When scale becomes the center of our conversations

For ecosystem builders, the issue of scale often creeps into conversations. Whether we are in the early design stages or in the midst of building, piloting new ways for getting different (at times, very different) role players to work together, at other times later in the cycle, where we might consider a change in ownership, acquiring organisations or bringing new investors on-board. At each one of these instances, the word scale is part of the conversation.

Yet scaling is more than simply replicating an existing growth initiative or even a successful collaboration with others. It is an opportunity to?pose new questions and challenge ourselves, to grow differently from here onwards. How far could this ecosystem grow? Who would bring leverage and scale to our building efforts, and what could stand in the way of truly realising its potential? It seems the pressure to scale has never been stronger.

To understand why, we need to appreciate the context in which scaling takes place. In Strategic Optionality, Professors Surja Datta of Oxford University and Tobias Kutzewski of VU (Vrije Universiteit) in Amsterdam, argue that the physical business landscape in not only changing, but transforming at pace. They point to globalisation and digitisation as the many driving forces here. Population shifts, conflicts erupting around the world, the changing shape of globalisation, have all contributed to this reality. Such changes transcend national borders and have accelerated to a point where much uncertainty faces organisations today, as they adapt and build resilience through collaborations beyond their organisation’s borders.

The result of these dual forces has not been, as many predicted, a simple directional shift from organisations operating in physical spaces, such as store fronts, logistics and even physical infrastructure, to a digital one. Certain interactions still take place distinctly in the physical world, while others, such as software-as-a-service, take place distinctly in the digital world.

What has taken place over recent decades is that the physical and the virtual has intertwined, in such a way that there is a new reality which is neither purely physical or digital. This complex system, termed a physi-digi reality, is where Prof.'s Datta and Kutzewski estimate we will spend app. 60% of our awake time.

Challengers have increasingly been aware of this widening space, between physical and digital, where new ecosystems are being build, beyond the confines of the strictly physical realm or a purely digital ecosystem, and so new businesses and collaborations can be made ready to scale, across these two spaces.

We have seen a few examples of this of late. Barnes & Noble began as a bookstore called Arthur Hinds & Company, in New York City, back in 1886. It has many firsts to its name, including the first TV advertisement in the industry. It followed, over the years, some traditional moves, from centralising Procurement and streamlining processes, to consolidating markets using M&A, and so by the 1990's, it has grown to become the largest national bookstore chain in the US, dominating the physical bookstore landscape. One could argue it capitalised on demographic shifts and early efforts at digitisation to reach this state.

This did not constrain new digital rivals from outpacing it. Amazon's focus on a fast evolving digital infrastructure enabled it to offer even lower prices, bigger discounts, and certainly a wider range of items, which could not be replicated at such scale in purely physical spaces. What has made Barnes & Noble a successful player in its physical stores, did not constrain Amazon from winning in the digital space.

However, would Amazon's rise be a one-way bet? A digital challenger outpacing a century of growth in physical store spaces? Many thought so, yet Barnes & Noble recognised that Strategic Optionality does not often sit in clearly defined spaces. Where physical and digital spaces meet can offer fertile ground for new challenger moves, making B&N a formidable rival, in the '60% space' between physical and digital.

This space required some tough questions to be answered and led to a fresh approach, where B&N experimented with smaller store formats, engaging in literacy programmes, reconnecting it with communities and indeed a national literacy drive, and empowering store more empowered to listen to their consumers and make their own decisions.

You might think that B&N may have gone back to their roots, becoming a modern version of their independent store heritage. I would like to argue otherwise. They recognised that wholly physical and wholly digital spaces have constraints and in focusing on the intersection of these, new value could be discovered, with customers and a broader set of ecosystem role players.

This is good news, as it allows us to pull both physical and digital spaces into our ecosystem efforts, and solve for issues which are bigger than ourselves, our narrow interests or competing priorities, together with other role players. Finding a challenge which many role players can resonate with is key to scaling.

What strategic challenges do you find yourself thinking of as one-way bets? Where can you recognise the '60% space' in-between physical and digital in your market space? It may lead you to new challenger moves.

Have a good week ahead.