Platt Perspective on Business and Technology

Business scale, business complexity, and lessons learnable from insular biogeography 2

Posted in strategy and planning by Timothy Platt on March 11, 2016

This is a second installment to a brief series in which I address an at least seemingly simple, fundamental question:

• How do you determine an optimal size for a given business with its current stage of development and its marketplace context, and both for its resource base and for its operational and systems complexity?

I began this discussion by positing two distinct approaches to answering that: one based on a largely internal-to-the-business understanding of organizational scale and complexity and its impact, and the other based on a more external-to-the-business, contextual understanding of that (see Part 1.) And my goal here is to at least begin to add change into all of this, and to further discuss these two approaches by considering its impact.

First of all, I need to clarify what I mean by change, as it becomes relevant in the context of this series. I am not referring to simple short-term perturbations that would be followed by a return to an essentially unchanged normal. I am referring to more ongoing, permanently trending structural change, that might simply develop along a slow ongoing evolutionary path, and that might occur in more abrupt discontinuous steps – or in some combination there-of. But however this change is timed and however smoothly or disruptively it arises, it is more fundamental and with no real return to any simple status quo ante possible. And I begin addressing that with the fundamentals:

• If external forces of change arrive essentially instantaneously, as they do for example when businesses have to respond to catastrophic events, it takes at least a measure of time to fully understand what has happened, and how best to respond.
• And when change only slowly emerges, it can be all too easy to in effect ignore it and its implications, until its extent and pervasiveness have reached a tipping point for overall impact and significance – in which case those who face it can find themselves in essentially the same situation that they would be in if confronting more immediate catastrophic change.
• My point here is that while slow evolutionary change and abrupt disruptive change are fundamentally different from each other, how we identify and come to understand them and how we actually respond to them in practice, can be all but indistinguishable, and certainly as they begin to more forcefully intrude on our awareness and as we mount an initial response to them.
• Effective risk management planning and preparation can significantly reduce the latency faced between the start of disruptive change and the point in which we begin to mount an effective response to it. And effective risk management planning and preparation can similarly help us to recognize slow, gradual change earlier and at least ideally before anything like a more crisis-type tipping point is reached. But even the best planning and preparation cannot make these latency periods disappear entirely, and if for no other reason than because communication and its follow through take at least a measure of time, in bringing all necessary stakeholders, and resources that are needed into play.
• And on top of that, the key stakeholders who would have to be brought in to address an emerging problem are all going to have their own already planned agendas and priorities and they might have to retask and free up at least some of the resources that they would have to bring to bear to help address it. And that always takes at least some time too.
• The more complex a business is and the more widely it and its employees and managers are dispersed geographically – or by internal organizational barriers (e.g. silo walls that arise ad hoc as the organization grows),
• The longer it is going to take to bring everyone up to speed on what has happened and to precise agreement on how to proceed – and certainly if a change event has novel features that have not been planned for or anticipated.
• And the farther the organization is from being optimally efficient as I have been discussing in this series and the more gaps and disconnects there are in its systems as a result, the longer the delays in effectively addressing change will be too.

Now let’s apply this to the question of business complexity and scale and how it is measured and understood. I offered two basic approaches to understanding organizational scale and complexity in Part 1. And as I noted above, one of them addresses resource base scale and operational systems complexity primarily from inside of the business. And the second of them, which I developed in terms analogous to those of an ecosystem model, views this primarily from outside of the specific business, and in terms of its competition and marketplace and the overall context that the business operates in.

I would argue that both approaches are needed to more fully understand business scalability and how to optimize what is in place and what is maintained, in making a business more functionally effective.

• The more internal to the business approach is pursued in strengths, weaknesses, opportunities and threats (SWOT) analyses and when applying other management tools to better understand what is currently in place and how it does and does not effectively work. (And I add here that while SWOT analysis, to cite my just-referenced tool, does specifically address external factors, it addresses them as it does not internal ones, collectively and from more of a within the business perspective.)
• But a more contextually oriented approach of the type I have been addressing here, is essential for optimizing what is maintained in a business, and both for its operational systems and for what resources they require. That is because ultimately, a business’ overall effectiveness and efficiency can best be measured in terms of how it meets the needs of its marketplace and its customer and potential customer base – and in the type of business ecological niche that it fills and how competitively effectively it does so.

I am going to pick up on issues that I have raised here and in Part 1 in future postings and series. But I end this brief two part thought piece here. Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory.

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