Can Mid-Life Companies Scale?
Scale multiplies Enterprise Value at 6x Optimization of the Core Business (Source: Baine & Co. Analysis of 1026 companies). This is because:
- Scale accelerates profitability.
- Scale generates its own capital for investment in sustaining the scaling process.
- Scale re-shapes the s-curve.
- Scale energizes survival.
- Scale leads to category leadership. Category leaders capture 76% of category capitalized value. (Source: Play Bigger, LLC)
Can any company scale?
Unfortunately, not every company can scale. Scaling is a leadership intensive process…and not all companies have leaders with the right combination of vision, tenacity, discipline, and commitment.
In addition to having leaders that are built for scale, a company must have direct knowledge of the customer, operate with a business design that ensures category ownership and ultimately build the business platform into an ecosystem. Depending on the company’s business model the chances of achieving scale vary. The least scaleable business model is that of the Supplier. Suppliers don’t have direct access to a scalable community and are constrained by their position as a supply chain participant.
Omnichannel and Modular businesses can achieve scale – but are limited by their ability to manage their value chain (think Hilton vs Airbnb for Omnichannel), or grow beyond use-case loyalty (for example, Vimeo vs YouTube for Modular Producer).
The most scalable business model is the ecosystem, which is built on the platform business model. In many cases, Omnichannel and Modular Producers that evolve their business models to become the authority around which a category is created can build an ecosystem. Coachleads is an example of an omnichannel business that is building an ecosystem. The founders went from being health coaches to training health coaches to helping health coaches market themselves – and are headed towards being the Health Coach Catagory authority out of which they can build an ecosystem.
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