Tag Archive for 'Mick Liubinskas'

The artist formally known as liako

Yesterday I switched over my blog to a new domain name: previously Liako.Biz, it now resides as a sub-directory off a domain with my real name (http://eliasbizannes.com/blog). Further more, I renamed myself on the primary micro-blogging tool I use (Twitter) from @liako to @eliasbiz. For most, you wouldn’t see why that matters so much – but for those knee deep in social media, you’ll understand how much of a big deal it can be. In the course of my decision, I realised a few things, so I thought I’d share it here.

Your brand – it matters
I created Liako.Biz in 2005 to document my travels. Although I was partly doing it to explore blogging as a concept, I never realised that my future would be in technology. A year after my trip, I relaunched my blog with a focus on issues I came across in the information and technology sector. The name “Liako” – which is a nickname for “Elias” in Greece and used by my brother and an ex-girlfriend – extended across the web as my online identity. With all these sites I would sign up to, I didn’t think much of it. Turns out those sites now matter.

Due to my work in the DataPortability Project, the concept of online identity has always been on my mind, so perhaps I am a bit more involved in such thinking than most people and hence why I think it’s a bigger deal. More recently however, I noticed Chris Messina have to go through this thought process as he renamed his Twitter profile. Rebranding yourself is a big deal, that I can understand why Messina hasn’t got around to rebranding his blog. It sounds ridiculous doesn’t it – changing your name on a service is a big deal. The question I suppose is why is it so?

All these technology tools are enabling us to stay connected with other people. Twitter as a case in point: I was pulled into that two years ago after Marty Wells and Mick Liubinskas told me it was critical if you are involved in tech.

We are seeing now beyond the tech community but in our everyday life, our reputations grow and develop based on our online activities. As relationships form and develop through these online tools, an emotional connection is attached with the persona of the person they interact with. As soon as I announced a name change on Twitter, I immediately got a reaction from friends – it wasn’t just me, they literally felt like something had changed – validating the emotional connection people build with a brand.

Twitter _ @EliasBiz

Anyone that has a blog understands how hard it is to build up its credibility. You require hundreds of people to link to you, for your blog to even reach a credible level. So to create a new domain name, you effectively are throwing out all that brand value and starting again. It’s like throwing money away for no reason.

Why it matters
Chris Saad and Ben Metcalfe convinced me I needed to drop my liako brand and go with my real name. It’s just common sense to do that – as your profile in the industry grows, people need to know you by your real brand (your actual name), not some alias which in the flood of other aliases makes it even harder for people to remember and distinguish you.

Twitter as a case in point (again), to get value from the service, you should follow people you don’t already know -which is how I know the people pictured below. These people created their own brand which is fine, but it’s lost opportunity – as far as I am concerned, they are two separate people and unless I know them well I may not join the dots.

Twitter _ Home

Our online identities are no longer a play thing: they’re now an intrinsic dimension to our overall identity. Identity is a crucial thing that we need to protect: it can affect our emotional health due to the standing we have in a community – and it can also affect our financial security due to people compromising it. It permeates our life in more ways than one.

Working in the Internet industry, I’m more acutely aware of the importance of my online identity as it directly relates to my career. But our lives are slowly being transformed by the Internet, and even if you don’t have a career touching technology, your online identity is increasingly going to become an important part of you.

Privacy
From a personal branding point of view, it’s obvious why you consolidate your names. You don’t need to necessarily pick your real name, but you need to stick with one name that makes you unique. If you don’t have a unique name, it makes more sense to pick a nickname. However, our actual names are the only brands that matter. We are not companies selling products; we are people selling ourselves.

But something that is worth considering are the privacy implications of using your real name on everything. A Google search for me will now bring up my real time thoughts on Twitter, which sometimes are about other people – not something I want happening in real time. Using multiple names actually can be a good thing, as I don’t want some girl I meet in a nightclub to be able to instantly track me down online (which has already happened – jut because I meet someone doesn’t mean I want to be permanently connected with them!). Separately, I’ve recently had some people harass me (non-stop communicating via multiple channels that I wasn’t responding to) and stalk me (turning up somewhere uninvited), and it’s frustrating to not be able to control the communication from them as you are everywhere and cannot really hide from them.

