“Scalability is ultimately important.”
“Products scale, services don’t.”
“Can this business scale?”
We talked about this a lot. Many of us start only businesses that can scale to huge ones. I’m also one of the people who believed this strongly.
However, I can tell you that scalability of a business is overrated. It is very important, but not more important than having a significant value to someone’s life.
Here are some of my thoughts about scalability of products/services:
Less Engagement / Artificial Engagement
Scalability requires automation. It requires machines, hardware, and software. It reduces as much human manual work as possible. If you look at businesses around us, the scalable ones are consumer packaged goods, electronics, etc. These are the products they put on the shelves of supermarket and electronics stores. There is very little engagement during our purchase process and when we are using it. It is less likely for us to develop a special connection with these products.
There is also social media, online e-commerce marketplace, and search engine. These businesses are scalable. However, I have moved from a social media to another for the past 5 years. I was hooked into one, moved to another, and hooked again. It was the artificial engagement created by Facebook, Twitter, Instagram, etc. They manufacture the features to hook their users without talking to them directly as people. We tell social media platform everything. We insert our job information, what movies we like, who our family members are, and more. Yet we won’t tell those to a complete stranger. These platforms are strangers. Btw, I tried a new search engine called duckduckgo and I can leave Google’s search engine.
Which businesses have high engagement? Awesome restaurants nearby your house whose food you can’t find elsewhere. The resort hotel in Batam that you really want to stay in that night, there aren’t many options anyway. Local businesses have high engagement, but people say it isn’t scalable. It does scale. It is more sustainable to build a locally engaged business that integrates with people’s daily lives. The only reason it doesn’t scale is when the business owners are using a lot of the money for their family’s expenses and not to grow the business. If it really doesn’t scale, just build more of these businesses. And make sure customers can’t really get anything like our products/services at our price elsewhere nearby. Differentiation, limited choice, and high engagement are keys. One more thing, perishable goods are less likely to lose a competition with scalable e-commerce and consumer packaged goods. Yes, nothing is impossible. Professional business services firm with a complete solution is less likely to lose a competition with a Software-as-a-Service from foreign countries, face-to-face talking is better than chatting.
Scalability craves for volume. It loses commitment in the process. It loses a human touch. It is easy for us to switch shampoo. It is easy for us to switch TVs, phones, etc. Apple is so successful because they create an emotional attachment between the users and the phones. It makes their products matter to people.
In order for scalable products to scale, they usually have to drop their price! It lowers the barrier for anyone to become one of their users/customers. Look at “free” social media and “free” search engine. Look at all the soap and shampoo products at low price. Look at all the electronics slashing prices.
The commitment to use or consume all these scalable products/services is so low. This makes these businesses powerful because new entrants can’t compete for their value proposition at their price. Having experiences in consumer packaged goods myself, I can see that it requires a large amount of capital for new entrants to be able to compete and eventually grow. However, this competition causes very low commitment on the customer’s side. Switching is fairly easy.
To make it blunt, which is more important to you? The 5 irreplaceable friends you are very close with, or the 1000 friends on Facebook you don’t really know?
The answer is obvious. Valuable things in our life require commitment. I have commitments for my loved ones. I believe we all have.
It’s all about building a business that matter and has significant value to someone’s life. It’s never about building a business that doesn’t matter and doesn’t have significant value to anyone’s life but hey, they use it!…for a period of time. Aaaand you are forgotten.
PS: Search engine is one of the exceptions. It scales, it gives significant value to everyone’s life. While it is very easy to switch, we know it changed our lives. Of course, there are many scalable products/services that give real value, but not all. 🙂