Previously, the principle of size applied. Companies that had a significant purchasing power, large sales, and a high capital base were of particular interest to suppliers, customers, employees, banks, and politicians, and were fiercely courted. It was about volume effects and cost degression, cut-throat competition and stability as an employer and business partner. However, in times of digitization, globalization, private equity financing and Generation Y, these reasons are increasingly losing importance. Five reasons make it clear why large companies will find it more and more difficult to be competitive in the future.
1. They only deal with themselves
Large companies like to revolve around themselves. They neglect their markets and customers. Inward-looking programs dominate to reduce costs, secure compliance or personal interests of individual top managers. These programs devour resources and often do not bring the desired results. If the employees themselves do not want to be in the maelstrom of re-organization, rationalization and re-positioning, then the ongoing account of their own overload, over-productivity and over-meaning as proof of their own indispensability. It does not count the effectiveness, but the pure action. In the end, although all are super busy, but bring the company little progress.
2. The bigger, the more complex
People are not made for complexity. But the bigger an organization is, the greater the complexity of dependencies, tasks, documentation, liability, key performance indicators, skills, people, processes, structures, deadlines and responsibilities. Who should overlook all this? The best way to do that is to work hard, to have clear rules and rigid structures to keep track of things and make it possible to work in a pseudo-efficient manner. However, this hinders any change, creativity and innovation.
3. Inertia of the mass
People usually do not want changes. You talk about it, but woe when the change really happens. If larger groups of people come together like in large companies, then the inertia of the mass leads to ever greater barriers to innovation. Innovation, however, is what drives change. So-called product, process, market, business model or even organizational innovations are redesigning existing processes and structures, something not everyone likes. The answer is resistance from open contradiction, rejection to the hidden blockade.
4. Ego-culture and silos
Egoism is human. However, the larger and often more impersonal the company is, the more one's selfishness can be lived out. Then it says: first me, then my direct organizational unit (ascending: team, department, area) and then only the large company. This leads to silo mentality, in which organizational units no longer support or even purposefully play off each other. Whether employees or executives: One speaks of cross-sectoral action, but experiences departmental egoism, a variety of principalities and a lack of identity for the whole.
5. Consensus culture
If it then comes to a more or less voluntary cooperation between departments, then there is a culture of consensus. It is not the search for the best solution, but the compromise for the simplest solution. The road to consensus is marked by long marathon meetings, as it makes all stakeholders involved, and extravagant decision-making based on in-depth analysis and business plans. Because all aspects should already be considered today, even if they are not even available. In the meantime, however, the market has evolved, but the (outdated) decisions continue to be implemented.
Conclusion: Effect of size regression
Instead of the desired and much-vaunted operational excellence and customer experience, inefficiencies and ignorance of the market often dominate in large companies. The trend is different for small to medium-sized companies: Whether startup or established company, these speedboats are already surpassing more and more large companies thanks to their clear focus on improved solutions and procedures, new technologies and business models as well as new, more agile management models. It comes to a si
ze regression, in which no longer the size, but the ability to adapt and implement changes in the market. The old saying of Charles Darwin (1808-1882) from his theory of evolution gets another meaning here: "It is not the strongest species that survives, not the most intelligent, it is the one that is most likely to adapt to change."
But how can big companies use the effect of size regression for themselves? Companies like Alphabet (with its well-known daughter Google) or Gore live on the principle of cell division. Like the amoebas, Gore shares over two hundred employees per unit in two, new separate units. This allows small, independent organizations to run with high efficiency. In the case of Alphabet, the motto is "we can cannibalize each other's interests rather than being cannibalized externally". A holding company then manages the various units and transactions without becoming operational. Especially at this point the future practice and research will give us many new insights.