Obsession with Scale

Nilofer Merchant in her HBR Article ‘Our Obsession with scale is failing us‘ talks about how the large organizations ignore the smaller looking opportunities and fail to be wired for the future. She cites an example of Bank Of America which ignored new payment methods like Paypal and Square. She talks about the business parameters that shunt out all opportunities less than a certain dollar value, even ignoring the fact that the current dollar value may be less but the potential may be high. A very valid point.

She also hints that the value that the industrial age attached to Scale is also changing its meaning in the social era, where the world is centered around individuals and technology can be as big an enabler as the other scales were once. I agree.

My thoughts on this – do we really need scale in the world or is it time to go back to ‘Small is Beautiful’ strategy. Is scale needed for the business that is good for the corporation and the customers or is it needed to give the corporate entity an ego boost, to be able to top the various lists published as part of a business strategy of the publishing houses? Till we question the need for scale, we will blindly work towards building the scale because we grew up admiring the big.

It is time to look at the inefficiencies that scale brings in and reminds me if this book  – Peters Pyramid

Anuradha Goyal

One Comment

  1. The problem for large companies to go after small opportunities is the current cost structures and the resistance to change. A large bank has built a world class customer facing organization & that has in turn created a huge cost structure. So when BoA saw the idea of Paypal, the managers of BoA would have said “Jeez, we just can’t offer such a service – because our costs of service is too high” and they would have also said “We just can’t change our costs structure – without causing a whole lot disruption in our current organization, and any change to the current organization will scare away our current customers.” This creates a reluctance to change and big firms dig in deep to compete with a nibble new comer.

    I have seen this happen repeatedly, both as a challenger and as an incumbent leader. The reluctance of the top management to disrupt the current operations and to protect the current customer base & revenue forces the large incumbents from changing.

    It is not that the people and managers did not see the competition, it is the sheer inertia of the large system which prevents them from changing course.

Comments are closed.