Seth Godin today wrote a post on the right size for an organization and how technology has enabled companies to work with a very few people.
He gives a good examples about deciding the scale of our business.
Creative Computing delivered an MP3 player. That was the unit. Apple changed this and delivered the player, the software, the music store, the headphonesand the retail outlet. Both sold music, ultimately, but Apple choose a far wider unit. Very risky, but it worked.
He gives another example of Ford where scale doesnt look good...
Ford Motor used to hire shepherds to tend Ford sheep on Ford land so they could weave Ford fabric to put on the seats of Ford cars. Today, of course, that's crazy. One day soon there will be car companies that have 200 employees.
What is the right scale for a business ? When should we scale up? When should we ramp down?
I feel when company feels it should expand vertically like Apple did, only if it can dedicate considerable amount of resources to do that and work on it as if it is their original business, if they are going in only for the cost arbitrage, then surely they will fail.
When should they scale down - When they cant invest into improving each part of the solution, then they should considering leaving that.. Taking the bigger scale is tougher, riskier and more rewarding... Even then whereever technology helps anything be done more easily and efficiently, it should be adopted as soon as possible.
One question which arises is what to do with those who are retrenched and lost their jobs.. I feel that if the company is not a dying position, then the best thing is to have some innovations sessions and think of some problems they could solve and get working on them. This way their experience is used, their motivation is increased and it might even contribute unexpectedly to the bottom line ...