So why did I do it
Although I’ve developed some goodwill on the Liako brand over the years, I am aware my real break into the industry hasn’t happened yet. So better to start fresh now – and do it right. My future is in the industry, and as painful as it has been to change over – getting it right now will pay off later. I’ve grown accustomed to Liako (my real world friends call me that now!), but using a nickname is exactly that. It disappoints the creative inside of me, but when we are talking about our identity – unless you’re an entertainer seeking attention – it’s worth being boring about that.

Postscript:

      people that subscribe to my blog via feed readers shouldn’t be affected;
      all my posts have been fully ported here so nothing has been lost;
      legacy links will get automatically redirected to the equivalent new URL

The change brought by the Internet is a correction

I was sitting at a restaurant with Mick Liubinskas of Pollenizer the other week, who I regard as one of the best minds in the Australian tech scene. Mick in a previous life used to run marketing at Kazaa, which was the music-industry’s anti-Christ during the early 2000s. Kazaa was one of the higher profile peer-to-peer technologies that made the distribution of music so widespread on the Internet.

I said to Mick how one of the things that plagues my thinking is trying to work out the future business models for content. Naturally, we ended up talking about the music industry and he explained to me the concept of Soft DRM which he thought was one avenue for the future but which the record labels rejected at the time.

DRM

DRM or Digital Rights Management is the attempt by companies to control the distribution of digital content. Hard DRM places control over access, copying and distribution Рwhile soft DRM does not prohibit unauthorised actions but merely monitors a user’s interaction with the content.

The basic difference, is that Hard DRM protects copyrights by preventing unauthorised actions before the fact, while Soft DRM protects copyrights by giving copyright owners information about infringing uses after the fact.

As I questioned Mick on this, he compared it to us sitting in that restaurant. What’s stopping either of us from getting up and not paying the bill? The restaurant let’s us sit, serves us food – and only at the end do we pay for the service.

Hard DRM is not congruent with our society
Part of the music industry’s problem is that they’ve focused too much on Hard DRM. And that’s wrong. They could get away with it in the past because that’s how the world worked with controlled distribution lines, but now that world no longer exists with the uncontrollable Internet.

In a restaurant, like any other service industry, the risk that you don’t get paid is real but not big enough to prevent it from operating. Our social conventions are what make us pay that bill, even though we have the ability to avoid it.

To insist on the Hard DRM approach, is going against how the rest of the western world works. Our society is philosophically based on the principle of innocent until proven guilty. Likewise, you pay after a service has been rendered – and you pay for something that has unique value (only scarcity is rewarded). What existed with the media world was unique over any other industry, but unique purely due to technological limitations, not because it was genuinely better.

The record companies (not the artists) are hurting
Artists practically sell their soul to get a record deal, and make little money from the actual albums themselves. This change for music is really a threat to the century-old record company model, of which the Internet has broken their distribution power and their marketing ability is now dwarfed by the potential of social media.

Instead of reinventing themselves, they wasted time by persisting with an old model that worked in the industrial age. They should have been reflecting on what value people will pay for, and working out the things that are better than free. Unfortunately, the entire content business – movies, television, radio, magazines, newspapers, books and the rest – have made similar mistakes.

The Internet is transforming our world and every object in our lives one day will be connected. In some ways, the great change brought about by the Internet is actually a step back to how things used to be (like it is for music where the record model was an anomaly in our history). Even the concept of a “nation state” is a 20th century experiment pushed after the first world war, where for our entire history prior to that, our world was governed by independent cities or empires that governed multiple ethnic nations – the Internet is breaking down the nation-state concept and good riddance because its complicated our lives.

Future

We need to clear the white board and start fresh. The Internet is only going to get more entrenched in our world, so we must re-engineer our views of the world to embrace it. With content, distribution was one of the biggest barriers to those industries to get into, and now it has been obliterated. Business models can no longer rely on that.

We should not let the old world drive our strategies for business because the dynamics have changed completely. If you are looking to defend yourself against an oncoming army – stop polishing the sword and start looking for the bullets to put in the machine gun.

