Scale doesn’t scale

Scale doesn’t scale

: Scale doesn’t scale anymore.

The old days of big players in the economy collecting consumers, audience, distribution, manufacturing efficiency, buying power, or capital in the grip of centralized control are waning. That used to be the way to find efficiency and size. That used to be the way to scale.

But they are being foiled by our new distributed world. And they are being replaced by a more efficient means of finding size and efficiency.

Aggregation is the new scale.

Read the post below about the decentralized, distributed future of job classifieds. Now consider how this same model of decentralization — of control at the fringes — can, should, and will hit other industries:

: News: As a producer, why depend on the 300 (expensive, snarky, recalcitrant) reporters you pay for when you could have 3,000 aggregated reporters to get more news less expensively than ever before.

As a consumer, why depend on one or two sources of news a day when you can aggregate the best of 200?

: Media: As a distributor, when you can no longer use your stranglehold on channels to guarantee you an audience, you will have to aggregate audiences to reach scale.

As a creator, you’re going to have to establish your own direct relationship with your audience: You have to do your own aggregating.

As a member of the audience, why adjust your schedule and taste to the distributor when you can aggregate your own entertainment from anywhere, anytime?

: Advertising: They simply won’t have the easy and inefficient option to buy network soon; they will have to aggregate niches of consumers to create a new and more efficient scale — with far better targeting, better advertising, better service, better sales.

: Retail: Why settle for the same crap that’s in every mall everywhere in the world (even on once-hip lower Broadway) when you can aggregate the unique stuff of an eBay?

And, for that matter, why bother with all those bricks when you can aggregate a more efficient customer base online? (See: Amazon.)

: Customer service: Smart technology companies have been taking advantage of the greatest gift of the distributed but connected world by turning customers into customer service representatives: I get a helluva lot better service on TreoCentral than I get from Sprint and Sprint saves the cost, real and psychic, of me sitting on hold and then yelling. It’s free money.

: Consumer products: Customized Barbies are about aggregating a customer base of one. I’ll be that car consumers will revolt against having premium packages shoved down their throats. Imagine how this could work even with Coke, which has to fight and pay for shelf space for all its many products trying to attract ever more tastes. If the let me go online and order what I want — caffeine-free C2 cola in bottles — I’d order a few cases and Coke would have a loyal customer and save shelving and even marketing costs… and also learn what consumers would want if they could control product design. Aggregate me, baby.

: Telecommunications: Dead. Next.

: Insurance: In New Jersey, folks fed up with expensive insurance created their own not-for-profit insurance companies for cars and now malpractice: They aggregated the underserved. Oh, how I would kill for that with my health insurance.

: Financial services: Will the wisdom of the crowds beat the wisdom of the brokers and analysts? Surely, yes.

: Education: How much better to be able to aggregate teaching, to select my teachers instead of having to throw my lot with one bunch or another.

: Labor: If you don’t need your employees to be in one place, on one old assembly line, how much more efficient it is to employ them wherever they are, whether that’s at home in the ‘burbs or at home in Bagalore. You aggregate the work instead of the workers.

: Politics: One-size-fits-all messages won’t work anymore as voters are able to find (or lobby for or create) a politician’s stand on any issue or any piece of legislation imaginable. Winning office will be like forming cabinets in Israel. Either the special interests that win might just be the special interests of the voters…. or politicians will be too scared to ever take a stand and only the pretty will win.

Pity every industry that has to adjust to the decentralized future. Money will be destroyed (on one side, but saved on the other) and the upheaval will make the business restructuring of the ’80s look like a garden party. But pity more the industries that are bound to atoms — airlines, home-building, shipping, and health care, say — that will have a hard time finding the efficiencies of aggregation, the new scale.

: See Fred Wilson:

You cannot collect all the pieces of a marketplace in a centralized way and control all of it. The technology won’t allow that to happen. You can’t “get to scale” that way.

You must be open to others owning pieces of the equation. You must let the users get the value of scale however the choose to create that scale. You must facilitate the creation of virtual scale.