Frictionless enterprise: the digitally connected future of business nicely summarizes how digitization is impacting how firms are organized and operated.
The article suggests there will be two winners in the future - small firms that attack niche markets and large enterprises that leverage their scale. Key quote:
- Enterprises can thrive by being smaller and more focused, benefiting from lower external transaction costs that allow them to more easily market a more specialized offering than was ever possible before. They can either target nearby customers more accurately or reach a larger geographic market more cost-effectively: becoming global minnows able to swim with the big fish.
- At the opposite end of the scale, larger enterprises can lower their internal transaction costs, both to co-ordinate and organize their in-house resources and to engage with external contractors. Many will become platforms that specialize in providing efficient networks of interactions between an ecosystem of smaller firms and the markets they address.
This view maps with our work on barbell industrial structures.
This work shows most industries are moving towards industrial structures consisting of a relatively few giant corporations on one end, a narrow middle consisting of a shrinking number of mid-sized firms, and a large and growing number of small, micro and one person (solopreneur) firms on the other end.
This view - which is very clearly supported by the data - is somewhat at odds with the more common view that technology is leading to the end of big corporations.
Nice to see other folks pointing out the death of the large corporation has been exaggerated.