Understanding entrepreneurs

Lachlan Hardy the other week was saying to Mick Liubinskas, myself, and others at the Sydney weekly Official Friday Drinks, that he doesn’t like “entrepreneurs” or at least people that call themselves that because he thinks it’s a silly term. We ended up having a lively debate and explored if there truly is value in an “entrepreneurs” degree. I thought I’d dig into what exactly an entrepreneur is because it’s an interesting term as Lachlan and the boys got me thinking.

Kid entrepreneur

I’ve had the label ‘entrepreneur’ slapped on me twice before without me even realising I was. The first time, I was 15 and lining up in the bank after school. The fat uniform shop lady from my school told me that she needed to get ahead of me, as she obviously had a lot more money to deposit over what she probably thought was me emptying out my piggy bank of $50 in coins. When it finally got to my turn, the bank teller remarked where did I manage to collect all that money (I think it was $5000). I told her I was organising my schools semi-formal, and I was collecting the ticket money. Just after I said that, the fat uniform shop lady waddled past me and quipped: “no – it’s because he’s an entrepreneur” and gave me a look and smile as if to say ‘you smart little bugger‘.

The second time I was called that was at work. In 2006 I pitched a proposal to have social media technologies implemented into the core operation of my rather large firm, which two years on, has successfully occurred. Early on, maybe six months into the roll-out, my home business unit (who would eventually use the technology but had no idea what I was doing behind the scenes in other parts of the firm) gave me an award in front of a few hundred people. As my skinny business unit leader described the story he said the “networking” award which I was being awarded is not appropriate, and instead should be regarded as an “entrepreneurs” award because that’s really what I am.

Weird eh? In the spirit of community, I organised a party for my school mates. Due to frustrations with my workflow, I attempted to make my workplace more efficient. Both those instances, were recognised as entrepreneurial. Fat lady called me an entrepreneur because I had a stack of cash in my hand; my stick-man boss’s boss called me an entrepreneur because I managed to convince senior management though contacts I developed to implement my idea.

What’s the common link?

What is this “Entrepreneur” that you speak of, sire?
According to WordNet, an entrepreneur is: “someone who organizes a business venture and assumes the risk for it“. Or the Oxford dictionary which states: “a person who sets up a business or businesses”.

This is very much in line with how people view the word – but there’s a problem with this definition. Let’s have a high-level look at the types of entrepreneurs.

Immrant entrepreneur

There’s the glorified king of them all – ‘The Entrepreneur’ – who starts a business and then lists on the stock exchange or gets bought out for one-hundred million dollars and makes it as Times person of the year. WordNet and Oxford definition’s through and through.

A second type, the intrapreneur, is an entrepreneur stuck in a big company but displays the same traits as a ‘real’ entrepreneur. The defining difference being they don’t take the same risk of capital loss as their ‘real’ buddies. And correspondingly, don’t get the same rewards.

A third type, is the social entrepreneur like my friend Donnie Maclurcan who started up Project Australia. This is an emerging type, but when people hear about them there’s a bit of confusion. I mean, how does a non-profit venture yield, um, profit – isn’t that what entrepreneurialism is about?

All the above are entrepreneurial, but they don’t match the definition because of a misguided understanding: we are using money to measure it.

Entrepreneurialism is more like a combination of a risk-taker (different from gambler) and passionate expert, who generates value in our society. It’s almost like a function in our society – some people are conductors, others are saxophonists, and others play the violin. Different people pick their specialty: the violinists are playing music according to their function and develop accordingly; the conductors similarly according to their function. Extend the definition with people that love to be employees, and others that love to be managers. There is a different skill class required, and quite often, people in one class don’t want to be in the other (like how some computer developers who love their trade, get pulled away from their passion into management which they call admin). An entrepreneur, like an bridge engineer, is someones who’s flagged ‘I’m on the lookout to build structures of value’ except the former is building structures for markets as opposed to the latter who is building structures for transportation.

The traditional definitions we use are inconsistent. How can you describe something using such a one-dimensional view as finance when really what we are describing are components to a job function or perhaps even a type of labour class. They are almost like an artist, trying to perfect the synthesis of the four factors of production: land, labour, capital, enterprise. With the rise of the corporation as the dominant institution in our society, we’ve forgotten that our society was built by individuals who would otherwise be called an entrepreneur: sole traders selling to a market. We now group ourselves in a collective (a company) for the apparent ‘economies of scale’, as we can minimise our transaction costs.

