June 11, 2014
Even before I started Compass I’ve always been a student of business. Not in the business school sense, but more from the perspectives of corporate culture and competitiveness. Although there are some objective measures for both of these areas, I believe that they are ruled more by subjective attributes that are virtually impossible to quantify. In analyzing the arc of companies that I’ve worked for and competed against, perhaps the biggest question that I have found myself coming back to time and again is, “how big is too big”?
For many businesses the question of “have we gotten too big” would fall into the “good problem to have” category, and it is certainly a goal we dream of attaining at Compass, but as we look at the history of businesses of all types can we really say that a company can never be “too big”? Certainly size can be viewed as a competitive advantage for a company in terms of financial resources, expertise and at least the perception of competency, but at some point it also becomes an issue in areas such as innovation and the ability to respond to new competitive threats.
Getting bigger does not have to mean becoming sclerotic—although the US auto industry does offer an effective counter argument—but it does aid in the generation of the baggage that a firm must account for in approaching the marketplace. Questions that new firms don’t have to address weigh heavier as a company gets larger. Issues like how does a new offering affect the existing product line and how do we react to new directions in technology force the large organization to spend as much time thinking about defense as they do offense. Cisco, for example, is grappling with these same types of questions as the see revenues dropping from their core routing and switching business—despite overwhelming market share—while attempting to leverage their size to make their Application Centric Infrastructure (ACI) a de facto SDN standard. Although they plan on making OpenFlow compatibility an option in their Nexus 9000 switches, its availability as an open protocol opens the gates for a number of smaller competitors who would love to take a chunk out of their gargantuan competitor.
No industry is immune to this question of “bigness”? Despite our historical fears of companies gaining a monopoly on the market, new innovations and competitors inevitably rise up to re-level the playing field. Standard Oil once ruled the oil and gas markets until someone hit pay dirt in Texas, Blockbuster was king of the video stores until the ability to stream content made the idea of going out to rent a movie seem archaic and a host of alternatives have chopped Microsoft’s Internet Explorer down to size. In each of these instances, and countless others, it is difficult to say that if they had been smaller they could have more effectively dealt with these new challenges, but it is unarguable the “nimbleness” is the first casualty of attaining a certain level of industry stature. The issue, of course, is at what point is the line crossed? Is it tied to the number of employees, or is it a by-product of financial achievement, going public for example? Perhaps it is a question that each company can only answer for itself.
Managing growth is perhaps one of the most difficult issues that all companies must address, and adding revenue and market share are nothing that any company would ever consider to be a bad thing. At Compass, for example, we certainly want to become as big a company as we possibly can without losing our corporate culture. Corporate success is really no different than anything else in life in that as you move forward, the challenges that you face change accordingly. Shakespeare didn’t say “Uneasy lies the head that wears the crown” for no good reason, but that will never stop any one from trying try it on for size.