Agility of small companies <i>vs.</i> inertia of big companies

It has been noticed again and again that small enterprises have agility advantages, which big and established corporations lost as they grew to their present size. Everyone realizes the advantages of small size, but seems to be unable to bring those advantages into a big corporation.

Maybe the following insight can resolve the dilemma.

Let’s consider the examples of building a small house vs. that of building a giant shopping mall.

The project of building a small house is easily-managed. There are few stakeholders to be consulted about designing the house. If plans need to be changed midway, they can easily be changed (of course, assuming that there is budget and the ROI figures are good enough).

On the other hand, when building a giant shopping mall, which involves also rerouting of roads around it, there are several stakeholders. The Electric Company needs to be involved with supplying electricity to the mall, and with re-routing electrical wires around it. Water and sewage systems need to have adequate capacity. Proper mix of shop sizes needs to be determined. Big construction loans need to be negotiated. Firefighting provisions are mandatory. You get the picture.

In the same way, small companies are agile, because they do not have a big network of external stakeholders, who need to be considered when changing corporate policies. On the other hand, if a big corporation wishes to make a small change in its policies, it is liable to find that several of the external stakeholders have an interest in the status quo, and will be damaged by the change.

My conclusion is that a big company may be able to regain the agility of a small business if it can reorganize itself to implement a business version of the Law of Demeter. Each decisionmaker and policy formulator should confine his interactions and influence to his immediate neighbors. Any policy changes should have an effect only on a small number of stakeholders. A stakeholder should be able to buffer another stakeholder, which interacts with it, from changes made by other interacting stakeholders.

If this policy is adopted, then stakeholders can be agile.

This runs against the empire building tendency of top level executives.

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