The Triple Chasm Model - challenging 50 years of Orthodoxy
Much of the thinking about scaling businesses over the last 50 years has been based on studying a small number of successful (mainly North American) companies, operating in stable markets, with well-established supply chains. While insights from this approach have been useful in the past, they are much less useful now: for most SMEs, the reality is characterised by high failure rates (over 90% fail in the first three years of operation), volatile markets, rapid distortions created by new technologies and dramatically changing market conditions.
The data-driven Triple Chasm Model challenges this orthodoxy in three important ways:
By Re-framing the Approach: The SME growth challenge, especially in technology-enabled companies, is framed by the ability to attract and secure Financial Capital, so that virtually everything is seen thorough this lens. This ideological driver influences most things, including shareholder value, return on capital, and operational efficiency, with sustainability or environmental considerations either ignored or treated as a bolt-on. This mindset is so embedded that we often see research and government reports representing the vibrancy & success of start-up ecosystems purely by the amount of venture capital raised-there is little to no analysis of the actual impact or value these companies are creating. While a number of alternative models have been proposed, ranging from impact investing to the more radical ‘Doughnut Economics’(1) approach, what is missing is an approach that allows the ideological bias to be explicitly articulated and re-shaped. The Triple Chasm Model approach is based on 12 meso-economic vectors identified from our detailed study of more than 3,000 companies globally. Based on real world data, our model removes ideological bias and allows us to define the relative importance of financial, social, and environmental drivers.
By Providing a Multi-Faceted Perspective: Most strategic approaches to understanding growth companies view things through a single lens, based on the primacy of either the market (for example, Porter’s work(2), core competences (for example, the work of Prahalad & Hamel(3) or resource constraints (for example, Burgelman’s work(4). While these approaches have been useful for relatively stable environments, where it is possible to look at these different aspects in isolation, most SMEs need a multi-faceted view, where they can understand the relative importance of all 12 meso-economic vectors. For example, SMEs need to understand the trade-offs between market spaces, technologies, intellectual property, customers, distribution channels, human capital and financial capital.
By Adopting a Dynamic Approach: Much of the orthodox thinking is based on ‘static’ equilibrium economics, with small incremental changes to accommodate the idea of growth. Unfortunately, this is not very helpful for SME’s on their growth journey. Our data driven approach is based on an inherently dynamic view based on an explicit understanding of maturity, which explains how the relative importance of the 12 meso-economic vectors changes as the company grows. The approach to maturity-mapping depends on integrating two key components: The Triple Chasm Model which shows how product growth can be defined by diffusion theory with three discontinuities, and modified technology readiness levels (effectively commercialisation readiness levels).
The Triple Chasm approach provides an integrated data-driven approach to SME growth(5,6) with significant implications for SMEs, investors, intervention agencies and policy makers.
The Triple Chasm Model provides the only systematic, integrated and dynamic approach for SMEs who want to understand and actively shape their commercialisation strategy and execution plan.
Raworth, K. (2017), Doughnut Economics, Random House, New York
Porter, M. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York
Prahalad, C.K. & Hamel, G (1990), The Core Competences of the Corporation, HBR, 68(3), 79-91
Burgelman, R. and Grove, A. (2012), Strategy Dynamics: Three Key Themes, Stanford Research Paper No 2096
Phadke, U.P & Vyakarnam, S. (2017), Camels, Tigers & Unicorns, WSP, UK
Phadke, U.P & Vyakarnam, S. (2018), The Scale-up Manual, WSP