4% reach $10 million, and 17,000 exceed $50 million. Common missteps—wrong markets, insufficient capital, ignoring competition—trip many, but the deeper issue is behavioral. As Leonard Schlesinger of Harvard Business School observes, most small-business owners prioritize stability over growth, lacking the ambition or skills to scale. Even talented entrepreneurs falter when early success breeds complacency. Luck plays a role, as Nassim Taleb argues, but choice drives the climb. The retailers who summit adapt relentlessly.
Some perspectives on Scaling up
- Start up, Scale up, Screw up, or fail to scale up
In his book on Scaling up, Verne Harnish describes the life cycle sequence of most businesses as they move up the S-shaped growth curve." 11
The key to scaling this curve:
· Attracting and keeping the right People ;
· Creating a truly differentiated Strategy ;
· Driving flawless Execution; and
· Having plenty of Cash to weather the storms.
Millions of people start new ventures, and of those that survive, 96% remain "mice." It's only a few — the "gazelles" or scaleups — that scale beyond $10 million, $100 million, or $1 billion in revenue, Eventually, many growing firms — gazelles — get sold, some to "elephants" (and a rare few grow up to become elephants themselves), often crushing the innovative culture of a thriving, growing company. Completing the cycle, many of these big companies turn bad — often downright evil — and later become extinct or irrelevant at best." 11
- Four Stages of Scale up
Verne described four stages of scaling up: 1) Less than 1 Mn, 2) From 1- 10 Mn, 3) from 10 -50 Mn, 4) Above 50 Mn. In contrast, there are many startups, but very few scale up. Only 4% of businesses consistently achieve the $1 Million revenue mark. And even fewer, just a fractional 0.4% of firms, ever reach $10 Million because the "valley of death" is a vast chasm to leap over if they are not set to scale successfully. Of the 28 million firms in the study, only 17,000 ever achieve $50 Million.
What gets you here may not take you there. After every stage, firms face the valley of death or the prospect of becoming irrelevant without understanding the changes required in the next stage to navigate. It is an evolutionary process. Therefore very few firms reach the final stage 4.- Verne Harnish in Scaling Up
Again this four stages model, though, discusses the valley of death after each stage as firms fail to realize that 'what gets you here will not take you to the next stage.' Most firms fail to evolve, adapt, or prepare for the next stage without understanding "what changes are required to get to the next stage'.
These are very simplistic and generalist views of scaling up. Even if you get all the elements described by the book right, there is no guarantee of successful scaling up to one billion. There is much more to it, as we will discover later.
What it takes to scale up: How Retail Giants Scaled up from single store
Most research or books on scaling up focus on the science part of why they fail or about the obstacles to scaling up. Very little research focuses on the art part of how all the big companies scale up from single store like 7-Eleven, Walmart, Best Buy, Home Depot, Uniqlo, Ikea, and Williams Sonoma. Business schools do not teach scaling up. It will be fascinating to learn from the founders of these retail firms how they initiated the process and propelled it from one stage to another. What was the secret to their successful scaling up? Was it strong desire, pure luck, vision, favorable tailwind, accident, new partners, ownership changes, or any other factors, which resulted in helping them to take off and scale up?
Eight retailers—Tesco, Best Buy, IKEA, 7-Eleven, UNIQLO, Williams-Sonoma, Walmart, and Home Depot—illustrate the art of scaling up. Their stories reveal patterns of resilience, experimentation, and reinvention.
Based on these findings/insights, this article attempts to develop the tenets by understanding what it takes to scale up. The purpose is to provide much-needed know-how to inspire millions of startups and firms to scale up to the next stage and increase the odds of success to become a billion-dollar firm.
1. Tesco—From Stall to Global Superstore
Jack Cohen’s 1919 London market stall sold surplus groceries, earning £1 profit on £4 sales (Scaling Up). By 1929, his first Tesco store opened in Edgware, focusing on tea. A 1935 U.S. trip inspired self-service, launched in 1947 with a public offering. “I saw the future,” Cohen said, embracing efficiency. The 1960s brought superstores, piling goods high and selling cheap, hitting $1 billion by 1979. The 1980s saw slim margins; Ian MacLaurin closed 500 stores, pivoted to upscale private labels, and modernized operations with centralized distribution. In 1997, Terry Leahy took Tesco global, entering Asia and Eastern Europe. The Clubcard loyalty program, leveraging customer data, boosted retention, while acquisitions like South Korea’s Homeplus fueled growth. By 2021, Tesco’s revenue reached $84 billion across 7,000 stores. Its climb hinged on strategic pivots—self-service, superstores, global expansion—and operational rigor, adapting to each stage’s demands. “What got us here won’t get us there,” Leahy noted, embodying the need for constant reinvention to scale.