Here’s an illustration with how the definition is at conflict with how we use it from the “risk” point of view. Most family businesses, like the local fruit-shop when they started, raised capital in the form of a bank loan. They very much are taking a risk there (the risk of bankruptcy) – but we probably don’t spare a moment in thinking the risk they took makes them “entrepreneurs”.

Contrast that to people innovating in technology. Typically a college kid comes up with a great new idea, and he then goes and raises funding from angel investors and then venture capital. What’s the risk there? If the venture fails, the money does not get enforced on the entrepreneur to be paid. People simply pack up shop with low heads and that’s it. In the upside, sure the entrepreneur needs to share profits. But if the only loss they face is the feeling of disappointment and perhaps, the $2 in capital they contributed to start the company, does this mean they are not entrepreneurs?

A better definition
This definition is from my favourite Frenchman, or at least, the guy that made me stop hating the French – and that’s saying something! (Greek waiters and French chefs do not work well under the same roof!)
Twitter _ Loic Le Meur_ _entrepreneur_
Loic says it’s simply someone who moves resources from lower yield areas to higher yielding ones. The man that coined this was an admirer of Adam Smith’s “Wealth of Nations” but felt Smith underplayed the role of an entrepreneur in capitalism. So if you have a fan in your house cooling a room where no one is sitting, it’s moving that fan to the room where there are 20 people that are boiling hot due to the hot weather. It’s a person who has the initiative to reallocate a resource to where the demand and appreciation of that resource is. Bringing it back to economics, entrepreneurs are one of the major reasons our market economy works – and the market economy, despite it’s weaknesses in some areas, is a brilliant system at organising our society.

The WordNet definition is the typical interpretation of an entrepreneur in society, whilst the Loic interpretation is truer to the source of the word. Reconsidered in this light, I’ve now come to appreciate that as annoying entrepreneurs can be (it takes a certain kind- very much a me, me, me view on things; mavericks who upset the order – which sounds heroic but the reality is that they are a real pain in the arse; and the “shut-the-hell-up-Ive-already-heard-you-talk-about-that-idea-a-hundred-times” trait), we certainly shouldn’t diminish their role in society. And if someone identifies themselves as one, I would say they are simply flagging their place in the personality tree: don’t mock it, be aware of it.

Silicon Beach Australia – the movie!

Last year in June, I said on this blog:

…David Bolliger coined the term “Sillicon Beach” to refer to a bunch of Sydney based start-ups – continuing an international trend of regionalising hotspots of tech innovation that aspire to be like Sillicon Valley (my other favourite is New York as Sillicon Alley). Although it‚Äôs not the first time the term has been used, everyone from Perth, Melbourne, Newscastle, Brisbane, and the rest are claiming they are the real silicon beach.

So seeing as our population is only 20 million, and we are one big island continent anyway – I think I am going to settle with calling Australia’s tech industry as a whole as “Silicon Beach”.

After having separate discussions with Bronwen Clune and Mick Liubinskas, I’ve been thinking over the last few months about how to actively build a strong Internet community here in Australia. With Bronwen, I was investigating the possibility of my firm hosting a conference; with Mick, I’ve been doing weekly Friday drinks as a way for people to get to know each other. And so the other week, I registered the domain name SiliconBeachAustralia.org with no real plan on what to do with it. To me, it’s just seemed like the natural name to brand such attempts.

Although the site’s been up for a few weeks, I’ve been busy. But it was only last night that I created a google group, and announced it by inviting people I knew. It hasn’t even been 24 hours, and already some great discussions have been had with individuals I consider to be pillars of the Australian community…as well as people I didn’t even know existed!

Many thanks to Kim for his coverage as well as Renai for raising awareness. It’s satisfying to see such an open embrace by so many good people.

So join the conversation! As I said on the discussion forum: “Now what? Plan – what plan?”. Last time I used that slogan, it was as the title of this blog when I went backpacking around Europe for nine months – and that was one of the most amazing experiences ever. Here’s hoping for another roller coaster ride.

