Transcript:

Entrepreneurship Scale

If you're trying to grow a business, you've got to think about scale. I'm Jim Metzner and this is the Pulse of the Planet.

Junkunc: Once you're up and running as a business, you're going to find competition. Without scale, you often don't have the economics to sustain the business in a competitive environment.

Marc Junkunc is an Assistant Professor of Management in the Pamplin College of Business at Virginia Tech.

Junkunc: By scale, we mean being able to grow the business and replicate what you're doing to reach a larger number of customers. What that does is it often lowers your production costs, it allows you to penetrate distribution channels that might not be available to you at a smaller scale.
There's a whole other aspect of scaling today that's even more important, and that is, when you're in a business that depends on a network. "The network effect" means that the more people that are involved in that network, the more valuable that business is. If your industry or products and services depend on a network effect, then you might find yourself in a market that's characterized as "winner take all".

Facebook was not the first social media company. There was a company way before Facebook called Six Degrees, based on the idea of six degrees of separation. There was another social media platform after that, that was doing pretty well called Friendster, which was based on a social network of friends. There was another one, after that, which is more well known, which was Myspace. Because of the network effect, Facebook, once they were able to achieve enough scale in their network, it became very difficult for competitors to come in and unseat Facebook as a leading social media network, because they never reached the kind of scale needed to really take advantage of the network effect, which is so valuable in many businesses today.

We'll hear more about entrepreneurship in future programs. I'm Jim Metzner and this is the Pulse of the Planet.