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How Scalable Is Your Business Model?

Is your company more like a job shop or a production facility? Both business models can make sense, but it’s important to know where you sit on the scalability continuum. There’s one question you can ask that will reveal how scalable your company is: What percentage of future customers will buy the same product or service you’re delivering today?

If the answer is ‘More than 80 percent,’ then you are solidly on the production-facility end of the continuum; meaning, you can deliver the same product or service over and over again without the need for much, if any, modification. Your operations can focus on improving your core offering, with each enhancement benefiting most or all customers.

As we all know, the prime example of a production facility is a software company. John Boyd, Founder of startup company TrackingFirst, said it best. “I love software because you can build one product and sell it to a lot of different customers.” Boyd’s company has made good on that strategy so far, selling its digital marketing campaign tracking tool to 10 digital marketing teams in different Fortune 500 companies — without making a single change to the software product itself.

On the other hand, if your answer to the question is, ‘less than 20 percent,’ then your company is without a doubt on the job-shop end of the spectrum. This means that a majority of your customers require a highly customized or personalized product or service. But, you already knew this, based on the amount of unique customization required with each customer engagement.

One good example of a job shop operation is the custom tailor who makes each item of clothing to the size and specifications of only one individual customer. This is known as bespoke tailoring. Senszio CEO Mark Motwani sums it up this way: “We love traveling the world and spending an hour with each customer; allowing them to choose from 4,000 fabrics, and then delivering a perfectly-fitting suit six to eight weeks later.” Motwani and his team come to the United States five times per year to provide this level of service, and the strategy has succeeded to the tune of 2,500 suits and 5,000 shirts.

Caution: Do not mix up these strategies

Imagine if Boyd tried to apply Motwani’s approach, or vice versa. TrackingFirst’s customers wouldn’t pay a custom-built software price, and Senszio’s customers don’t want the fit and style (or lack thereof) that come with off-the-rack clothes.

Savvy entrepreneurs are constantly seeking to increase alignment between their business strategy and their target customers’ desired outcomes. Understanding the impact of the production facility versus job shop continuum is a critical part of this strategic alignment.

Which approach is best?

Many entrepreneurs think the production-facility strategy is the only way to go. Just ask John Boyd. But a mass migration by businesses toward scalability, at the expense of the singular customer experience, can open up a competitive advantage in any industry for the job-shop entrepreneur. Just ask Mark Motwani’s well-dressed customers.

This article was written by Larry Myler from Forbes and was legally licensed through the NewsCred publisher network.

The views of the author of this article do not necessarily represent the views of First Republic Bank.  

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