Shifting paradigms from “economies of scale” to “economies of time” can power your next business growth spurt.

Thiru Shan
7 min readAug 25, 2020

An entrepreneur-friend who runs a medium-sized business recently told me how he had typically viewed this problem from growth strategies for his business through the lens of market behaviour. Although he was successful, he felt he had lost chances because he sometimes saw only flat growth and ambiguity. “Maybe it’s because I have always leaned towards “economies of scale, he concluded ruefully.

Having worked with many SMEs (Small and Medium Enterprises) across the globe, I knew that a change in mindset would be a prerequisite for his business to experience the next spurt in growth. I also knew that such a change would be possible only when the penny dropped for him. The paradigm of “economies of scale” has many associated dimensions, and God is in the details. So I nudged him to take a deep dive by saying, “Think along three key dimensions- Delivery, Organization and Optimization”.

That got him going and he said “I focus on delivering top quality products and services. To do so, I try and capture as much value as I can in-house and avoid risks. And to minimize costs, I have always looked at maximizing volumes”, he triumphantly announced.

On a sheet of paper, I wrote the following:

I turned to him and asked “Does this sum it up”? “Yes”, he answered. I told him, “This is the essence of how many entrepreneurs think”.

“What’s wrong with this way of thinking?”, my friend asked. I took a deep breath and said “Do you and your colleagues talk about delivering superior customer experience”? “Of course, we do!” was his immediate reply. He sounded offended that I might think otherwise. “OK, so how do you actually deliver superior customer experience?”, I asked. He was silent for a while, as he thought of a suitable response.

As I waited for him to speak, I wrote the following on another sheet of paper:

Deliver Experience:

What you have been doing

I waited for a minute and then asked, “How do you know what experience your customers value”? I quickly followed that up with another question. “Do all your customers want the same elements of experience”? He looked puzzled but said “I am sure everyone wants the lowest price and quality”. I countered with “Are you sure? What if some customers are willing to pay a higher unit price for additional guarantees around reliable supplies”? He said “Yes, but we cannot give that guarantee”.

What you should do

I smiled and said, “This is one aspect of what needs to change in your way of thinking”. I continued, “Your customer’s businesses are also evolving and changing. Spend time to understand how and why and what that means for what goods and services you provide them. This will vary with each customer, so you need to know every customer very well”. I continued, “This knowledge will allow you to be close to your customer and be that subject matter expert they first seek out. Naturally, this will help you develop new products and services as well as shape your customer’s behaviour when they use your product or service. And that creates a virtuous cycle of experience-based value that can differentiate you from your competitors”, I concluded.

My friend excitedly said “That also means we can move away from low-margin products and services that are trapped within the narrow boundaries of certain value elements”. I just smiled and nodded. I knew the penny had dropped when he said, “I suppose that means a deeper dive into each customer… something beyond just asking “What’s your problem”? He was almost thinking aloud as he said “What is needed is a series of questions…. “What problems is customer X facing?”, “What’s most annoying about how customer X is going?”, “Where do you feel you need more support in solving customer X’s problems”? He looked at me like a child handed a new toy. I smiled, saying “Answers to such questions will offer deep and meaningful insights that can help you design and develop better solutions”.

Right below where I had written the dimensions of “economies of scale”, I wrote:

Dimensions of “economies of time”

Deliver -> Experience

Organization:

What you have been doing

I looked at my entrepreneur friend and asked, “If you were to ask your colleagues the question ‘How can we improve?’, what do you think they will say”? His face clouded a little. “Everyone just says ‘things are pretty good the way they are”, he said. “How do I change this?”, he questioned.

What you should do

I said “That’s where the best-owner principle kicks in”. I continued, “This essentially means that a business owners will attribute value to their business based on the strategy they are pursuing or plan to pursue”. Although the concept is more relevant in an M&A context, this line of thinking is useful to uncover strategic changes that can be made to enhance value. This means asking questions such as , “What do you think is the most overlooked area of the business?” or “Where do you think other innovators have not looked at”? Successful entrepreneurs are envisioning “innovative products” and “thinking really, really big”. They get there by “segregation of duties”, which is a simple way of saying that by assigning different tasks to different people, organizations expect to improve efficiency and reduce the risk of errors.

My friend looked confused, so I said, “As an example to make it clear, we can extend the conservation-of-value principle to say that a company should not take on a risk that will put its future cash flows in danger. This caveat should be enough to guide decision makers with an $X million upside, a –$Y million downside, and a $Z million expected value. If a $Y million loss would endanger the company as a whole, the decision makers should forgo the project. On the other hand, if the project doesn’t endanger the company, they should be willing to take calculated risk the $Y million loss for a far greater potential gain. With the best-owner responsible for driving product strategy, there might be more calculated risk in the organization- but a much greater chance of breaking through as well”.

On the sheet, I wrote:

Organization -> Best-owner principle

Optimisation:

What you have been doing

What’s optimized under “economies of time”, my friend asked. I responded with a question of my own. “What would your marketing team say if you asked them what the statement ‘Speed is money’ might mean”? He thought briefly before answering “I guess they will say it means speed and time are as valuable a resource as money”. I nodded and said “Marketing teams and tech teams often are on different pages when it comes to identifying and communicating common ground on customer data strategy, product-market fit, customer focus and data-driven decisions. Economy of scale thinking enables teams to operate within their boundaries to bring out efficiencies.

What you should do

Business leaders need to look at the construct of “value” in a new way. Internal efficiencies and cost structures will remain important, but they have to pay much more attention to the question of time by bringing the tech, marketing and operation teams together to debate, discuss and define new ways of product-market fit.

I wrote on the sheet:

Optimization -> Speed

In a nutshell

I handed the sheet back to my entrepreneur-friend, who saw this:

In a nutshell, the “economies of time” paradigm is all about creating a path through all available resources including time and vast amount of data that they can capture customer needs, a resource that has traditionally not been given the attention it deserves. Think about terms like the “connected economy” or the “convenience economy” and you will see that these are all manifestations of customers signalling a change in their expectations and behaviours. They all point to “speed” and “time”.

The pandemic has reinforced the value of flexibility and adaptability; the realization has dawned on leaders that agility in transforming is a major source of competitive advantage. This change is clearly visible across sectors. For example, in the education sector, leaders adjusted their content and scaled up delivery capabilities to address a growing segment of customers through online classes.

I hope to have clearly brought out the nature of shift that entrepreneurs and businesses need to make in their approach to conduct business and delivering value. Many of you reading this are probably wondering how to figure out if this shift is important in your business and if it is, how you go about making this change. If you can’t wait for my next article, feel free to get in touch with me.

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