2. Best Buy—Surviving Retail Storms
Dick Schulze’s 1966 Minnesota stereo shop, Sound of Music, catered to audiophiles (Scaling Up). A 1981 tornado wrecked his Roseville store, but Schulze’s “Tornado Sale” of damaged goods at bargain prices drew thousands, birthing a discount superstore model. Renamed Best Buy, it went public in 1985, hitting $428 million by 1988 with 60 stores. The 2012 Amazon surge caused a $1.2 billion loss, threatening collapse. Hubert Joly’s “Renew Blue” strategy—launched in 2012—saved it. Joly price-matched Amazon, revamped stores into tech showrooms, and invested $2 billion in e-commerce, achieving 20% online sales by 2018. Staff training rivaled Amazon’s convenience, and partnerships with Samsung and Apple created in-store exclusives. By 2021, Best Buy’s revenue hit $51.76 billion across 1,000 stores. Its scaling success came from turning crises—tornadoes, e-commerce—into opportunities, adapting operations (digital transformation), strategy (price-matching), and organization (staff empowerment) to navigate retail’s valleys.
3. IKEA—Flat-Packs to Global Reach
The IKEA Group is a value-driven company passionate about life at home. We are a concept company; if we stick to the concept, we will never die- Ingvar Kamprad, Founder of IKEA.
Ingvar Kamprad’s 1943 Swedish stall sold pens and seeds before shifting to furniture in 1947 (Scaling Up). A 1951 price war nearly bankrupted him; Kamprad’s showroom and flat-pack designs cut costs, saving IKEA. “We turned a threat into a model,” he said. In 1965, a 46,000-square-meter Stockholm megastore—Europe’s largest—launched the “potato field” strategy: massive stores on cheap, remote land, drawing crowds with low prices and self-service. By 1994, IKEA hit $4.8 billion, expanding to 114 stores across 25 countries. Kamprad’s Testament of a Furniture Dealer embedded thrift and quality, sustaining culture across 400+ stores by 2021. Operational innovations—flat-packs reduced shipping costs by 30%—and strategic store placement fueled scale. IKEA’s climb overcame price wars and global logistics challenges, adapting its value proposition (affordable design) and operations to each stage, cementing its $41 billion empire.
4. 7-Eleven—From Ice Dock to 24/7 Empire
Give the customers what they want, when and where they want it."- Joe C. Thompson Jr., 7-Eleven Founder
In 1927, “Uncle Johnny” Green sold milk from a Texas ice dock (Scaling Up). Joe Thompson Jr. added gas in 1928, branded as 7-Eleven for 7 a.m. to 11 p.m. hours, and pioneered 24/7 operations in the 1960s, hitting $1 billion by 1971 despite bankruptcy. A 1991 buyout by Japan’s Ito-Yokado transformed it. The “Tanpin Kanri” system—data-driven inventory management—achieved 50 stock turns annually, far above Walmart’s eight, ensuring fresh stock. By 2020, a $21 billion Speedway acquisition boosted revenue to $58 billion across 71,000 stores. 7-Eleven scaled by adapting operations (24/7 hours, inventory tech), ownership (Japanese expertise), and strategy (convenience focus). Bankruptcy forced resilience; the buyout brought capital and systems. “We learned to move faster,” a 7-Eleven executive said. Its climb shows how operational rigor and strategic acquisitions can turn setbacks into a global convenience empire.
5. UNIQLO—From Flops to Fashion Leader
I want to keep learning so I can make UNIQLO better. Many businessmen fear the unknown, but not me. I embrace it. It is going after the unknown that continues to make this business an exciting one to be in. – Tadashi Yanai
Tadashi Yanai’s 1949 men’s shop in Japan became UNIQLO in 1984, a casual clothing chain (Scaling Up). Early 2000s UK and U.S. expansions flopped—20 of 21 stores closed—teaching Yanai resilience. “Failure’s the seed of success,” he said. Relaunching with “LifeWear”—functional, affordable apparel—UNIQLO targeted China’s middle class, opening 600 stores by 2022. Innovations like HeatTech and AIRism fabrics, developed with Toray Industries, differentiated it. By 2022, revenue hit $30 billion across 2,400 stores, outpacing H&M. Yanai’s ambition to be global No. 1 drove scale, with 50% of revenue from Asia outside Japan. UNIQLO’s climb relied on strategic repositioning (LifeWear), market adaptation (China focus), and product innovation, overcoming early flops through resilience and a customer-centric value proposition, positioning it as a fast-fashion leader.
