Scale Up or Niche Down
Pick an end of the barbell; the internet destroys whatever sits in the middle
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 88%
The internet lets anyone in the world reach the best provider for free, which concentrates traffic on the global leader and simultaneously makes tiny deep niches viable. What it destroys is the middle. Brooks ran the niche play: in 2002 it was everything to everyone, doing about $60 million in revenue and losing roughly $5 million a year. Jim Weber declared it a running company for performance runners, killed entire product lines, blew up the big-box distribution channel and cut revenue to around $30 million, then reinvested in R&D and brand. Twenty years later it does close to $1.2 billion. The New York Times ran the opposite play, absorbing enormous fixed costs to be one of a few trusted global brands while mid-sized newspapers went bankrupt. The choice is structural, not stylistic: the two ends demand incompatible cost structures, which is exactly why the middle cannot survive.
Origin
Extracted from Acquired, drawing on their Brooks Running and New York Times episodes and their own experience building a deep-niche media business.
Core principles
- 01The internet punishes the middle: undifferentiated mid-scale players lose to both ends.
- 02Global scale wins when you can carry the fixed costs of being genuinely best in the world.
- 03A deep niche wins when you keep your cost structure low and aggregate everyone in the world who cares about your specific thing.
- 04Niching down almost always means deliberately shrinking revenue before it grows.
- 05The two ends require opposite cost structures, so you cannot hedge between them.
- 06This squeeze started in media but is spreading to capital, education and everything else.
How to run it
- 1
Locate yourself on the barbell
Determine whether you are currently a global leader, a deep niche, or in the middle. Being everything to everyone, as Brooks was with barbecue shoes and apparel for every sport, is the middle.
Pro tip If you cannot name the specific person who chooses you over both extremes, you are in the middle.
- 2
Choose an end and be honest about which you can win
Scaling up requires believing you can operate at global scale and carry the fixed costs. Brooks concluded plainly that they were not going to beat Nike at the everything game, so they had to niche down and play a different game.
Watch out Choosing scale-up without the capital to fund best-in-the-world fixed costs leaves you back in the middle with a worse cost base.
- 3
Cut everything that does not serve the chosen end
For the niche path this is brutal and immediate: Brooks slashed entire product lines, dropped unprofitable categories and blew up its big-box distribution channel to serve performance runners only.
Pro tip Do the cuts in one move so the organisation understands the new identity.
Watch out Expect revenue to halve. Brooks fell from about $60 million to roughly $30 million before it grew.
- 4
Reinvest the freed resources into depth
Focus only pays if the savings go back into the chosen end: R&D and brand with runners for Brooks, the most and best reporters plus massive technology investment for the New York Times.
Watch out Cutting without reinvesting produces a smaller version of the same undifferentiated business.
- 5
Be repeatedly loud and specific
Aggregation depends on the people who care about your niche being able to find you. Say the same specific value proposition over and over until the audience assembles.
Pro tip Keep your cost structure low enough that you can survive the years this takes.
- 6
Give it years, not quarters
Both ends compound slowly at first. Brooks grew slowly for years before the strategy paid off, and Acquired took seven years to reach a quarter of a million subscribers.
Pro tip Judge the strategy on trajectory and depth of engagement, not on the first year's revenue.
Watch out Abandoning the position halfway returns you to the middle having already paid the cost of leaving it.
In the wild
In 2002 Brooks made everything from family-barbecue shoes to apparel for every sport, was doing about $60 million in revenue and losing around $5 million a year. Jim Weber decided it would be a running company for performance runners, cut entire product lines, dropped big-box distributors, and let revenue fall to roughly $30 million. The freed resources went into R&D and brand with serious runners. Growth was slow at first and then compounded: Brooks has grown 30-40% a year for around two decades and now does close to $1.2 billion.
→ A loss-making generalist became one of the top performance running brands in the world.
While mid-sized American newspapers went bankrupt under internet disruption, the New York Times grew larger and healthier by aiming to be the one national and one of a few trusted global brands. That meant absorbing enormous fixed costs: hiring the best and the most reporters, and building out such large technology investments that the hosts describe it as genuinely a technology company. It only works if you truly reach global scale to justify those costs.
→ The global end of the barbell captured the traffic that the middle lost.
Common mistakes
Hedging between both ends
Scale and niche demand opposite cost structures. Trying to keep a foot in each is the definition of being caught in the middle.
Refusing the revenue drop
Niching down means cutting profitable-looking lines and channels. Teams that flinch at halving revenue never actually leave the middle.
Expecting the niche to pay off quickly
Aggregating everyone in the world who cares about a specific thing takes years of repeated, specific messaging before the compounding shows.
Is it for you?
Best for
Companies stuck in the undifferentiated middle of a market being reshaped by internet distribution.
Not ideal for
Businesses protected by genuine local or regulatory moats where global access does not apply.
From the transcript
“so this one is scale up or niche down and i want to start first by talking about niching down”
“we are not going to beat nike at the everything game so we have to niche down and play a different game”
“sure you can niche down sure you can scale up but you really don't want to get caught in the middle”
From the episode
The Playbook: Lessons from 200+ Company Stories