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« The pillars of social media site success | Main | Getting serious about your meeting problem »

The right size

I've been thinking a lot about issues of scale and units of measure.

Many businesses that are in trouble are in trouble for a simple reason: they're the wrong size.

A newspaper that only had a few dozen employees would be doing great today. But they have hundreds or thousands of employees because that was an appropriate scale twenty years ago. When I started my first web company fifteen years ago, the idea that you could be successful with six or ten employees was crazy, but today many of the most successful companies have not many more than that. That's 15,000 fewer employees than eBay has.

It's tempting to get bigger. But is bigger better? In many cases, it's worse, particularly when you can leverage reliable systems that are cheaper and faster and more stable in the outside world. If you can make your product better by assembling it yourself, you should. But if that action makes it worse, why do it?

Which leads to the idea of figuring out what the unit of manufacture or delivery is. Do you deliver the entire solution or just a piece of it? Twitter delivers a sentence, sandwiched in between two other people's sentences. A blog delivers a series of longer pieces, sandwiched in between other pieces by the same person. A website delivers page after page of pieces, all from the same organization. What's the unit that works right now?

Creative Computing delivered an MP3 player. That was the unit. Apple changed this and delivered the player, the software, the music store, the headphones and the retail outlet. Both sold music, ultimately, but Apple choose a far wider unit. Very risky, but it worked.

The flip side works as well. If you want Kona coffee in Senseo pods, the web makes it easy to find. Aloha doesn't have to subsidize the cost of the entire system, worry about shelf space or build coffee makers. They can just make a profit from a small piece of the entire system.

Ford Motor used to hire shepherds to tend Ford sheep on Ford land so they could weave Ford fabric to put on the seats of Ford cars. Today, of course, that's crazy. One day soon there will be car companies that have 200 employees.

So many businesses are stuck on tradition. What happens to your agency or brokerage or factory or freelance practice when you make the unit of measure bigger? smaller? Why are you assuming that your scale is correct?

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» Seth Godin on the Right Company Size from Small Business Labs
Seth Godin has a very interesting post about scale and business size. Key quote: "Many businesses that are in trouble are in trouble for a simple reason: they're the wrong size." We've done a lot of work on this topic... [Read More]

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