6. Williams-Sonoma—From Cookware to Digital
Chuck Williams’ 1956 Sonoma cookware shop, inspired by French culinary tools, sparked a 1961 catalog boom (Scaling Up). A 1978 $173,000 loss forced a $100,000 sale to Howard Lester, who saw lifestyle potential. Lester’s 1983 IPO raised $30 million, funding expansion. Acquiring Pottery Barn in 1986 added scale, but Laura Alber’s 2001 digital pivot—70% of sales online by 2021—drove $5.7 billion in revenue across 600 stores. Alber invested $200 million in e-commerce platforms, integrating stores and online for seamless customer experiences. “It’s about their passion,” she said, emphasizing customer focus. Williams-Sonoma scaled by evolving its value proposition (lifestyle brand), leveraging capital (IPO, acquisitions), and embracing digital operations. Navigating losses through ownership changes and tech investment, it transformed a niche shop into a global empire, proving adaptation across stages is key.
7. Walmart—Rural Roots to Retail Titan
Sam Walton’s 1962 Rogers, Arkansas, discount store bet on rural low prices, mortgaging his home to start (Scaling Up). A 1970 IPO raised $5 million, funding warehouses handling 1.6 million weekly deliveries. Sam’s Club (1983) and Supercenters (1988) expanded reach, blending groceries and general merchandise. By 2016, Doug McMillon’s $3.3 billion Jet.com acquisition countered Amazon, boosting e-commerce to 13% of sales by 2021. Walmart’s tech-driven supply chain—using AI for inventory—kept costs low, hitting $572 billion across 10,500 stores. Walton’s “buck the system” ethos drove scale, adapting strategy (omni-channel), operations (supply chain), and capital (IPO, acquisitions). Facing Amazon, Walmart invested $14 billion in digital and logistics, securing its climb. Its success shows how strategic focus and operational efficiency can scale a rural store into a global titan.
8. Home Depot—From Flop to DIY Giant
"We had this grand opening, and nobody came.- Bernie Marcus, Founder, Home Depot
Bernie Marcus and Arthur Blank’s 1979 Atlanta warehouse flopped, with kids begging customers to shop (Scaling Up). Customer feedback—stocking 25,000 items and offering DIY workshops—hit $1 billion by 1986 across 50 stores. A 2001-2006 stumble under Bob Nardelli, who cut staff and prioritized efficiency over service, stalled growth; stock fell 10%. Frank Blake’s 2007 retail focus—restoring staff training and customer service—revived it, reaching $151 billion by 2021 across 2,300 stores. Home Depot invested $1.2 billion in supply chain upgrades, ensuring 90% same-day delivery. Its climb relied on customer-driven strategy (workshops), leadership alignment (Blake’s pivot), and operational scale (inventory depth). Overcoming early failure and leadership missteps, Home Depot’s resilience and adaptation turned a shaky start into a DIY empire.
The world changes, the environment changes, competition changes, people change, everything changes. Retailers can't ever stay the same. If you don't change, you are a dead duck. Responding to change is one of the reasons for the success of the Home Depot."- Bernie Marcus, Built from Scratch
These retailers faced near-death moments—tornadoes, bankruptcies, flops—yet scaled by adapting their business models, leadership, and operations at each stage.
The Adaptive Scaling Blueprint: A new Framework
The ascents of Tesco, Best Buy, IKEA, 7-Eleven, UNIQLO, Williams-Sonoma, Walmart, and Home Depot reveal a shared path: they scaled by dynamically adapting five elements—Strategic Focus, Operations and Efficiency, Ownership and Control, Organization, and Leadership Style—at each stage of growth. The Adaptive Scaling framework (Scaling Up) is their map, guiding them through the valleys of death to billion-dollar summits.
Scaling isn’t linear; it’s an adaptive process requiring constant reinvention across five elements. Failure to adjust any one risks a plunge into the valley of death.
Strategic Focus: Evolve the value proposition to match market shifts. Tesco’s shift from “pile it high, sell it cheap” to upscale superstores and UNIQLO’s “LifeWear” repositioning kept them relevant.
Operations and Efficiency: Build scalable systems. IKEA’s flat-packs and 7-Eleven’s “Tanpin Kanri” optimized costs, while Walmart’s tech-driven supply chain fueled growth.
Ownership and Control: Secure capital and professionalize. Tesco’s 1947 IPO, Best Buy’s 1985 public offering, and Walmart’s 1970 listing funded expansion, while 7-Eleven’s Japanese buyout brought expertise.
Organization: Align structure and culture. Williams-Sonoma’s digital team and Home Depot’s value-driven culture supported scale, while IKEA’s “Testament of a Furniture Dealer” anchored its global identity.
