Small is Beautiful

I’ve recently started re-reading an old book that seems appropriate to the ideals of Upstarta.

It is ‘Small Is Beautiful’ by E.F.Schumacher. Subtitled ‘A study of economics as if people mattered’, this book was written in 1973 and seems even more appropriate given the recent financial state of the world. If Schumacher was alive he’d be pointing to this book and saying ‘I told you so!’

Schumacher covers many topics from conservation, macro, micro and Buddhist economics through to forms of ownership and government, but of most interest to startups would be the final chapters. In the last chapter he takes an in depth look at a business started in 1951 called the Scott Bader Commonwealth. The rules for this business were as follows (edited for brevity):

First: The firm shall remain of limited size. No greater than 350 people or so. When it grew beyond this due to demand, new independent businesses were to be created.

Second: There was to be no more than a 1:7 ratio between the lowest and highest salaries in the organisation.

Third: All members of the organisation are to be co-partners. They cannot be dismissed other than for gross personal misconduct.

Fourth: The board of directors is full accountable to the Commonwealth. i.e. The employees have say in how the business is run.

Fifth: 40% of profit goes to the commonwealth, 60% to running the business and taxation. Of the Commonwealth’s profits, half goes to the workers and half to a designated charity outside the organisation.

It was predicted that this arrangement could not work. It did very well, at least until the time of the book’s publication.

I don’t suggest that one should take on this model in a startup but it is worth thinking about what unconventional structures may have to benefit the business, it’s workers and the world.

If you happen to be in a secondhand bookstore this old tome is worth picking up.

Modularity vs Integration

Modularity is about business processes as well as software or system design. The Innovator’s Solution (Clayton Christensen, Harvard Business School Press) analyses this very well, identifying modularity as a phase, or more accurately, a state in the going development cycle.

Choosing modularity as a core objective, as many appear to do these days, does not appear to be effective. Trying to make something modular when the subject is not fully understood and the interfaces not clearly defined and predictable can be fatal.

When, in order to make a product or process good enough in the current state of its market, it needs to be tightly integrated… then that’s the way to go. The system will evolve to a point where modularity at that point makes sense (for a period of time), with tightly bound sub-systems.

Looking at products (including software), consider the business processes in the market. For instance, the packaging (not necessarily physical, but documentation, support and other services) and other logistics are also part of the whole, and may well be suited to modularity (e.g., one company offering support for a product that’s built by another) even if the product itself is tightly integrated at that point in time.

In summary, modularity is not better or worse than integration. Each has its place, depending on the state of the market/ecosystem where the process/product/service operates. Part of a system can be in a modular phase, where another part of the same system needs integration.

Time to Market

At a user group meeting last week I got talking with someone who was working on an interesting PhD project. It was not IT related, but as part of the PhD he was developing a website offering a really useful service to people. When I asked “so when will the website go live?” he answered “mid next year”: PhDs are a three-year thing and he needs to span the time.

What a pity. That site should go live as soon as possible! Also, there might be some business in it, but with a longer time-to-market you run a serious risk of “entering obsolete” or at the very least encountering seriously changed market conditions. The world moves faster these days.

And think about it… once online, there’ll be data to collect and analyse that’ll also contribute to the thesis, that in itself will take considerable time. You’d want to get the site up as early as possible, for this reason and to have more time to learn from the real world and fine-tune the service.