Mine is Bigger Than Yours

Is the Enterprise 2.0 company bigger or smaller than the current ones? [tweetmeme source=”Marcio_saito” only_single=false]

As I read the newspapers this morning, I learn that United and Continental are merging to form yet another “largest airline in the world”.

Consolidation seems to be rational for an industry that manages to charge the same for a coast-to-coast flight as the cab that takes me to the airport in a 50-mile ride and still have really unhappy customers.

The justification for the deal are familiar:  economies of scale, and the “synergies”. Are big companies the future or are they a legacy of the past?

Economic theory uses the concept of the perfect market (where information is available to all in real-time, competition is open and transparent, and transactional costs approach zero) to study the effects of openness and better information systems.

In a truly perfect market, companies would not exist. Buyers and sellers would settle their transactions in the marketplace. Workers would organize as free agents as needed in transient projects with no need to permanently belong to an organization in charge of pooling and coordinating the resources and people needed to tackle a complex problem.

Of course a perfect market doesn’t exist and never will. But it is a useful concept. Now, there is strong correlation between perfect competition and Enterprise 2.0.

Enterprise 2.0 uses tools and techniques that promote transparency and bring down the costs of collaboration. As a result, people don’t need to be placed in rigid segmented organizational charts to be efficient and have more freedom to contribute value outside their functional job descriptions. Because there is less segmentation, organizations can be less hierarchical and more transparent as well.

In an article, Dion Hinchcliffe, one of the thought leaders in Enterprise 2.0, talks about how companies can and are offloading some of the work needed to solve complex problems to online communities (crowdsourcing), and not building armies of internal experts.

If I take further that parallel between market perfection and Enterprise 2.0 operation, I wonder if companies adapted to a more collaborative and transparent way of doing business, will tend to be larger or smaller than the typical company today.

The most natural answer would be: “smaller”. If work can be offloaded to social communities, people can self-organize effectively and efficiently in transient projects, and there are less transactional costs, there is less advantage in the economy of scale of big and slow and more advantage in the nimbleness of being small and agile.

However, if Enterprise 2.0 companies become more successful, they will tend to grow and dominate their markets. Some of the companies with an E2.0-like culture are indeed growing very large (Google is probably a good example).

So, I don’t have the answer… Are E2.0 companies going to be bigger or smaller than the equivalent company today?

What do you think?