Focus and Scale on the Internet

Transmission Control Protocol

Internet focus

The next wave of online business models must focus narrowly, rather than blindly pursuing scale.

An excerpt from an interesting article at Business+Strategy by Tim Laseter.

During the early days of the Internet, popular wisdom highlighted the power of the new virtual business model that could reach a mass market without the bricks-and-mortar constraints of the “old economy.” Venture capitalists threw money at the lucky startups and encouraged them to get big fast before competitors could gain a foothold. Operating strategies were all about “scalability.” Although that model worked fine for a few companies, like Amazon and eBay, it proved a dead end for most. Today a simplistic approach built around mass markets and scalability is a near-certain recipe for failure.

That’s not to say that we won’t continue to be amazed by growth phenomena — like Facebook and Google — that expand quickly by creating fundamentally new business models. But most Internet businesses are simply offering a new twist on an old business idea and, accordingly, seek to displace existing companies. No longer expecting every new idea to transform the old economy, entrepreneurs (and even venture capitalists) are beginning to realize that scale is the result — not the cause — of business success.

A careful look at some past successes and failures as well as a few emerging Internet stars reveals that a clear focus on distinct capabilities has led to success. And, perhaps surprisingly, the old model of mass-market scalability is being turned on its head by a new local focus. Instead of using the virtual nature of the Internet to reach a geographically unconstrained mass market, new companies are building distinct capabilities at a local level to attract loyal customers. Those capabilities — not scale — provide the barriers to entry that allow these companies to outperform their competitors. Much as in the old economy, leading Internet businesses are gaining scale by replicating their success rather than pursuing scale as the key to success.

Many of the recent success stories of the Internet demonstrate the value of focus over scale. Two of the best examples are Inc. and Quidsi Inc., both high-profile acquisitions by Amazon over the last two years. In 2009, Amazon closed a $1.2 billion acquisition of Zappos, its biggest deal ever. Zappos, founded in 1999, focuses on shoes, a tough category to sell on the Internet because customers want to try shoes on to ensure proper fit, and they often return them. So Zappos focused not only on shoes, but more importantly on building a set of capabilities to attract and retain loyal customers.

Focus on Local Capabilities

The latest trend on the Internet takes to the extreme a focus on capabilities rather than scale. Instead of seeking to serve the mass market from a virtual node on the Internet, independent of geography, companies are starting to leverage the Internet at a local level, turning the scale-based model on its head — and perhaps putting the final nail in the coffin of the original Internet model.

The clearest example of turning the old model on its head can be found in the grocery industry and the infamous “last mile” terrain that Webvan sought to tackle with the “get big fast” model of scalability and a mass-market focus. Unlike Webvan — or even the largely successful FreshDirect — Retail Relay Inc. seeks to minimize capital investment and avoid the pursuit of scale economies and mass-market consumers by building uniquely local capabilities. Instead of targeting major metropolitan markets, Relay scales its operations to smaller cities and towns. It can afford to serve these less-dense populations by offering a mix of pickup locations throughout the area rather than seeking to serve all customers through a home delivery model.

Execution Matters

Focusing on developing loyal customers and unique, local capabilities does not guarantee success on the Internet. Companies must inevitably fend off the competition by executing their strategies well.  The mass market can be quite fickle.

A constant reminder: competitive advantage can be fleeting and scale isn’t everything.

For most aspiring Internet entrepreneurs in today’s online environment, the most likely paths to success will start with focus, build on success, and then — and only then — lead to scale.

Full article @

About Georges Abi-Aad

CEO, electronic engineer with MBA in marketing. Multicultural; French citizen born in Lebanon working in the Middle East and fluent in French, English and Arabic. I have more than 30 years of proven experience in the Middle East with European know how. I am good in reorganization and in Global strategic management business. I am a dependable leader with an open approach in working with people, forging a strong team of professionals dedicated to the Company and its clientele. Perseverance is my key word. Married to Carole and having 2 children: Joy-Joelle and Antoine (Joyante!).
This entry was posted in eBusiness, strategic management, Tutoring and tagged , , . Bookmark the permalink.

15 Responses to Focus and Scale on the Internet

  1. Pingback: Focus and Scale on the Internet | Joyante's Blog |

  2. Very interesting information!Perfect just what I was searching for!

  3. Pingback: GD 438 – E-Commerce & Marketing : Week 1 – Case Study « Jerin P.

  4. Kaye Allvin says:

    Wohh just what I was looking for, regards for putting up. “The only way of knowing a person is to love them without hope.” by Walter Benjamin.

  5. As I website possessor I think the subject material here is very wonderful, regards for your efforts.

  6. Lyle Lanes says:

    Wow! This could be one particular of the most useful blogs We’ve ever arrive across on this subject. Basically Wonderful. I am also a specialist in this topic so I can understand your effort.

  7. I genuinely enjoy studying on this web site , it holds good posts .

  8. That is very fascinating, You’re an excessively professional blogger. I’ve joined your rss feed and look forward to in the hunt for extra of your excellent post. Also, I have shared your website in my social networks!

  9. I like what you guys are up also. Such clever work and reporting! Carry on the excellent works guys I have incorporated you guys to my blogroll. I think it’ll improve the value of my web site :).

  10. Woah! I’m really loving the template/theme of this website. It’s simple, yet effective. A lot of times it’s very hard to get that “perfect balance” between superb usability and visual appearance. I must say you’ve done a awesome job with this. Additionally, the blog loads super fast for me on Safari. Superb Blog!

  11. This is really interesting, You are an overly professional blogger. I have joined your feed and sit up for seeking more of your great post. Additionally, I have shared your site in my social networks!

  12. Your Internet site is very valuable. Thank the author so much for keeping a collection of Excellent content.

  13. Andreas Ice says:

    This is the right blog for anyone who wants to find out about this topic. You realize so much its almost hard to argue with you (not that I actually would want…HaHa). You definitely put a new spin on a topic thats been written about for years. Great stuff, just great!

  14. Wow ! Terrible job! i would like to read your post ofttimes.Its make me to dig more information. Thank You !

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s