Companies as living organisms

People have compared companies to living organisms before. People like Arie de Geus have argued that, just like organisms, companies learn, evolve, and eventually die. Now there's data to suggest this comparison is not just New Age and metaphorical. It's scientific and mathematical.

Geoffrey West, a physicist who has studied quarks and dark matter, has been looking to see if any of the scientific principles that apply in astronomy and physics also apply in the worlds of biology and the social sciences. He has zeroed in on "scaling" phenomena, taking a look at how the various characteristics of a system change when size changes.

What he's discovered is that, for all their inherent complexity, both companies and organisms scale in a predictable way, actually according to a simple power law. Size predicts growth rates, metabolic rate/profitability and life expectancy.When you compare an elephant to a mouse or an ExxonMobil to a Twitter, you see very consistent scale effects.

West has also determined that organisms and companies do not scale linearly with size--they scale sub-linearly. For every x times bigger an organism or company is vs. another, its system characteristics only change at a fraction of  the size increase. For companies that means that operating costs only increase at a fraction of the rate of increase in the size of the company, leading to economies of scale benefits for large companies over smaller ones. That sounds good but the same formula also suggests that companies, like organisms, are eventually doomed to die. (Death for companies comes from the fact that profitability will decline towards zero.)

An important difference between companies and organisms is that the company data show a lot more variation than the organisms data. There are many more outliers, suggesting that companies have more control over their destiny than organisms do. If large companies are aware that the natural scaling laws are dragging them down and they look out for and react to the warning signs, they may be able to stop and even reverse the aging process before it's too late.

Photo: Paramecium by cesarharad.com on Flickr

Jack of all Trades or Master of One (continued)

Last week, I reported on the work of Alexander Chernev who has been trying to determine whether a narrow, specialized positioning where a product focuses on one feature works better than an all-in-one solution.

His main conclusion is that consumers tend to devalue the perceived performance of features if they are bundled together compared to a product with just one feature (unless the bundled products are priced higher).

Today, I listened to a story on Marketplace about healthcare which has parallels. According to the Robert Wood Johnson Foundation, family doctors aren't getting the funding or the respect that they ought to from the National Institutes of Health.

In his commentary, Robert Martensen says that this is wrong. He makes the case for family doctors by comparing Pierre, S.D., where there are only a few medical specialists with Boca Raton in Florida which is chock full of them. Turns out that people live longer in Pierre. Martensen thinks it's because family doctors play a critical role in integrating and coordinating health care which specialists simply can't. As he says of the specialists: "Because their focus is narrow but deep, few of them, however well meaning, are likely to have the big picture about you."

Bringing this back to the world of marketing, is this the challenge that integrated marketers have vs. specialists? They may have the potential to provide the best solution because they can develop a coordinated plan across multiple disciplines but they don't get the respect they deserve vs. a specialist who offers just one solution/approach.