Is that even possible? 

Can the efficiency of an organisation max out? If efficiencies in acquisition are maxing out, it means that the spends to acquire (CAC) and retain customers are not met by the revenue gained from them (LTV). Sure, the organisation would try to trim some costs, but how much can that scale? So arguably, we could stretch the efficiency maxing to a business level. Yes, addition of product lines with higher margins and up/cross sell, but how can that be made a sustainable advantage?

Additionally, the bigger an organisation becomes, the higher the probability of silos. When each of them work towards becoming more efficient, it might be at the cost of  the overall efficiency. This is especially so because resources including budgets and say, tech resources for implementation, are limited. It therefore becomes quite easy to convert the internal journey of efficiency into a zero sum game!

Should scalable efficiency be the goal?

This post on Farnam Street makes an excellent case for efficiency making us fragile. Efficiency can be great when the environment is stable, but is hardly the case for any business today. Inefficiency, on the other hand might help discover paths that could lead to the same goal, and useful in an environment which does not support the hitherto efficient methods. Inefficiency, therefore, is not to be confused with ineffectiveness.

Not to mention “intellectual debt”, a wonderful concept I picked up from an article on automated thinking. It’s possible to discover what works without knowing why it works, and then to put that insight to use immediately, assuming that the underlying mechanism will be figured out later. As automation spreads across the various domains of an organisation, and efficiency is the only goal, the non-obvious trade-off is the ability to think and make decisions based on first principles.

That leads to the obvious question, what is the alternative?

Building an alternative

An alternate to both scalable efficiency and intellectual debt is scalable learning. (Arguably) scalable efficiency is built on institutionalising knowledge, and again, that can work well in a stable environment. But when the environment is not stable, the ability to think, execute, fail/learn, regroup is more crucial. Developing knowledge becomes more important than sharing.  This is a subject John Hagel has been writing about for a few years now.

The link above has excellent thoughts on how to build organisations based on scalable learning principles. Another excellent framing and application method I (re)discovered recently is Venkatesh Rao’s “Leak-before-fail“. A type of built-in inefficiency in the system, controlled slack. Extrapolated, this leads to a larger principle – designing for economies of variety – thus creating a potentially anti-fragile system.

The way I see it, scalable efficiency, and the economies of scale lean towards being a zero sum game, scalable learning and economies of variety, on the other hand, can help create a non-zero sum game.

The consumer, irrespective of his touch point, will expect a consistent and probably even a customised experience,  basis preferences communicated earlier, and transactions which can only happen if the functions talk to each other. And it is in that context that I found this (slightly dated) post by Dave Gray very interesting.

He cites a talk by John Hagel, in which it was mentioned that “the average life expectancy of a company in the S&P 500 has dropped precipitously, from 75 years (in 1937) to 15 years in a more recent study.” In this context, he then goes on to dissect the design of companies – from a machine like structure with focus on control, maintenance and leading to eventual wearing out… to a design based on organisms or complex structures built by humans, like cities where there exist flexible ecosystems, a shared identity and an early seizing of opportunities to grow.

Within the same analogy, he also then shows how a ‘machine’ design also brings in a “design by division”, resulting ultimately in function based silos. The alternative is “design by connection” which goes on to the Social Business Design concept and includes crucial elements like culture, starting small and scaling and so on.

There is another interesting angle to this – the way much of this data (I have only social platforms to rely on now) seems to be flowing, it does not necessarily have to be the organisation that uses it best. It could be any of the middlemen – from retailers armed with sensors to a platform like Facebook/Foursquare/Twitter/Groupon (the last entity is talking to cash register manufacturers to have their button pre-installed at retail cash registers!) to super users. So perhaps it is time for brands to take a more structured view of data and its custodians. I have a feeling that it will have to be a hybrid model of design by division and connection.

until next time, data open