Volume XXI, Number 4 (Issue 1008) January 23, 2023
Scale and Scalability
How important is scale? The obvious answer is it depends. If the subject is nimbleness, bigger is not always better. Large ships do not turn quickly, especially if they are underway with a head of steam. Conversely, if the subject is capabilities, bigger is often better – at least until you reach that threshold where complexity and inflexibility set in and start to get in the way of things like responsiveness – again, think big ships. With scale, some challenges are easy to meet. Others, not so much.
When it comes to business, one rule of thumb is if you are not growing you are dying. That suggests scale is more than good, it is crucial. That goes double if you have designs on controlling your destiny. There are implications for other metrics too including market share, diversification, the ability to leverage fixed costs, pricing power, and more. Bottom line: growth in shareholder value is usually easier with scale, a vision, and the right strategy well executed.
But there is another mantra common to business: you have to spend money to make money. There are times when a business (and individuals) must invest heavily to move from one level to the next. The resulting growing pains are part of both the price and the journey. Still, there can come a point where the trade-off or return on investment is not accretive. Not in the short run, at least. Other times, when the price is right and the values align, transformation takes place.
Two things have prompted me to examine the issue of scale. First, on January 1 I made a note to self about scale. Not recalling the details, something I either read or heard on New Year’s Day caused me to want to address the topic. More recently, a conversation with one of our client’s divisional presidents turned to a discussion of the identical topic. As he and I talked, he shared that he has found it nearly impossible to establish a meaningful summer internship program for area college students even though he firmly believes initiatives of that sort to be a high-impact investment. In his case, his division’s lack of size gets in the way. He further stated the need for staff training and development, be it technical, product, sales, upskills, or leadership training – all can and frequently are obliged to take a backseat to production demands. I imagine many of you can relate to such competing priorities.
In fact, who among us cannot relate to the challenges that resource constraints bring? Size can help. But even the largest of organizations (think GM, Google, Microsoft, the Federal Government) cannot accomplish all they would like to. Choices must be made between rival projects. Priorities must therefore be
determined. Scarce resources, including time, must be allocated across the things that are important. Scale influences, if not drives, outcomes.
Soli Deo Gloria
“Enter by the narrow gate. For the gate is wide and the way is easy that leads to destruction, and those who enter by it are many. For the gate is narrow and the way is hard that leads to life, and those who find it are few.” Matthew 7:13-14
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Copyright 2023 by J. Keith Hughey. All rights reserved. Permission is hereby granted for reproduction and redistribution of this essay as provided under the copyright laws of the United States of America. The entire early library of Monday Morning Musings issues may be found at www.jkeithhughey.com. Your comments are welcome and encouraged.