For the sports equipment retailer Fodgdog Sports, one of Draper Fisher Jurvetson's portfolio companies, quickly aggregating a fragmented supplier group provided a barrier to new entrants. And for the free Internet service providers, reaching a critical mass of subscribers quickly was vital to creating competitive barriers around low costs. How companies achieve scale also determines the sustainability of the business model. For example, America Online achieved scale and built subscriber switching barriers by investing significant capital into a proprietary network. The growth of the Internet, however, gave rise to new entrants that could piggyback on its lower-cost infrastructure for a much lower, more sustainable cost structure.
Speed is another vital dimension of achieving scale.
In the physical world, many franchises fall victim to this challenge. For example, the Jamba Juice franchise, born and rolled out in California, was quickly duplicated by a competitor on the East Coast. Jamba Juice could not achieve scale in enough markets to keep out potential competitors. While the Internet renders such geographical challenges irrelevant, many Web business models have not learned that lesson. Many ISPs began regionally only to lose out later or get absorbed by national brands.