Is a network of niches the answer to business survival?

With the latest economic crisis, the phrase “too big to fail” has been bandied about as a mantra of justification for a businesses right to exist (or be “saved”) yet, something is starting to sound inherently wrong about “economies of scale” in today’s networked market.
If there is one thing that is clear from The Long Tail, it’s that focused, niche products and services can find their customers easier and more efficiently today than ever before. Communities can pop-up almost anywhere, where like-minded consumers can meet and discuss their passions, without any intervention or support by business (such a community has popped up on this site for fans of WMMS, a rock radio station that dominated the Cleveland market in the late 70’s).
So, as we watch big banks, big car companies, the titans of Wall Street falter, the question of what will survive isn’t as important as what is the business model of the future. I’m starting to think it’s not WalMart, Best Buy, or even Target- although Target has done a better job of finding a target to market to.
It’s pretty obvious that deregulation came along with a total disregard for anti-trust as well. It was deemed anti-business to try to make sure that there was true choice in the marketplace.
The first place to really see the failures of this policy have been the very companies that fought regulation the hardest: the media giants. With deregulated markets we saw the elimination of competition in newspapers and the dumbing down of the press at the exact same time as we moved to an information economy. The answers of big business were to give us less info- at a time when people were virtually drowning in it. The same happened in TV and Radio broadcast, with an appetite for bigger audiences, the money believed the answers were bigger broad market programming, when audiences were increasingly able to pick and choose what fit them best.
The same has happened to mass-market retailers, who can easily be out-maneuvered by niche internet retailers, as long as the shipping costs aren’t too high, or the need to experience first hand a big part of the buying experience.
Even preferences in shopping experiences have changed from big malls to lifestyle centers, with big box “power centers” losing some of their appeal.
All of this points to a future that probably isn’t in the hands of the giants anymore- but to the most adroit marketers who have built a network of other symbiotic businesses to support each other. Working together as a loose network to promote unique experiences, products, services are going to not only be keys to business survival, but of communities, who can’t afford to trust those companies that are “too big to fail” yet still do.
The survival of social networks and open source development depends on the number of users/size of community that adopts the service and contributes. In business, the number of connections that are built, and the sharing of support functions like marketing- will work the same way.
The answer to success in this new economy is less about getting big, but in getting connected. Relationships are more important than ever and the best way to build your business may be by helping someone else build theirs as long as there is reciprocal behavior. Networks of independent businesses are part of the model of Amazon and EBay, two of the most successful online marketers. Google is making inroads by giving away services, software and social connections in return for relationships that can be exploited softly as time goes by.
While we’ve been teaching and preaching the benefits of Web 2.0 for several years, we’re just starting to push our clients to reach out and work together with other similar small businesses. If Goliath is going to fall, it’s because either he’s gotten so big as to miss opportunity- or that the guerrilla’s have organized to out network and out maneuver him.
Just as the transfer of electrons at almost no cost and high speed has changed the media markets, over time, some of our big cities may find that they are having a hard time competing with smaller walkable communities as gas prices rise, as people’s time becomes more valuable and our love of big loses its luster.
Yes, too big to fail now, may be the kiss of death very soon.
It’s time to think of your network and working on your niche.