If you are a Startup and wondering why your company has not performed as expected, the premature scaling theory may help you understand it better.
All Startups essentially go through several phases such as Discovery, Validation, Efficiency, Scale, Sustain & Conservation. Premature scaling in terms of business can occur when you jump to a next phase while still in the lower phase. Premature scaling can occur in terms of several dimensions such as:
Customer: spending too much resources on a customer before the product/market fit
Product: building product without validating the problem/solution fit or product/market fit
Human Resource: hiring too many people and a tall organizational structure. (Often a problem when cheap human resource is available)
Financial Resource: raising too much capital than Startup can handle (especially from outside sources)
Business Model: focusing too much on profit maximization without looking at market or environment.
Infographic on Premature Scaling of Startups
See more details as covered by the Startup Genome Research