Organisations need to be a size 12

Last week at the top 100 web applications launch, Ross Dawson made a brief remark that I feel should not go ignored. He said that technology aside, companies like the ones in the top 100 list have a huge impact on our society; They are redefining our society as a whole, with new ways of doing things such as how organisations are structured. On that same panel Duncan Riley was crying out foul about the problem with Australia is that venture capital money is nothing like how it is in the US (which is offered for riskier ideas, at a quicker turnaround, and with bigger amounts) – but a retort made by Phil Morle brought this common whine in the Australian industry to a different level: “You don’t need to be a billion dollar company to be successful.”

In the context of the discussion, this can be taken in several ways about the state of the venture capital industry and its interaction with Internet start-ups, but take a step out of that mindset and instead explore the opportunity with the point made by Ross. Organisations, like incorporated companies of today, are something we should and can re-examine because a billion dollar company is not what the goal should be. Why? I’ll show you.

(Dis)economies of scale

Economic theory proclaims that the larger a company, the better. In the literature, this is regarded as ‘economies of scale ‘ whereby things become cheaper the bigger firms become. For example, the cost of capital is cheaper for a large a company (for those without a financial background, that simply means things like the interest on a bank loan or how much a shareholder expects as a return in dividends or share-price growth) . Operating costs can also fall, which if you think about how retailers will offer discounts on bulk buys – if you are a bigger company, you buy more and therefore get those deals (as well as have influence to create those deals).

Even if you don’t have an economics background, I am sure you are familiar with the concept given the ‘growth’ obsession we have in our world: bigger is better or more is more. However something we should be equally aware of is the ugly cousin: diseconomies of scale . Even economic theory recognises that you can get to a stage where you are just too big, where in fact each extra increase is no longer creating economies but the opposite. It’s a bit like trying to carry the shopping from your car boot: some people can carry a half dozen bags to save on multiple trips; however there is a point where they are carrying too many bags, and the extra benefit of less trips back to the car is in fact outweighed by the increased risk of dropping the bags and hurting their back.

We live in a world, where the growth obsession of our world fails to recognise the ugly cousin. We constantly hear about growth, but what goes up must come down – we never seem to hear when a company is “big enough”. Building on Ross’s point, maybe the answer to that is not that we need to identify the point on the continuum where the diseconomies kick in; instead, the new opportunities offered by technology can instead determine how we can organise resources with the least amount of size.

I have a client that is regarded as one of the biggest advertising agencies in the world. I’m sure anyone with experience with the internal operation of ad agencies will recall how damn complicated they can be – which I think has to do with the ego prominence of the creative industries. Everyone needs differentiation in those industries (and so, the one company is in fact a group of multiple agencies like their own mini empire or stand alone business unit). The complex organisational structure that my client operates in, made me think this is what modern day socialism is like: create a large organisation that becomes so complex, that no one understands it – and in the process, have multiple over-lapping jobs filling functions that are not needed. Giving people jobs for the sake of it. As a case in point, one of the guys in the finance department told me how there was a girl that no one knew what she did. One day she resigned, and whilst one would expect strain on a group with one less staff member, what actually happened was that no one noticed any difference in the output of the team!

Little did I realise however that soon afterwards as I performed a internal (non-client facing) role that this advertising agency wasn’t unique with its socialism. Aside from the fact I’ve met people at my firm that I still couldn’t tell you what they do, my experiences had me see another bigger negative about a big organisation that can be summed up in one word: people. And just like how people by nature are complicated, so too will my answer as to why.

My firm employs 140,000+ globally and about 5,000 in Australia. Whilst that is a high number, more remarkable is the fact it’s a professional services firm: we are not talking about 140,000 high school drop outs but a well educated work-force. As a consulting firm, client facing staff like myself can be in a group as big as 200 people (in each city). There are effectively another dozen or so people with exactly the same skill set and job role as me, but we are just resources that go out to different clients, so ultimately we are doing the same work. That side of my job at my firm has seen me experience a very efficient, lean machine with the fundamental economic concept of “allocating scarce resources” brutally evident with the language of how we run our projects (I even just called myself a resource above, not a employee). However it’s that internal role which had me see the supporting ecosystem for client-facing groups like mine and which made me realise the weaknesses of a big company. I couldn’t tell you how many of the 140,000 people are supporting the client-facing professionals, but I would hazard a rough guess to be about 20%. The nice way of saying it, is that in Porter’s model , that 20% are the support staff to help execute our primary revenue-generating activities. Another way of putting it: that 20% are the overhead.

