Why we need to rethink scale
As intangible assets displace physical production, the experience curve logic that has underpinned competitive strategy since 1966 breaks down—digital businesses achieving $500M ARR with fewer than 50 employees are inverting the traditional relationship between scale and competitive advantage.
Summary
The article challenges the experience curve logic—articulated by Bruce Henderson of BCG in 1966 and foundational to the growth/share matrix and classical cost-leadership strategy—by noting that as intangible assets increasingly constitute firm value, the assumption that scale drives cost advantage weakens. Knowledge doesn't depreciate with use, software marginal costs approach zero, and AI-native firms like Cursor ($500M ARR, <50 employees) and Midjourney ($200M, ~40 people) achieve extraordinary revenue density with tiny teams. Referencing Martin Reeves (BCG Henderson Institute), the piece argues that portfolio decisions, competitive positioning, and M&A rationale built on scale economics need fundamental revisiting in asset-light, high-intangible environments.
Editor's opinion
McGrath builds a historically rich case — from Wright's 1936 cost curve through the BCG matrix — to challenge scale as a strategic axiom, arguing AI is eroding its four traditional benefits and replacing them with new moats: proprietary data, trust, and ecosystem position. Theoretically grounded and practitioner-sharp.
Key concepts
Experience curve · scale economics · intangible assets · competitive advantage · asset-light business models · revenue per employee