Death by efficiency is slow and painful Economies of Scale vs Economies of

Death by efficiency is slow and painful economies of

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Death by efficiency is slow and painful Economies of Scale vs. Economies of Speed Large companies looking at their digital competitors are often surprised to find out that those companies don’t move 10% faster, but 10x faster. A quick example shows, though, that this is still quite conservative. I once observed a large IT organization define a standard for source control. After about 6 months of community work they came to the conclusion that they should be using GIT 229
Economies of Speed 230 as a code repository. Alas, it was considered too difficult to migrate other projects off Subversion, so both products were recommended. The significance of this decision for a large financial business is about as high as determining that you can make your kitchen coun- tertop from stone, but wood is also allowed. After the 6 months, the preparation cycle for a global architecture steering board meeting took at least another month, bringing the total elapsed time to 7 months or roughly 210 days. A modern IT organization or start-up would have spent a few minutes deciding on the product and have accounts setup, a private repository created, and the first commit made in about 10 minutes. The speed-up factor comes out to 210 days * (24 hours / day) * (60 minutes / hour) / 10 minutes ≈ 30,000! If that number alone does not scare you, keep in mind that the target state is different: one organization decided what to do on paper (and not even at the product vendor level, say BitBucket vs. GitHub vs. Gitlab) while the other organization is committing code. If you extrapolate the traditional organization’s timeline to include vendor selection, license negotiation, internal alignment, paperwork, and setting up the running service, the ratio may well end up in the hundreds of thousands. Should they be scared? Yes! Old Economies of Scale How can this happen? Traditional organizations pursue economies of scale, meaning they are looking to benefit from their size. Size can indeed be an advantage, as can be seen in cities: density and scale provide short transportation and communication paths, diverse labor supply, better education, and more cultural offerings. Cities grow because the socioeconomic factors scale in a superlinear fashion (a city of double the size offers more than double the socioeconomic benefits), while increases in infrastructure costs are sublinear (you don’t need twice as many roads for a city twice the size). But density and size also bring pollution, risk of epidemics, and congestion problems, which ultimately limit the size of cities.
Economies of Speed 231 Still, cities grow larger and live longer than corporate organizations. One reason lies in the fact that organizations suffer more severely from the overhead introduced by processes and control structures that are required or perceived to be required to keep a large organization in check. Geoffrey West, past president of the Santa Fe Institute, summarized this dynamic in his fascinating video conversation Why cities keep growing, corporations and people always die, and life gets faster ⁹² .

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