Company Sizes

A discussion, this week, about the sizes and lifecycles of companies. With someone who had a vested interest in the subject (being the MD of a growing small company), but believed that all large companies were essentially doomed to die.

An interesting discussion though- starting as it did with something that looked suspiciously like the Gartner hype cycle, with small companies growing rapidly at the start of the graph, and larger ones down the back of the curve, desperately trying to recapture the spirit and entrepreneurship that drove them when they were smaller. He also cited Racal as the only British example of a large company that got it right.

But wait – trying to capture the spirit yadda sounds suspiciously similar to what innovations managers are trying to do. Creating subcompanies, building fast-response groups, developing rapidly into new markets – all things you’d expect to see in a set of startups. And all needing a similar set of skills. Which I’ve known for a while, but I’vI haven’t yet thought hard about what the real differences between these two situations are. So.

Small Big
Funding – from investors – risk in early years of outgrowing cash supply Funding – from PV or customer programs. Risk of outgrowing budgetholders goodwill (“funding valley of death”)
Resources – whatever you can acquire, plus anything provided by small business schemes. Usually enthusiastic, usually skilled, unlikely to cover very wide range Resources – whatever you have, plus whatever you can buy in. Variable levels of enthusiasm and experience, range might be wide, but might not if the company has overspecialised
Politics – external, often benign, sometimes positive; company is often image-sensitive Politics – external plus internal, rarely benign

2 thoughts on “Company Sizes”

  1. I'm not really talking to myself: Firefox gets in the way of making comments on this site. D's comment is…
    Another one of the things that distinguishes small from large companies is the latter's ability to shield R&D from its real costs. In a small company, there is typically not enough money for R&D, so it has to be raised. That has a real cost, and R&D must earn enough to pay for its cost of capital. A large company can, if it chooses, bury those costs instead at corporate centre. Many firms that are thought of as innovative – like IBM a few years ago, or Microsoft – have made that decision. It allows them to have a more academic environment: indeed, these days, the best corporate labs are I suspect more academic than Universities…

  2. It depends what you mean by academic. A really good corporate lab will be both creating, applying and testing new theories and ways of doing things at the same time, on its real customer base (or at least on a real and significant subset of itself). That gives the lab a really tight development loop, but it also (by dint of fast payback) gives it the resources and drive to develop larger theories slowly over time – something that is often lost in the dog-eat-dog, short-funding-cycle, must-publish-lots-to-tick-boxes university world of today.

    So, in the old-fashioned sense of 'academic', I suspect yes, the corporate labs are. It remains to be seen whether the coming innovations culture will either enhance or diminish this.

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