Thinking about…

Experts in business and government are always talking about economies of scale. They say that increasing the size of projects and institutions brings costs savings. But the “efficient,” when too large, isn’t so efficient. Size produces visible benefits but also hidden risks; it increases exposure to the probability of large losses.”

On the other hand the “conventional wisdom” says that small is better when it comes to innovation and it also says that the more people are involved in the innovation process the better the result.

We know also that the context has a vital role in solving problems even when we approach the problems in a global way. Even if the problem is common to many people as the frequent lack of drinking water in areas where they inhabit, the possible solution begins always with a clear definition of the context and the ecosystem.

In recent years we have witnessed an economic growth and work in some areas of the globe driven by large-scale innovation and that is connected to the mobile communication networks.

It seems to be true that innovation is the main source of new jobs and the same time also seems to be true that are small businesses that generate most jobs.

We have seen a real trend of speech focusing on entrepreneurs and startups as a way to overcome many of the “crises” that exist in Europe and beyond, which makes me question the existing structure in many of the companies that ceased to be the source of employment and wealth.

Is that the time has come to restructure the large companies in small networks?

Could we design small businesses at scale and with this leverage the results?

The structures of different possible ecosystems that emerge around a core of innovation (e.g. Apple) are independent and flexible result of extensibility potential to the different contexts in a global world.


“The flexibility of small-scale infrastructure is attractive because it gives firms the ability to deploy investments gradually over time, which further reduces cost and risk. “If a city’s electricity demand is growing, a utility firm doesn’t have to finance a gigawatt power plant that might take four or five years to come online,” van Ryzin says. “It can instead deploy smaller plants as needed.” In turn, a firm doesn’t incur the cost of building a large plant right away — one that might not operate at full capacity immediately.”

Will change from large in size to large in number (but small in size of infrastructure) scale?

For that, apart from direct benefits in the reduction of investment costs and risk (considerable economic benefits) it is necessary to create new frames to calculate the return on investment and that passes necessarily by the “calculation” of the efficiency and effectiveness of the organizations and by the well-being and growth of employees of these organizations.

Keeping the smaller nuclear teams, there is a building team spirit, an innovative leadership and recognition that the effort has value and purpose.

We already passed the age of large machines and large enterprises to small networks of computers and we already have seen the birth of new feelings of independence and responsibility in organizations through this evolution.

We must now respond more to the needs of different contexts of the different capacities of different ecosystems and start creating new alliances of enterprises, more open and innovative.

The space for a joint growth exists. Lack the will or believe in that possibility.

The flexibility of small-scale infrastructure is appealing because it gives companies the ability to deploy investments gradually over time, which further reduces the costs and risks and smaller units also offer geographic flexibility, we can use it in a single location or concentrated around key supply or demand sources.

Innovation initiatives that were once handled by dozens a decade ago are now run by only handfuls,” writes Michael Schrage. He mentions Google, Facebook and Apple among the leading innovators that swear by the power of tiny teams. The trend is not just with tech companies. Global pharma giant GlaxoSmithKline now regularly relies on teams of as few as eight people.”

Do you want to comment?


Tagged with:

One Response to When thinking small can be better than economies of scale

  1. Important ideas. I’ve been doing some thinking along these lines — for me, thinking about how to help leaders learn to let go in this new environment.

    A quote from a post of mine, “The famous golfer Sam Snead is said to have described the best grip for a long shot as the same as holding a baby bird in your hand. It may be that we can apply this technique to modern organizational design. Keep a light grip for greater success.

    In terms of organizational design and leadership this means a focus on the work to be done more than the people to be hired. I’m looking forward to talking with Philip Rosedale [Coffee & Power] about the realities of building an organization in this way. I’m also interested in thinking about how you transition from a more tightly held model to one with a looser grip.”

    This is a new form of organizational design & leadership. I’d love to hear success stories — and ones of failure. Changes are needed across the human (our expectations), technical (interoperability), and process (perhaps culture building for projects rather than companies, more freelancing, etc.)

Leave a Reply

Your email address will not be published. Required fields are marked *