How to Use the “Rule of 3 and 10” for Business Growth

Hiroshi Mikitani, CEO of Rakuten, an electronic commerce and internet company based in Tokyo, established what he dubbed the rule of 3 and 10 to guide his company through periods of extreme growth.

Although this rule was created for companies that are growing very quickly, it applies to all companies as they progress through these major growth milestones.

The Rule – “Everything breaks at multiples of 3 and powers of 10”

I have seen this rule in action over the years in quite a few businesses as they start to grow. What worked with 3 people no longer works 30 people. What works with 30 people doesn’t work with 90 people. The tools and processes set up to work with 10 people are broken when you grow to 100 people.

One of the businesses I worked at in the 90’s had no organized repository of processes, tools, or templates when they were under 100 people. This approach worked relatively well because we were small enough to share efficiently and to build on what each other’s successes.

However, as we grew beyond 100 people, there were quality issues, schedule issues, repeatability issues, and wasted effort reinventing already existing tools. These issues were costing the company money and reputation. Essentially, everything broke when the business hit a critical mass. Things had to change if the company was going to grow successfully.

The solution was to create a repository of templates, tools and processes to increase repeatability, decrease quality issues and duplicated effort. This solution was not perfect but it allowed the company to grow significantly and was a contributing factor when the business was acquired a few years later.

So what is the solution to productively move forward through the “3 and 10” milestones of growth?

Understanding the Growth Rule and Leading Your Organization

Leaders of growing organizations of any type must understand the following points and take the actions outlined if they are planning on successfully navigating through periods of extreme growth.

1. First of all, recognize that everything breaks at roughly multiples of 3 and powers of 10. This means;
   • Decision making
   • Business systems
   • Marketing
   • Sales
   • Accounting
   • Payroll
   • Benefits
   • Infrastructure
   • IT
   • How you schedule meetings
   • Leadership structures
2. Secondly, understanding that everything breaks means that the organization must be constantly reinventing every aspect of itself in anticipation of the approaching break points.
3. Leaders must drive and support the reinvention culture within the organization.
4. Leaders must task employees to lead change and reinvention teams. This promotes a reinvention culture and it gets organizational buy in to the changes must faster.
5. The organization must be strategic about the reinventions:
   • Always be on the look out for rules and processes that made sense at some point but are no longer fulfilling their original purpose. See this article for more details.
   • Watch for tools with size, data or speed limitations. Put plans in place to migrate away from them before the business performance is affected.
   • Study the marketplace to see what other companies are doing and the tools they are using. Learn from their experiences.
6. Understand that change is constant but the organization needs time to breathe and regroup between periods of extreme change.
7. Finally, celebrate successfully implemented change initiatives!

Take Action

If your organization is struggling in any area, it is worth taking a step back and strategically analyzing the issue. Is the struggle happening because something in the organization has broken due to the Rule of 3 and 10 growth? Is there a pending break point approaching that you need to take action on?

Take some time this week and review your business and make sure you are prepared for your next growth break point. Also, read the following posts for some additional ideas on how to productively and proactively deal with your business growth.

• Predictable Success
• Are Rules, Processes and Tools Killing or Improving Your Business
• 10 Signs That Your Business is Mired in Bureaucracy
• Who’s Running Your Business 

 

“Change is not merely necessary to life. It is life.” Alvin Toffler

Have you had experience with the Rule of 3 and 10 in your business? Give us a quick summary in the comment section below

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