You now have a product that’s sticky. You’ve got virality that’s multiplying the effectiveness of your marketing efforts. And you have revenues coming in to fuel those user and customer acquisition efforts.
The final stage for startups is scale, which represents not only a wider audience, but also entry into new markets, a modicum of predictability and sustainability, and deals with new partners. Your startup is becoming part of a broader ecosystem, in which you’re a known and active participant. If the Revenue Stage was about proving a business, the Scale Stage is about proving a market.
Harvard professor Michael Porter describes a variety of generic strategies by which companies compete. Firms can focus on a niche market (a segmentation strategy); they can focus on being efficient (a cost strategy); or they can try and be unique (a differentiation strategy.) A local, gluten-free coffee shop focuses on a specific customer niche; Costco focuses on efficiency and low costs; and Apple focuses on branded design and uniqueness. Some companies have different focuses for supply and demand—Amazon, for example, is ruthlessly efficient on back-end infrastructure from suppliers, and brand-heavy on differentiating for demand.
Porter observed that firms with a large market share (Apple, Costco, Amazon) were often profitable, but so were those with a small market share (the coffee shop). The problem was companies that were neither small ...