Innovation Strategist & 2x Entrepreneur

Scaling is a Race

The company which grows the biggest, the fastest, will win.

<tl;dr>
Scaling is a race. Market opportunities don’t stay open for long. As soon as one company spots a lucrative opportunity, and demonstrates early success, others will follow in hot pursuit. It’s a race, and the winner will find themselves atop the ultimate league table of entrepreneurship: market share.

 

The First Across the Battlefield

Creating companies, let alone opening new markets, is risky business. The business battlefield is littered by lone soldiers who venture into no-mans land to change the way things are done. Occasionally, a skillful and brave soul crosses the field of land-mines, and makes it to the other side – rarely unscathed, but alive nonetheless.

For the rest, watching from the cover of their bunker, a path across that treacherous terrain has now been carved. Of the thousands of possible crossings, one has been found that does not result in a tragic end.

And that is enough.

In that very moment, several aspiring challengers spring from their safety to follow. The path has been trodden once before them. And so they set afoot, in hot pursuit, chasing down the leader. They can move more quickly, less tentative about where to place each foot. They simply follow the path of the successful first-mover.

The Race is Going on All Around Us

Do you remember SugarSync? They are a cloud-based file storage system, just like Dropbox. Except, they were founded in 2004, 3 years before Dropbox was. When I first started using SugarSync in 2008, Dropbox was a seedling company with a vastly inferior product, and SugarSync had a big lead on them. When working in teams, SugarSync offered much better collaboration and permission controls, and their killer feature was the ability to select and sync any folder on your computer. Dropbox had neither of those capabilities. Today, SugarSync is nowhere to be seen. Two upstarts have outpaced them: Dropbox and Box, both founded after SugarSync.

Take a look at this image of Steve Jobs on stage talking about the market shares of mobile operating systems. RIM is there. Android is not. How things can change in a few short years.

MarketShare

There are fresh races going on right now. Consider Uber vs Hailo vs Lyft vs GetTaxi in the race for car-hailing mindshare. Uber is crushing Hailo in the US. Hailo had it’s early luck in the London market by making it significantly easier for Londoners to hail a black taxi cab. In the US, Uber started with private black cars; a more premium offering. Hailo entered the NYC market about 18 months ago to bring their model trans-atlantic. In response, Uber made it possible to hail a yellow cab, straight from the Uber app, for free. With Uber, you pay the cab-driver directly and there are no fees. This is a genius competitive move that completely undercuts the Hailo model. Hailo has no other way to make money, other than via cab-fare transaction fees. Uber now represents a single point for consumers to get any car they need. There’s only one app to open; and it’s Uber’s. A simple adjustment to Uber’s business model is making it essentially impossible for Hailo to compete. Even still, the race continues. Lyft and now GetTaxi are moving in on Uber’s territory. Just because you’ve won a qualifying heat, doesn’t mean you’ve won the medal.

Secondly, Makespace vs urBin vs Boxbee are in a race to disrupt the storage market with convenient mini-storage offerings. The mini-storage race is just starting. Each of these companies has been launched in the past 12 months and are establishing themselves in geographic regions before the game goes national. Whichever company perfects its model first, will be the first to attract growth capital from the investment community. That will supercharge their ability to enter new markets. Each new market will fuel the company with cash flows and a growing customer base.

The Race is Won with Market Share

When several players graduate out of the startup phase and begin to pursue growth while chasing the same market opportunity, the race is on.

The race to scale is won with market share — the ultimate validation for a company. You don’t win by being features on the Inc.500 list, or on Forbes Magazine’s “hot companies to watch” list. The indisputable league table of entrepreneurship is market share. It is won by whichever company can grow the biggest, the fastest.

Whether market share measured in terms of revenue, profit, or customers – it doesn’t change the fact that there is still only one leader. The leader has demonstrated it can create the most value for customers, the highest return for investors, the best career path for employees, and the most interesting strategic prospects for partners. They become the number one choice, and wield incredible influence. These are the spoils of market leadership.

This is not a principle contained exclusively to the tech industry. Uber and Makespace are arguably not tech companies, but logistics companies competing in large, old industries. We can just see it playing out with tech/tech-enabled companies in fast forward. These rules apply to every company.

Whoever can get the biggest, the fastest, will win.

The Million Dollar Question

Market share is equivalent to winning the competitive race. The million dollar question is “what makes a company fast?” It’s the subject for another post!

 

Let me know your thoughts. Leave a comment or connect with me on Twitter

 

 

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Kosta Stavreas

Innovation Strategist & 2x Entrepreneur