Compilers:

Anubhav Kataruka
Shubham Agarwal
Strategy Chronicles
Building Scalable Business Models
Issue: MIT Sloan Management Review (Winter 2018)
Building Scalable Business Models Strategy Chronicles
Issue: MIT Sloan Management Review (Winter 2018)
Successful companies of the day are able to leverage business model scalability to achieve profitable growth. Businesses need to factor scalability
attributes into their business model designs or they risk being left behind.

Sweet Spot
1) Business Model Innovation Business Model Scalability 2) Traditional View
How business models How business models Scalability goes beyond Economies of Scale Economies of Scope
Create, deliver and these two traditional
Achieve
capture value aspects and involves Firms benefit from lower Firms benefit from lower
profitable growth
identifying accelerating average cost because average costs because
returns to scale in
OR
Alignment between Alignment between costs decrease as the costs are spread over a
Value propositions & Value propositions & order to reach the sweet amount produced variety of products.
Customer needs Strategic partners spot. increases.

Returns to Scale

Diminishing Returns to scale Stagnant Returns to Scale Accelerating Returns to Scale

Figure out quickly on how to exit When returns are flat, figure out ways New resources, capabilities, or value
or downsize the business quickly.
to increase returns or invest propositions provide new properties
elsewhere. to an existing industry.

Value Cannibalization Average Business Models Exemplar:

When returns to additional investments When returns are linear, it makes further Algorithms introduce customers to
.
exhibit diminishing returns to scale, investments unattractive. This might be a products they may not have considered
overall business value gets cannibalized. marker of average business models. but might be of interest to them
Building Scalable Business Models Strategy Chronicles
Issue: MIT Sloan Management Review (Winter 2018)
Business Scalability Patterns Roadmap to Business Model Scalability
Add New Distribution Channels Case Solution
Identify Potential Strategic Partners
Fresh Fish Supplier Added direct to consumer
If sales in existing channels not cannibalized – Add Are there potential strategic partners?
for high-end retail channel, accessed new
new sales channel to spread the costs of • To perform activities in your model
restaurants clientele wanting high-quality
overhead and reap benefits from increased sales • To provide resources to it
seafood at home

Explore workarounds to capacity constraints Case Solution

Reveal roadmap to Scalability
Identify traditional capacity constraints of the Consulting Co. - Market standard outputs and Analyze the required reconfiguration of
business model and analyze if there are ways hourly billing for simple reports to new segment business model and the road map
around it large clients of small businesses • Evaluate & imbibe competitor attributes
Shift Capital Requirements to Partners Case Solution • Change the role of existing stakeholders
• Create customer lock-in mechanism
Cashflow and investment optimization are of high Drone developer Allowed customers and • Enable agility to threats and changes
priority, hence models that shift capital and manufacturer strategic partners to access
requirements to strategic partners can be for industrial development and add own Analyze scalability attributes of options
desirable. settings hardware & software Post Idea generation, evaluate potential
Leverage the work of partners Case Solution business models.
• Take strategy decisions as per attributes
Tupperware - Leverages a community • Accelerate returns on investments.
Identify what customers and partners value and
Supplier of interested in selling its products
use this to optimize value offerings by smartly
food storage for direct and widened
leveraging strategic partner resources. Key Learnings
products customer access

Implement Platform Models Case Solution While innovation allows businesses to create, deliver and capture value,
scalability is essential to achieve profitable growth. It is thus important
Platform models involve collaboration and Provider of Allows software platform for managers to identify and include scalability attributes in business models.
mobilization of existing capability for additional professional net- access to competitors on a The 5 patterns can be used for structured ideation. The roadmap to
benefits. Identify ways to turn competitors into working groups private label for an additional scalability highlights the key aspects to consider at each stage of the
partners or even customers. for managers and recurring revenue stream configuration process.