Scaling up a business is hard work. Most new businesses remain relatively small affairs, especially the "mom and pop" variety.
Venture capitalists and other early stage investors generally limit their investments to startups with large market opportunities. It's simply too hard to hit an investment homerun otherwise, and without a few homeruns,the venture portfolio investing model doesn't work very well.
And scale matters even more in a low inflation, low growth economic environment such as the one we are currently experiencing. With most companies having little or no pricing power, the advantage goes to the low-cost producer and that requires scale. Or, you have to develop a high-performance niche product or service which can consistently command premium prices.
Scale does not, however, mean just bulking up unless you can also achieve the unit costs and economies of scale of the best companies in your competitive space. Bulking up via acquisitions or lower prices is the easy part. Translating that size into competitve profitability is a lot harder. It requires automation, product simplification, and significant process and cultural changes to dramatically improve profitability. Few companies can make all of these changes successfully.
Where do you start?
First, carefully evaluate your strategic opportunites. If there is a Wal-Mart in your space, becoming the largest low-cost producer may not be a viable strategy. While there are only a few such giants, there are many, many successful niche businesses which thrive because their markets are too small to attract the giants and / or the owners have developed proprietary expertise which is not easily duplicated.
Second, if you conclude that a scale opportunity exists in your space, prepare yourself for a long, hard campaign. The numbers of Google-like companies which can spring seemingly from nothing to mega status overnight are tiny. A great example is Iron Mountain, the records storage company which has spent decades consolidating a "mom and pop" industry to become "the world leader in information management services."
Finally, there is a corollary to the "Great Leapfrog Theory".* The price of failure may be extinction. Does anyone remember Webvan or Altavista?
* There is no natural law which says you can't jump ahead of the guy in front of you - as long as you can make it stick. Attributed to Robert Ringer in Winning Through Intimidation. (According to one reviewer "Winning Through Not Letting Yourself GET Intimidated" might have been a more appropriate title.)