What business is your company really in? Most firms actually engage in 3 businesses:
- Attracting customers
- Developing products and/or services
- Managing operations infrastructure
Through integrated, these three businesses also conflict. In attracting customers, profitability depends on scope – extending relationships and generating enough revenue from them to cover your customer-acquisition investment. But speed to market – not scope – drives successful product innovation. And you need economies of scale to fund the high fixed costs of capital-intensive infrastructure.
Companies can’t optimize scope, speed, and scale simultaneously, so they make trade-offs.