Leadership Style: Match leaders to stages. Joly’s turnaround at Best Buy, Leahy’s global push at Tesco, and Alber’s e-commerce focus at Williams-Sonoma show the need for stage-specific leadership.
This Adaptive Scaling framework demands that leaders rethink every element at each stage. As Verne Harnish notes in Scaling Up, “What gets you here won’t get you there.” Stagnation is fatal. This Adaptive Scaling framework demands that leaders rethink every element at each stage. As Bob Sutton and Huggy Rao argue in Scaling Up Excellence, scaling is a “ground war” requiring shared mindsets, but actionable frameworks are rare. The framework ensures firms evolve dynamically, avoiding stagnation.
Eight tenets for Scaling Success
My own experience of thirty years in scaling up different organizations in China, India, and the Middle East and based on these findings using the Adaptive Scaling-up framework for these eight retailers: Best Buy, 7-Eleven, Uniqlo, IKEA, Walmart, Williams Sonoma, and Home Depot, we have developed eight essential tenets of scaling up, which can help firms in their scalping up the journey, provide insights and increase the odds of success at each stage to become a billion dollar in revenue.
From 30 years of scaling firms and analyzing these retailers, eight tenets emerge to guide leaders:
Desire and Action: Scaling starts with ambition. As Schlesinger says, “Unless you want it, nothing happens.” Walton’s rural gamble and Yanai’s global vision sparked their climbs.
Experimentation: Test boldly. IKEA’s showroom and Best Buy’s Tornado Sale were daring bets that redefined their models.
Adaptation: Pivot through valleys. 7-Eleven’s bankruptcy and Tesco’s margin crisis forced reinvention, proving resilience trumps rigidity.
Value Proposition: Differentiate relentlessly. Home Depot’s DIY workshops and UNIQLO’s fabric innovations set them apart.
Resilience: Endure setbacks. UNIQLO’s early flops and Best Buy’s Amazon battle show failure is a teacher, not a tombstone.
Capital and Control: Fund growth strategically. Public offerings (Walmart, Tesco) and acquisitions (7-Eleven’s Speedway) provided fuel.
Leadership Fit: Choose the right sherpa. Joly, Leahy, and Alber matched their firms’ needs, while misfits like Nardelli at Home Depot stalled progress.
Culture: Root values deep. IKEA’s thrift and Tesco’s service ethos sustained growth across decades.
This research reveals that scaling demands relentless adaptation across the framework’s elements, guided by the eight tenets. Leaders must ignite Desire and Action, test through Experimentation, pivot via Adaptation, differentiate with a Value Proposition, embrace Resilience, secure Capital and Control, ensure Leadership Fit, and root Culture. Apply this blueprint: assess your stage, adjust the five elements, and embed these tenets.
Conclusion: The Path Forward- Lessons for Leaders
Unless you truly want to make something happen, the odds are nothing will. Without desire, nothing else matters . . . or occurs. So, the starting point is: what do you want to create? - Just start, Leonard a. Schlesinger Charles f. Kiefer
Scaling up is a grueling marathon, not a sprint. These retailers show that success demands continuous adaptation, not a static playbook. Tesco leapt from a stall to global dominance; Best Buy outran Amazon; IKEA and 7-Eleven turned crises into catalysts; UNIQLO, Williams-Sonoma, Walmart, and Home Depot carved unique paths. Yet, research lags—business schools focus on startups, not scale-ups. As Bob Sutton and Huggy Rao argue in Scaling Up Excellence, scaling is a “ground war” requiring shared mindsets, but actionable frameworks like Adaptive Scaling are scarce.
For leaders, the implications are clear. First, assess your firm’s stage and adapt all five elements—strategy, operations, ownership, organization, leadership—to avoid the valley of death. Second, embrace experimentation and resilience; as Sergey Brin of Google said, “Success comes from lots of failures first.” Third, instill a culture of ambition and learning, as Kamprad did at IKEA. Finally, seek capital and leadership suited to the next peak, not the current ledge.
The quest to scale up is daunting but transformative. If the 96% failure rate drops to 80%, economies will surge with jobs and innovation. Business schools must prioritize scaling in curricula, and leaders must study these retail giants. As Marshall Goldsmith asks in Blueprint to a Billion, “How do we turn great ideas into thriving organizations?” The new framework of Adaptive Scaling with five elements will help firms to adapt as they move from one stage to another. Without it, they will become irrelevant and reach the valley of death, as has happened in most cases. It takes years of patience, resilience, experimentation, business model change, and visionary leadership to achieve it. It is time to commence the journey of scaling up to become a billion-dollar firm.
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