words that work
Think of one of your favourite suppliers. I don’t mean big brands, but small ones. The boutique PR agency or the web-hosting company you use. Or anybody who’s ‘small enough to care, but big enough to cope’ (in that time-worn marketing phrase). So they’re in that happy space between being a mom-and-pop shop and a big, faceless supplier.
How would you feel if they got bigger? How do you think they’d cope? How do you think you’d cope if you were the supplier?
As a company scales up, the dynamics change. I thought about this as I watched a TED talk recently.
Theoretical physicist Geoffrey West of Santa Fe University has some fascinating insights on scalability. The really striking thing is that it’s governed by a universal law: plot size against resources required and it’s entirely predictable.
The same is true of animals, cities and organizations. So the graph looks the same for an elephant, New York and a Fortune 500 company. The interesting thing is that the relationship is ‘sublinear’. So when organizations double in size, resources only need to increase by 75%. And at the same time, revenue increases by 15%.
In other words, you get economies of scale.
So does that mean that continuous, scalable growth is a given? Not quite. Because sooner or later, West says, companies (and he and his colleagues studied 23,000 across the US) face ‘systematic collapse’. What saves them from that collapse, and takes them onto the next growth curve can be summed up in one word.
Innovation.
It’s a thought-provoking presentation. Check it out and maybe it’ll help you think too (as it did me) how to avoid systematic collapse. I’m innovating even as we speak.
[If you’re reading this in an email, click here to see the talk on TED.com]