Ronald Coase nailed it back in 1937 when he identified scalable efficiency as the key driver of the growth of large institutions. It’s far easier and cheaper to coordinate the activities of a large number of people if they’re within one institution rather than spread out across many independent organizations.
Great Businesses Scale Their Learning, Not Just Their Operations
Ronald Coase nailed it back in 1937 when he identified scalable efficiency as the key driver of the growth of large institutions. But here’s the challenge. Scalable efficiency works best in stable environments that are not evolving rapidly. Today we live in a world that is increasingly shaped by exponentially improving digital technologies that are accelerating change, increasing uncertainty, and driving performance pressure on a global scale. There still is a compelling rationale for large institutions, but it’s a very different one from scalable efficiency. It’s scalable learning. In a world that is more rapidly changing and where our needs are evolving at an accelerating rate, the institutions that are most likely to thrive will be those that provide an opportunity to learn faster together. Scalable learning offers the potential to shift away from a “diminishing returns” model to an “increasing returns” model where the more people who join together to learn faster, the more rapidly value gets created.