April 25, 2017

Why Small Can Be So Hard When You’re Big

I’ve written before about the search marketing difficulties of large sites, but today I want to make a bigger point.

Doing anything small is hard for many large companies. If you work at a small company, this might mystify you-after all, big companies have the talent and resources to do big things that your company would never attempt, so why can’t they do small stuff?

Call it corporate myopia.

They can see clearly the things right in front of them, the things that they habitually do. But they can’t see that far into the future. For some reason, big companies don’t believe that oaks from little acorns grow. They just complain about how small those acorns are.

Small companies are happy to watch acorns take root and begin to grow. Small companies can work small and succeed small. The very best small companies eventually live to see that tall oak grow and they become large companies.

But big companies often cross off anything small from the agenda. They need a business case that shows $100 million in revenue in three years or else they aren’t interested. And it’s because that $20 million business looks like such a puny business compared to their existing oaks. It always seems to make sense to invest in growing those oaks even higher, rather than risking money on a speculative acorn that might never turn out to grow into anything.

So people working at large companies learn not to propose any $20 million businesses. If they think that their company should get into a $20 million business, they have to inflate it to $100 million to get any attention. And then they have to ask for far more money to run that business than makes sense, because they think that if they ask for $10 million to try the business instead of the one million they really need, then they can get to $100 million faster.

Except they don’t.

There are some businesses that really can grow faster if you invest more money in them, but most businesses are not like that. Most new businesses grow at the rate of the market not the rate of the investment. Investing more brings you a product faster, but it doesn’t necessarily grow your business faster. And, inevitably, when that speculative business is discovered to be an over-investment, the big company just shutters the whole thing instead of trying to see how it should go back to the beginning and do things in a small way. Big companies don’t believe that they are doing things the wrong way, they just think they bet on the wrong acorn.

I would argue, in fact, that the more you invest up front in a speculative business, the more likely that you’ll fail. Because you must justify a big investment toward a big return, that causes you to take the big strategy approach, where everyone convinces themselves they have the right idea, instead of the Do It Wrong Quickly approach.

If you are willing to do small things in small ways at first, you can experiment. You can admit that you don’t necessarily know what you are doing. You can try things to see if they work, rather than having to persuade everyone that you are right. When you have persuaded executives to make a huge investment, you almost can’t get the feedback to see if it worked-that’s too dangerous to your career. If, however, you accept up front that what you are trying is probably wrong, then you can really listen to your customers to see how far off you are and see how you can adjust.

That’s what small companies do. They invest small, they listen to customers, and then they adjust. Big companies, for the most part, don’t operate this way. They could decide at any moment to spend only small amounts of money to incubate businesses, just as venture capitalists do, but they rarely take this approach. And they sit idly by while small companies grow acorns into new oaks. (Then they pay top dollar to buy those full-grown oaks.)

Every company has a vision, but most companies have blurred vision-big companies and small. The difference is that small companies take small steps so it doesn’t hurt so much when they hit a wall. Big companies seem to want to go full-speed all the time, so when they fail to see what’s in front of them, they hit that wall hard and they don’t recover from it.

Some large companies are beginning to adopt a Do It Wrong Quickly culture. Some companies are figuring out how to think small. If more big companies don’t learn to think small, they might wake up one day and find that they aren’t so big anymore. When a company gets too big to do anything, economics have a wonderful way of making them smaller until they remember. Smarter big companies are learning to adapt without being forced. If you work at a small company, enjoy the ride-if you have a better idea, your ability to adapt might outflank your less-nimble, larger competitors.