As I have noted before that nothing is more important in a startup than having the capacity to acquire new customers, easily. A startup must grow because without growth, the alternative is bankruptcy. So, over the last few years, we have seen companies introduce new roles like Head of Growth, Growth Hacker [we used that in a Lagos client two weeks ago], and Vice President of Growth. In a network effect business, the most important product is “many users” because the more the users, the more useful the product becomes.
You need to know that in a perfect online market, the marginal cost of a digital product, under most scenarios, is zero. But markets are not perfect. And that means you must find ways to deliver great values to users even as the marginal cost tends to near zero. Why? Customers in the digital space congregate more into an ecosystem when the marginal cost is very low. When you have a low marginal cost, customer growth improves and when that happens, you would experience a positive continuum of network effect where great products trigger more customers and more customers enable building better products.
Scalable Advantage is a nexus with numbers between 0 and 1 which is used to ascertain the organic capacity to grow an enterprise, by examining the inherent elements like marginal cost and external forces, within an unconstrained and unbounded internet economy, where if nearly perfect, all transaction and distribution frictions between demand and supply disappear, producing an SA of “1”.
Today, I want to ask you: What is your scalable Advantage? Does it get towards “1” or “0”? The trajectory will determine how far that business will go. I have a simple chart to help below.