Agility vs Scale in Business
Recently I was watching a video about entrepreneurship. This was going viral and people were appreciating the talk. I wanted to analyze and understand what the speaker wants to say, what people are understanding, and what should be learning from the talk. I wrote a paragraph on this, but very soon I realized this deserves more contemplation and an article. In that process, I ended up writing this article. I hope you will get some more insights. Many of you may have different insights and different perspectives, so don’t forget to share your perspective.
In the video, the speaker is talking about following
- How easy it is to make decisions when a business is small?
- How well is the distribution of profit when the economy is run by many small-size businesses vs large corporates?
- Why do people get good service at a better price when business is small?
Kindly make a note, I am neither arguing for large size corporates nor advocating for small business size. As a social thinker and entrepreneur, I am trying to analyze why in the first place we needed a big size organization? What problem do they solve? What problems do they have? Are those problems solvable? If yes, then how? What problem do they create for small entrepreneurs and for the overall ecosystem? What value addition do they do, and at what cost do we get those benefits?
We need to understand scale and agility are two key factors for any business to survive. Whether we are talking about a one-person enterprise or a corporate of two million employees.
In the case of a one-person enterprise or small enterprise, scaling doesn’t matter much. Because they produce less, and they know somehow they will identify some consumers for their products or services. There will be issues when many small enterprises are selling the same thing, but normally that doesn’t happen, they maintain some kind of differentiator. You can go to your local market, and observe all shops are selling different items and very less competition between shop owners. They know very well who are their buyers, their habits, what they like, what they can afford, etc. Keeping these characteristics in mind, they design their outlet and sell their products and services.
Their thriving depends upon their agility. If one can switch quickly between what one sells and selling style between one timeframe to another, then one is unbeatable. The timeframe can be from morning to evening, for example, one sells snacks in the morning to officer goers and in the evening selling snacks before a wine shop. The timeframe can be Monday to Sunday. For example, on Monday one sells flowers, on Sunday you sell green vegetables, etc. The timeframe can be different festivals. For example, in Holi one sells colors but in Diwali, that person sells light, etc.
Being a single-man army or small organization, agility is not an issue for them. Until someone is very rigid or lazy or uncreative.
For an enterprise of two million employees, scale matters hugely, and agility is extremely difficult. Whether any large organization will survive or not, hugely depends on whether they can scale or scale down their operations with the least impact on themselves or not. If scaling is an issue they will face problems in producing more or less, as per the demand, they will face problems in producing at different geographical locations. To scale volume at one location or another location you need to understand various factors, develop your infrastructure accordingly, and train your people. It is a very complex and CapEx intensive job.
To bring agility and scale together, we go towards automation. It helps us achieve our goal at a lesser cost. Whether we use software or robots or AI technologies, all these help us in scaling. Although new technologies also help in improving the quality of the product and services, reducing cost, reducing risk, etc., yet primarily they are addressing the issues which surface up due to scale.
Automation, AI, Robotics, Software, etc. are a double edge sword for every business. It helps individuals less and helps more to a corporate. It is not that automation technologies help any less to an individual. We know our whole life has changed because of these technologies. But if you compare whether a billion and trillion-dollar corporates are more today or in the 19th century, then you know the answer. What do these large corporates want to do with all the automation and hyper scaling? To get the answer to that you can ask yourself how many enterprises, shops, the small business closed in your surrounding in the last 10 years. Why? Because online aggregators, big shopping malls, large factories have replaced those. Thus, automation marks more cuts on individualism, entrepreneurship heavily compared to corporate.
Due to automation when an individual gets hit he can survive or not it depends upon his surviving skills, skill up-gradation, etc. But when big companies have problems, it is clearly visible and reported by electronic, print and social media. Businesses close, migration, employees retrenchment, etc. are huge issues when one big fish dies or is eaten by another big fish. We read this kind of news on a regular basis. In the case of small enterprises, if this kind of problem happens, a complete physical market is wiped out, but this is an extremely rare case. So, small business knows how to survive.
Smaller businesses are already agile. Process automation helps in reducing costs for both, small entrepreneurs and for large corporations. But process automation, AI, etc. address the issue of scale for a larger organization. At the same time, they try to bring some agility to their systems. Process automation helps more to a large organization, therefore they need to pay more for automation and maintenance of their systems. But, it increases the cost of doing business. So, they scale up or down and achieve some agility at a higher cost compared to small size businesses. Because large organizations get the highest benefits of scale, this gives them another lever in the market to purchase products or raw materials at the cheapest possible price, which is not possible for small businesses.
I promised you, in this article, I will not favor or disfavor any business model but just compare the weakness and strengths of the two. What is good and what is not good for the society, economy, environment, business, and individual I leave to your judgment.