Overhead matters for two reasons in this discussion: it slows down an organisation (ie, decisions) and it can definie its existence (ie, costs). Each of these points are worth looking at separately.

lego men

“Frustration” defined: the sum of all people you need to work with to get something done in the last month

People and decisions

That internal role I discussed above, was about implementing a new technology at my firm. I could write a book about the experience, but suffice to say I can recall one incident which is a perfect reflection of something I learned about getting something done in a big company.

This particular technology allows you to add extensions that can drastically alter the functionality of the product. These ‘plugins’ are remarkably simple – we are talking about uploading a single file that is perhaps 50kb (smaller than a typical word document) – and once uploaded via an admin interface it can be activated for immediate effect (with documentation fully provided on the web). Indeed, in the early days of the technology’s roll out, I would often add new plugins as I felt the need arose, but that quickly ended when I was forced to concede that’s not the right way to do things (as it’s not my job). So therefore, if I ever wanted a plugin, I would have to e-mail the IT guys, who would then review it, test it, and then upload it. This is fair enough because adding a plugin could destabilise the system losing valuable data.

I might also add whenever I sent those e-mails after I no longer installed those plugins myself, I would follow up a few weeks later only to find no one had got around to doing it.

Why the significance of this story? Something that I could do in 30 seconds instead takes weeks because I work in a large organisation. For example:

– write an e-mail asking for the request explaining why: 30 minutes

– following up on the status of my request: 60 minutes of e-mails, listening to justifications for inaction, etc

– escalating to a superior when I felt things were taking too long: 60 minutes of meetings and e-mails, as I stressed the importance of a particular plugin for the productivity of one of our pilot groups

…And that’s in raw effort. That’s not accounting for the time stretch of a few weeks (actualy months in one of the cases).

Even though I had the skills, understanding, access, and ability to do this – I couldn’t due to lines in the sand of what I was allowed to do. And because I couldn’t, what would take 30 seconds for a small start-up using the same product, it would in fact take me hours upon weeks to get another few people whose “job” it is to do it.

This example is more humourous than harmful, but when it comes to large organisations, it’s a perfect characterisation of how things get done. I can assure you, all big companies work like this – by definition, a company that is Sarbanes Oxley compliant has so many segregation of duties it will make you cry with laughter. If I shared with you some other stories, that laughter will turn to shock, when you come to the truth of how companies actually operate.

People and cost

At another one of my clients, they have been undergoing some massive growth over the last few years, with a large organisational re-shuffling as this rapidly growing company took shape. A guy I’ve got to know that’s been there a while (and which I might add, we have no idea what’s he actually does as a job despite his title) told me something quite funny. His observations over the years, is that as a company increases in size, so does a corresponding increase in headcount irrespective of any other factor. By example, he explained that lets say a new person is appointed to lead a new team – they now require a personal assistant. And that new team now needs a dedicated IT guy. And then an HR representative. And the list goes on – rather then a company consolidating on its size (ie, merging job roles to avoid duplicity), what he thinks is that as the company has grown over the years, there is always a corresponding increase in head count regardless without any obvious reason why. It’s almost like a natural externality of growth is headcount.

Payroll is a significant cost for any company which can be up to 80% of the total expense of an organisation (my former headmaster told me that, that being a knowledge intensive organisation: a school). So as my above discussion highlights, I obviously find it amazing how such a significant cost is not controlled because management don’t actually understand what staff they have (and as an aside, current enterprise social networking technologies specifically target the real need of documenting what expertise a company’s staff actually has because no one knows). Whilst this may seem like an important point from a controlling costs point of view, I wish to raise it’s actually a hell of a lot more significant.

Let’s say a company needs one million dollars a week to pay for things like wages, electricity, office rent etc. In other words, a company needs sales of minimum $1million a week purely to stay alive – to pay for the stuff that in theory is meant to help it make money in the first place. This is without regard to meeting profit targets as expected by a company’s owners and other such factors. If that company can’t cover that $1million, it is technically insolvent. Meaning, jail time for the directors and senior management for running such a company.

