Scale is wealth in the digital world 
Published: Apr-23-14
 

Scale.
 
Large companies have it.
 
Start-ups don’t.
 
Conventional business thinking, particularly as it relates to digital business, sees scale as a hindrance to innovation and success. Scale in a world of rapid change creates an anchor to the past in their view, something that holds a company back, makes it unnecessarily conservative, all at a time when competition seems to be a game of survival of the fittest.
 
There is no denying the success of digital business start-ups relative to the seeming sluggishness of their incumbent competitors. Business journalists, consultants and others paint a picture of impending disruption as the victory of David over Goliath all because big companies were too big to change.
 
Scale is not a sin in the eyes of innovation or agility. Scale is a sign of success and a powerful weapon when wielded by the right leadership team with the right technologies. Accenture’s 2014 Technology Vision highlights this face in its assertion that “Big is the next BIG thing.” It is an idea worth exploring further.
 
Scale is the play in the digital world.
 
While it’s easy to talk about how young disruptive companies are, its rare that we really thing about how big they have become. Big not in the sense of capital, operations, employees or even revenues so much as big where it counts – customers. Whatsapp had 450 million customers when Facebook acquired it for $19 billion as an example.
 
It takes scale to make scale work. Digital company acquisition strategies reflect the need to continuously build scale and build capabilities for the scale they already possess. They think about building customer scale in part because they recognize that their customer base dwarfs their employee base. The same is true for incumbent companies and that is a view that incumbent leaders must take to heart when entering the digital world.
 
Scale is wealth not weight.

 
Companies seem to gain weight as they gain scale. It seems that the bigger you are the harder to change. This creates a conventional wisdom that incumbent companies cannot compete with smaller organizations. That can certainly be the case when executives believe it to be so, but examples of large, nimble organizations exist. So what is at play? I believe that perspective plays a big role in seeking scale as an asset or liability.
 
Start-up companies think from the outside-in. They work from the customer back to the company for the simple reason that there is not that much ‘company’ to work with. Get more “company’ to manage and executives start thinking and working from the inside-out. They spend more time working in the business rather than working with customers. They become more conservative as it’s easier to think about what you could lose, how hard it will be to convince others to change or how the past must be a predictor of future success. As they grow, scale becomes synonymous with sloth.
 
Looking at the company from the outside-in view turns weight into wealth. Starting every conversation with the customer’s perspective, what they value and how they experience it brings an appreciation of the wealth that comes with scale. The alternative, seeing the world as a set of internal issues makes everything seem difficult and slow.

 
 
 
 
Apr-26-14
I agree with Peter; this is an inaccurate generalisation. If scalability is an issue, many good start ups can initially take advantage of 3rd party cloud services, such as Azure/Amazon etc. Not to mention, by the time scalability becomes a real issue, they are likely to attract the investment to expand their technological infrastructure as they will probably have a large consumer base by that point. To conclude; instead of focusing on scalability; innovative ideas which have the potential to attract a large consumer base is what corporate giants need to be focusing more on.
 
 
Anon anon   |   Apr-26-14   |  07:57 AM
Apr-25-14
I have to say I agree with the comment by Peter. Whatsapp in time still constitutes a start-up... but it is in the way that start-ups build their products, with scalability in mind or immediate factory to shelf need.
 
 
Richard Kadiaka   |   Apr-25-14   |  06:52 AM
Apr-24-14
I have to say that to assume all start ups do not have scale would be an inaccurate generalisation. What about those that have built their businesses on some of the most exciting & scalable technologies like salesforce.com? Here at Improved Apps - we pride ourselves on being able to scale to any size of customer. Many partners within our Eco-System like CloudSense, Apttus & FinancialForce.com, are benefitting from this 'economy of scale' once seen as a preserve of the Dinosaurs. If you think start ups are not scaleable, you are not looking properly.
 
 
Peter McManus   |   Apr-24-14   |  05:44 PM

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About the Authors
Mark P. McDonald
Managing Director, Accenture Strategy

Mark McDonald is a Managing Director and Digital Business Strategy Lead in Accenture Strategy, which helps clients to strategize, architect and ...

 
Glen Hartman
Global Managing Director
Digital Consulting, Accenture Interactive

Glen Hartman is global managing director of digital consulting for Accenture Interactive, a business unit dedicated to delivering integrated mar...

 
 

 

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