By Daryl Bishop
Reading popular press or watching movies such as the Aliens series where Weyland Industries pretty much ran the world, you would be under the impression that the future of business is pre-ordained with large behemoth corporations running the show.
The notion that large corporations will evolve into globally dominating entities is not new and not without historical precedent. Certainly, the U.S. Government has in special cases, split up large companies with the aim being to minimise monopolistic behaviours. I would, however, like to offer a counter view that market forces are compelling the move from large centralised organisations to ones where greater profitability is linked to smaller nimble businesses that can rapidly react to changing market conditions.
Here are my reasons why:
Built for Creativity and Innovation
The two companies below highlight the advantages of keeping organisation sizes small or at least acting small
- W.L. Gore & Associates – Bill Gore, the founder of W.L. Gore & Associates, the maker of the famous Gore-Tex fabric, organised his business into small task force groups. To promote communication he limited teams and manufacturing facilities to 150-200 people. There was a sociological imperative for this sizing as it was thought that this was the maximum number where people could build connections with each other.
- Flight Centre – Flight Centre, an Australia-based travel company with over 2000 stores, uses an organisational structure where stores within a region operate as tribes competing with other stores. This encourages connectivity and belonging within the tribe while promoting competition between stores.
In both examples the key to unleashing the creativity and innovation of people was limiting the size of the corporate ‘tribes’ to encourage connectedness.
Agility
The last few years have seen the rise of the startup movement; these companies attract the best talent, have a source of funding through venture capital and crowd funding sites and have a lean startup framework to build and quickly adapt to the market. Startups innovate quicker and produce products that customers want, as they can rapidly pivot as needed to match their products to customer demand.
Profitability
Interestingly, when Standard Oil was broken into 90 separate companies in 1911 as a result of an anti-monopolistic legal action, the share price of these separated companies on average more than doubled. Companies survive, thrive and die based on their ability to innovate and quickly bring products to the market. The speed of business has accelerated over the last decade due to globalisation, the Internet era and the aforementioned rise of the startups. The companies that can create and react quickly to the market will survive and thrive.
Small but Large
The recent 19 billion dollar sale of WhatsApp to Facebook is an example of how companies can be small and still attract large valuations. In WhatsApp’s case it had 55 employees at the time of sale. The historical link between the payroll and company valuation no longer applies. Smaller organisations make ready use of a larger service and capability ‘organism ecosystem’. This minimises capital investment by use of a service consumption model, allows focus on their market segment, and supports rapid growth. The use of cloud services is an example of a technology service offering from this ecosystem. This also expands to manufacturing services such as design, fabrication and batch run.
Joining the dotted lines, I believe the trend will be towards smaller organisations that will better react and compete in a fast paced marketplace than their larger brothers. Of course, large organisations will still have a place across all sectors; however, I predict the market will provide a natural brake on unrestrained growth, as size becomes an impediment to competitiveness.
So what’s this to do with technology? IT needs to work closely with the business to ensure that the right strategy and services are in place. As technology is at the forefront of change, the onus is on us to inform, educate and be creative for our business. Finally, IT needs to be the model of agility that other business units strive to replicate.
Daryl Bishop is a business solutions architect with VMware Accelerate Advisory Services and is based in Melbourne, Australia.
