SCALE.02: Collaboration in Companies — a double-slit experiment?
Recommended book (+ chapter)
In short summary, West’s Scale builds on Kleiber’s work of metabolic rates of organisms in order to apply scaling laws (i.e. logarithmic plots) to cities. Kleiber observed that the metabolic rate of a species scales at 0.75 its mass. In other words — the slope of the log plot is “sublinear”, or less than 1; there are economies of scale as a species grows in size. The infrastructure of cities demonstrates this same sublinear phenomenon: a power law with the exponent (or slope) of 0.85. This means that as a city grows in size the amount of infrastructure, say the length of pipe or road, also sees economies of scale. However, underlying forces of urbanization (e.g. social interaction and flow of information exchange) shift this sublinear slope of infrastructure to a superlinear slope of cities, or 1.15.
This in itself is fascinating. But now, apply that to companies.
West finds that “companies scale sublinearly, rather than superlinearly like cities.” My immediate thought on reading this was: Why does the collaboration of a city —i.e. the social interaction and information exchange of a city — shift sublinear scaling to superlinear, but that same approach doesn’t apply to a company? Surely company culture and collaboration forces would produce a similar exponential impact… right?
As if anticipating my question, West *lightly* addresses this point, explaining that companies “operate as highly constrained top-down organizations that strive to increase efficiency of production and minimize operational costs.” Cities, on the other hand, “triumph innovation over the hegemony of economies of scale.”
I didn’t find this answer satisfactory.
The other day I expressed this query to our Head of Talent. Her perspective was: “Of course it doesn’t scale exponentially!” People are people. As your company gets bigger you need more processes, which ultimately counterbalance the benefits of the collaboration.
Light bulb: It’s kind of like a double-slit experiment!
Nevertheless, the collaboration-loving optimist in me still wonders if there’s more superlinear outcomes we can achieve for companies when it comes to organizational design and company culture.
Author: Geoffrey West
Chapters: Toward a Science of Companies
The fact that companies scale sublinearly, rather than superlinearly like cities, suggests that they epitomize the triumph of economies of scale over innovation and idea creation. Companies typically operate as highly constrained top-down organizations that strive to increase efficiency of production and minimize operational costs so as to maximize profits. In contrast, cities embody the triumph of innovation over the hegemony of economies of scale.
Despite their apparent bumbling inefficiencies, cities are places of action and agents of change relative to companies, which by and large usually project an image of stars unless they are young.