Many small business owners think they need to scale to compete with larger companies. They imagine growing bigger, serving more customers, and automating processes will lead to success. But what if scaling your business leads you down the wrong path? What if the best path to long-term success is to focus on the things that don’t scale easily for the competition? The lack of scale advantage could cure what ails your business.

Scaling can be tempting, but it’s not the right choice for every business. By focusing on what makes your business unique and on the things that larger competitors can’t easily replicate, you can carve out a competitive advantage that shields your business from the threats of scale-obsessed competitors.

This is an excellent point that AI scholar Ethan Mollick makes in his book “The Unicorn’s Shadow: Combating the Dangerous Myths that Hold Back Startups, Founders, and Investors.”

He says that many small businesses do not need to scale into massive corporations to be considered successful. Instead, staying small can be both viable and valuable, especially when aligned with the founder’s goals and the needs of the business. He highlights that many entrepreneurs find greater satisfaction and stability in keeping their businesses small, focusing on profitability, autonomy, and quality of life.

In the book I highly recommend, he makes a strong case for small business owners to embrace models of success that best fit their unique situations rather than chasing industry norms that may not apply to them.

The myth of scale advantage

We often hear about the advantages that large businesses have because of their size—cheaper production costs, more marketing dollars, or bigger customer bases. This is what’s known as the “scale advantage.” But for small businesses, competing on size can be a losing game.

Instead, small businesses should focus on their core product or service, especially if it’s something that can’t be scaled easily by larger competitors. This is where you can create a moat around your business—a competitive advantage that keeps the big players at bay.

The Toyota example: winning without scale

Let me explain this idea by sharing a real-world example from my years as a business journalist covering the automotive industry. I was curious about how Toyota, then on its way to becoming the largest automaker in the world, seemingly missed the mark when entering the lucrative full-size truck market in the U.S. in the early 2000s. 

At the time, crew cab trucks were wildly popular, but Toyota wasn’t offering one. Many customers were frustrated, wondering why such a major automaker wasn’t competing head-on with Ford, Chevy, and Dodge in the full-size truck category. I visited a Toyota dealership to find out. The dealership’s general manager, Jerry Gray, explained, “We know the big three—Ford, Chevy, and Dodge—own the U.S. truck market, especially among customers who need a full-size truck for work. But most truck buyers don’t need the biggest engine or the highest tow rating. They buy trucks because they want a truck.”

Toyota knew they couldn’t immediately compete with the giants in the full-size truck category, he said, so they focused on what they were best at: building reliable, efficient, and constantly improving midsize trucks that appealed to different buyers. Instead of rushing to scale into an area where they weren’t ready, Toyota stuck to their strengths—and eventually, they perfected their full-size truck offering. (The Toyota Tundra DoubleCab, or crew cab, hit the market in 2004.)

How lack of scale can lead to success

This lesson applies far beyond the automotive industry. I’ve seen many small businesses succeed by focusing on areas that don’t scale easily for larger competitors. Instead of playing the same game, they’ve created their own rules.

Let’s take a look at two examples of how this strategy works:

    • Zappos: Known for its uber-personalized customer service, Zappos created a moat around its business by focusing on a service experience that would be too costly for larger companies to replicate at scale.

Both Zappos and Patagonia succeeded by focusing on what their competitors couldn’t—or wouldn’t—do. They didn’t need to scale in the traditional sense to create fiercely loyal customers and a thriving business. 

Why digital marketing agencies shouldn’t scale 

If you work in digital marketing or run an agency, you’re probably used to hearing that scaling your services is the only way to succeed. But scaling comes with risks, especially if it dilutes what makes you special.

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Let’s take SEER Interactive, a digital marketing agency, as an example. Founder Wil Reynolds built the agency’s reputation by focusing on out-caring competitors. His approach was to obsess over the needs of his clients and go the extra mile in ways that larger agencies could not match. That deep level of care and personalization couldn’t be easily scaled by competitors.

Reynolds’ strategy paid off—SEER now has offices on both coasts and does over $25 million in annual revenue.

Creating your own moat: prioritize exemplary client service over scale

If you’re a small business owner, here’s the key takeaway: Instead of chasing scale, focus on relationships. Building strong, long-term connections with your clients and would-be customers is a competitive advantage that is difficult, if not impossible, for large businesses to replicate.

Consider making client service the hallmark of your brand. Reach out regularly, build rapport, and show clients that you care about their success. When you create a business based on relationships, your clients are more likely to forgive small mistakes and stick with you in the long run.

Avoid the content hamster wheel 

Another trap small businesses fall into is thinking that they need to produce more content, more often, to compete. The truth is, producing endless content can feel like a hamster wheel—you’re running fast, but you’re not getting anywhere.

Instead of focusing on quantity, small businesses should focus on quality content that delivers real value to their target audience. When you focus on creating the best experience for your customers, you’ll be competing in a game where scale doesn’t matter as much.

Two strategies for creating high-performing content 

Here are two strategies to help small businesses produce high-impact content that stands out from the competition:

    • Focus on Content Depth: Find the top-ranking content in your industry and hire an expert to create a deeper, more insightful version. If the top piece is a checklist, consider creating an in-depth guide or a series of blog posts that offer even more value.

    • Develop Content Themes: Instead of focusing on how many blogs you’re publishing each week, develop content around specific themes that align with your brand’s strengths. This makes it easier to produce quality content that resonates with your audience.

Conclusion: use the lack of scale to your advantage

In a world where everyone is obsessed with scaling, it’s refreshing to think that small businesses can thrive by focusing on the things that don’t scale. Whether it’s personalized service, a niche offering, or a deep connection with clients, these are areas where large companies struggle to compete. By going where the competition isn’t and focusing on what you do best, you can create a defensible moat around your business—one that doesn’t rely on scale. I’ve worked with many small businesses who used the lack of scale advantage to find success; you can do the same thing.