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Futuristic, technology-driven business models are weakening the conventional advantages of Economies of Scale.\u00a0 Large corporations, founded on Scale, nevertheless have areas that they can exploit if they reposition rapidly.<\/p>\nFuturistic, technology-driven business models are weakening the conventional advantages of Economies of Scale.\u00a0 Large corporations, founded on Scale, nevertheless have areas that they can exploit if they reposition rapidly.<\/p>\n
For the best part of over a century, Economies of Scale\u2014Cost Advantages that businesses achieve owing to their scale of operation\u2014fashioned the corporation into a perfect engine of business.\u00a0 The economic concept of Economies of Scale was first floated in the Adam Smith era where the idea of obtaining larger production returns through the use of division of labor was introduced.<\/p>\n
A technological rush, distinct in history, was observed near the beginning of the 20th century.\u00a0 These new technologies were accompanied by scale i.e., bulk production and access to huge markets. \u00a0The Economies of Scale guided business success\u2014the strong inverse relationship connecting fixed costs and output grew into a basis of Competitive Advantage<\/a>.<\/p>\n Back then, investments in scale was the most sensible proposition.\u00a0 Not only did it lower fixed costs but also created a formidable barrier for competitors, denying them entry in the market.\u00a0 Every type of business spent the 20th century in the quest for scale.<\/p>\n The advent of game-changing new technologies such as mobile devices, social media, and cloud computing, augmented by Artificial Intelligence (AI), is whirling Economies of Scale into Economies of Unscale<\/a>.<\/p>\n Specifically, rise of Software as a Service (SaaS) and emergence of Product to Platform Transformations<\/a>\u2014coupled with AI\u2019s ability to customize\u2014overthrows bulk production and mass marketing as a basis of Competitive Advantage. \u00a0These progressions have battered the powerful inverse correlation between fixed costs and output that delineated Economies of Scale.<\/p>\n Today, minor, unscaled businesses, leveraging Platform Scaling Strategies<\/a> while renting SaaS, can hunt in niche markets, effectively contesting big companies that are strained by decades of investment in scale, i.e., in large-scale production, distribution, and marketing.<\/p>\n The triumphant companies in the current tech rush\u2014enabled by Platforms and SaaS\u2014are the ones led by Customer-centric Design<\/a>, providing each customer precisely what they want, that too while making a profit, and not companies offering everyone uniform products.<\/p>\n Large corporations can remain relevant in this era of niche marketing by taking leverage of their existing infrastructure through astute modifications in their use.\u00a0 They can deploy 3 key tactics to accomplish this:<\/p>\n Let us delve a little deeper into the details of the 3 tactics for leveraging Economies of Unscale.<\/p>\n Dynamic corporations have expended decades building scale which is extremely specialized for their industry.\u00a0 Efficient factories, distribution channels, retail outlets, supply chains, marketing expertise, and global partnerships have been painstakingly developed.\u00a0 It is time for these corporations to take a decision on whether it is more viable to rent out this capability to other companies or not.<\/p>\n An example of such an approach is that of P&G\u2019s Connect + Develop program that has been running for more than a decade.\u00a0\u00a0<\/strong><\/p>\n As corporations become bigger, emphasis on control becomes more pronounced\u2014processes, regulations, stock prices, and a variety of non-core issues take precedence over great product offering.\u00a0 Niche market focus blurs and attempts are made to make a product that may appeal to the masses in an effort to create Economies of Scale.<\/p>\n In this age of Unscale, the product\/customer-focused competitor preys on such weakness.\u00a0 Large corporations can mitigate the repercussion of such weakness by organizing as a network of small businesses focusing on core function while outsourcing non-core functions.\u00a0 Each business, completely dedicated to creating a product perfect for its part of the market.<\/p>\n Apple Inc. contracts out manufacturing to Chinese companies while keeping the R&D and innovation\u2014its core function\u2014in the U.S.\u00a0<\/strong><\/p>\n Successful companies in this day and age of Unscale are the ones that make every customer feel like a market of one.\u00a0 A corporation\u2014a compendium of products\u2014can match this by initially understanding its customer, then bundling its products as per each customer\u2019s needs.<\/p>\n A great example is The Honest Co., which in 2012, began selling specialized line of diapers and wipes by subscription. \u00a0First year, the company raked in $10 million in revenue by supplying a niche customer, a niche product, dissimilar to mass-market brands. \u00a0By 2016 it was making sales exceeding $300 million.<\/p>\n Interested in learning more about the 3 tactics for leveraging Economies of Unscale<\/a> and how corporations have, in their own way, taken advantage?\u00a0 You\u00a0can download\u00a0an editable PowerPoint on Economies of Unscale<\/strong> here\u00a0<\/a>on the\u00a0Flevy documents marketplace<\/a>.<\/p>\n You can download in-depth presentations on this and hundreds of similar business frameworks from the\u00a0FlevyPro Library<\/a>.\u00a0\u00a0FlevyPro<\/a>\u00a0is trusted and utilized by 1000s of management consultants and corporate executives.\u00a0 Here\u2019s what some have to say:<\/p>\n \u201cMy FlevyPro subscription provides me with the most popular frameworks and decks in demand in today\u2019s market.\u00a0 They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions.\u00a0 I strongly recommend FlevyPro to any consultant serious about success.\u201d<\/p>\n \u2013 Bill Branson, Founder at Strategic Business Architects<\/p><\/blockquote>\n \u201cAs a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power.\u00a0 For us, it is an invaluable resource to increase our impact and value.\u201d<\/p>\n \u2013 David Coloma, Consulting Area Manager at Cynertia Consulting<\/p><\/blockquote>\n \u201cFlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over!\u00a0 The quality of the decks available allows me to punch way above my weight \u2013 it\u2019s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.\u201d<\/p>\n \u2013 Roderick Cameron, Founding Partner at SGFE Ltd<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":" Futuristic, technology-driven business models are weakening the conventional advantages of Economies of Scale.\u00a0 Large corporations, founded on Scale, nevertheless have areas that they can exploit if they reposition rapidly. For the best part of over a century, Economies of Scale\u2014Cost Advantages that businesses achieve owing to their scale of operation\u2014fashioned the corporation into a perfect… Economies of Unscale<\/span><\/a><\/p>\n","protected":false},"author":110,"featured_media":9069,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[82,81],"tags":[122,1683,2500,2496,2495,2498,2485,2499,2488,2497,2494],"class_list":["post-9062","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-operations","category-strategy","tag-competitive-advantage","tag-customer-centric-design","tag-dynamic-rebundling","tag-economies-of-scale","tag-economies-of-unscale","tag-platform","tag-platform-scaling-strategy","tag-platform-transformation","tag-product-to-platform-transformation","tag-scale","tag-unscale"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/9062","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/110"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=9062"}],"version-history":[{"count":7,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/9062\/revisions"}],"predecessor-version":[{"id":9071,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/9062\/revisions\/9071"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/9069"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=9062"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=9062"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=9062"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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<\/a><\/p>\nProduct to Platform Transformation<\/strong><\/h2>\n
Absolute Product Focus <\/strong><\/h2>\n
Dynamic Rebundling <\/strong><\/h2>\n
Do You Find Value in This Framework?<\/h2>\n