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Death by efficiency is slow and painfulEconomies of Scale vs. Economies of SpeedLarge companies looking at their digital competitors are oftensurprised to find out that those companies don’t move 10% faster,but 10x faster. A quick example shows, though, that this is stillquite conservative. I once observed a large IT organization definea standard for source control. After about 6 months of communitywork they came to the conclusion that they should be using GIT229
Economies of Speed230as a code repository. Alas, it was considered too difficult to migrateother projects off Subversion, so both products were recommended.The significance of this decision for a large financial business isabout as high as determining that you can make your kitchen coun-tertop from stone, but wood is also allowed. After the 6 months, thepreparation cycle for a global architecture steering board meetingtook at least another month, bringing the total elapsed time to 7months or roughly 210 days. A modern IT organization or start-upwould have spent a few minutes deciding on the product and haveaccounts setup, a private repository created, and the first commitmade in about 10 minutes. The speed-up factor comes out to 210days * (24 hours / day) * (60 minutes / hour) / 10 minutes ≈ 30,000!If that number alone does not scare you, keep in mind that the targetstate is different: one organizationdecidedwhat to do on paper(and not even at the product vendor level, say BitBucket vs. GitHubvs. Gitlab) while the other organization is committing code. If youextrapolate the traditional organization’s timeline to include vendorselection, license negotiation, internal alignment, paperwork, andsetting up the running service, the ratio may well end up in thehundreds of thousands. Should they be scared? Yes!Old Economies of ScaleHow can this happen? Traditional organizations pursue economiesof scale, meaning they are looking to benefit from their size. Sizecan indeed be an advantage, as can be seen in cities: densityand 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 superlinearfashion (a city of double the size offers more than double thesocioeconomic benefits), while increases in infrastructure costs aresublinear (you don’t need twice as many roads for a city twice thesize). But density and size also bring pollution, risk of epidemics,and congestion problems, which ultimately limit the size of cities.
Economies of Speed231Still, cities grow larger and live longer than corporate organizations.One reason lies in the fact that organizations suffer more severelyfrom the overhead introduced by processes and control structuresthat are required or perceived to be required to keep a largeorganization in check. Geoffrey West, past president of the SantaFe Institute, summarized this dynamic in his fascinating videoconversationWhy cities keep growing, corporations and peoplealways die, and life gets faster⁹².