So if a company has these commitments, it ties their hand. They suddenly become very risk-averse; where experimenting with a better way of doing something may threaten their ability of making that $1 million a week. Couple that with the fact that most organisation’s single biggest expense is payroll, with lists of employees that no one person exactly knows what they are doing, and it makes you wonder. Companies effectively exist to cover their expenses, but if they actually dug down, they’d realise those expenses may not even be something that require. In effect, a company’s entire strategy and positioning in the market (ie, prices that take into account enough to cover overhead) may be dictated by something that might not be needed. A big company exists purely to feed the beast, making decisions that may not be what a company should be making if it didn’t have to worry about its overhead.

small is the new big

Small is the new big

The power of 12

Going back to how technology is enabling us new ways of organising, if the only reason why a company needs to get big so it can get economies of scale, why don’t we flip it? We no longer live in the industrial era where economies of scale are the goal. Instead, the biggest cost we have now is time; if the expertise is in the people we employ, we need to scale operations so as to give them money and working conditions that suit their lives. This isn’t relevant only for professional services, but for any web service – the fact you provide a service and not a manufactured good means its driven by people not metals.

Of course, a company’s strategy can either be cost-competitive (like Dell) or differentiation (like Apple). But this doesn’t negate the fact, that a company should only have costs that directly add value for the customer (which is why we have innovations like activity-based costings which allocate overhead directly to customer activities, but that’s another story). Given that people are the biggest expense in companies now, we need to question, do we really need that many people to provide that value?

I have a rule I follow in life which has grown out of my experience with how things go wrong: complexity. The more factors, the more likely something is going to fail. For example, if you are driving to a wedding – the more traffic lights, the more likely it is going to slow you down. The longer you have to drive, the more likely you will get involved in a car accident. If you need to drop something off on the way to the wedding venue, if you need to make two separate stop-offs, the more likely you will be late as opposed to one drop off (regardless of the distance, but based purely on unforeseen variables). So basically, you need to minimise the ‘nodes’ in the line. Even when things look they are fine, the more variables to success, the increased risk of something happening that will distract that goal.

However, I am willing to concede, you can’t be a minimalist for everything, which is why I am settling for the number 12 – keep your variables, especially people, to a maximum of 12. Aside from religious connotations which makes the number so omnipresent in our lives, the reason I like it is for the same reason it’s the base number of measurement systems used through history , like the still dominant imperial measurement system. That reason being, it’s one of the most versatile numbers. Versatility and agility to the market is what success is now; not economies of scale.

If designing an organisation, you want a core team of 12 people. Those 12 people together, should be able to do everything that needs to be done to meet the needs of the customer. And if the organisation needs to scale for whatever reason, then those 12 people should have specific functions that they own. The number 12 is magical, because for the same reason it was used in the measurement systems in the past, it is so versatile: you can re-group your 12 people into even teams of two, three, four or six. Don’t underestimate the impact team dynamics like that can have – or using a term that Mick Liubinskas says as often as a nun does her Hail Mary: it emphasises the importance of “focus”, in an agile way that can easily adapt to situations. Yet at the same time, you will find with 12 you can get almost anything done if you truly have a talented team. Still don’t get 12?

The number twelve, a highly composite , is the smallest number with four non-trivial factors (2, 3, 4, 6), and the smallest to include as factors all four numbers (1 to 4) within the subitizing range. As a result of this increased factorability of the radix and its divisibility by a wide range of the most elemental numbers (whereas ten has only two non-trivial factors: 2 and 5, with neither 3 nor 4), duodecimal representations fit more easily than decimal ones into many common patterns

Source: Wikipedia

There are dozens and dozens (whoops, was that 12?) of companies that are small but successful . Challenge yourself: does world domination really equate to a 15,000 person workforce? Focus on getting 12 highly capable people, and you will avoid entering the trap of the big companies today that are slaves to their own existence. We have technology today that could design a radically different organisation in 2010 completely foreign to how traditional business operates. If you explore what smart people have said to complement what Ross originally meant by his comment, you now might also realise that those top 100 web applications represent more than meets the eye.