Do economies of scale still apply?
In the old days, if you wanted to develop a product vision and bring a proposition to market, you’d have to go through a lot of trouble and spend a lot of money to create a prototype, look for customers ready to sacrifice some of their time to give you feedback, etc. Typically, for a product to get to testing stage required burning up at least € 100.000 in development costs. No more. Now you can test your concept for free.
There are sites (like this one , or this other one), that can help you test your website with customers for free. Need customers, or professionals, ready to take a look at your concept? They’re on sites like dribbble.com and conceptfeedback.com. Even better, if you want strategic feedback for your pitch early on, drop by at one of the strategy roundtables of Sramana Mitra (who by the way runs a wonderful initiative that wants to help 1 million entrepreneurs reach 1 million dollars each in annual revenue).
Need communications? Want to market your product? Just take a peek in one of several startup toolkits. Want to publish apps for all major mobile platforms? Just click here.
Taken together, all these services dramatically lower the cost of setting up shop for a new business, a new product, a new concept. Of course, the failure rate of new products and services is still high, so dirt-cheap development will not mean every crazy idea will end up changing the world. Still, going bust has never been so affordable.
What does this mean? Must we discard conventional wisdom about product development processes, lower the threshold for ideas to get to market? Many startups have already answered yes. Established businesses however, likely want more control over the NPD process before launch, and tend to worry about their reputation when a product introduction fails ostensibly, so they might still take a more cautious approach. This means they forgo transactional learning, possibly denying viable opportunities their chance to contribute to the bottom line.
So this trend, too, looks likely to favour startups versus mature businesses, entrepreneurs versus corporate giants. In my post on the music industry, I wondered whether other sectors too were in a process of atomization where large conglomerates have an ever shrinking operating margin, payroll and market share and small and ultra small firms are the new norm.
In effect, as soon as all services a business needs can be outsourced cheaply and reliably, economies of scale no longer apply. Will the long tail of propositions morph into a long tail of businesses?