When, and why, did we start taking about businesses ‘scaling’ instead of just growing? Is it because it is the fashionable term or does it actually convey something which ‘growing’ does not? On the face of it scaling would seem to be an attractive term because it suggests that, if a business can be established successfully on a small scale, then it can be turned into a bigger successful business by scaling it up. But does that work in practice – or are there limits to what can be ‘scaled’?, asks Professor Simon Bridge.
For example if you were out walking and wanted to cross a small stream, a plank of wood might serve as a suitable bridge. Then, if you encountered a stream twice as wide you might look for a plank twice as big. Actually, being twice as wide and twice as thick, the new plank would be four times as strong because its strength is proportional to its cross-sectional area – however its weight, being proportional to its volume, would go up by a factor of eight.
Therefore, if a plank is continuously scaled up to serve as a bridge for ever bigger gaps, eventually it would be so large that it would collapse under its own weight. Consequently, in this situation, there are limits to scaling and, if ever longer bridges are needed, then steel has to be used instead of wood, and trusses instead of simple girders – and eventually a change to suspension bridges. Which is why big bridges are not scaled up versions of small ones.
Scaling
Businesses also have to change form as they get bigger. A bigger business does not have bigger employees, it has more of them, and managing large numbers of people requires a different approach to leading just a small team. Robin Dunbar even put a number on this: 150 and showed that throughout human history it has, more or less, been the maximum size of close-knit groups as varied as cohesive communities and army companies.
Bigger groups exist but they require more formal structures and sub-divisions – and that also applies in business. Thus Dunbar’s number and its implications are one reason behind Edith Penrose’s observation, over 60 years ago, about business growth:
With increasing size both the managerial function and the basic administrative structure have undergone fundamental changes which profoundly affect the nature of the ` organism ‘ itself. The differences in the administrative structure of the very small and the very large firms are so great that in many ways it is hard to see that the two species are of the same genus. … [and] we must look on them differently; we cannot define a caterpillar and then use the same definition for a butterfly.
Butterflies are not scaled-up caterpillars and Geoffrey West in his book Scale has a similar message. He explores the scientific rules that explain the limits on scaling. For instance, due to the requirement for a constant flow of blood in capillaries, and therefore a distance between them and a pulsing heart, a shrew is as small as an animal can be – while insects can be much smaller.
Also, because of the need for legs which can bear its weight and a surface area large enough to cool it, an elephant is approaching the upper limit of size for a land-based animal.
While West suggests that cities are not similarly restricted in size, businesses are – and the bigger they get, they more they limit their potential life. Indeed a sample of companies listed on the New York stock exchange at the time he looked appeared to have a half-life of only ten and a half years – so very few would last for 100 years.
However he pointed out that some businesses do appear to be exceptions and live for hundreds of year – but they are invariably enterprises which have not tried to grow but have found a niche which they concentrate on serving well.
Therefore, if businesses cannot just continuously scale up as they grow, is it helpful to talk about them ‘scaling’? Further, if growth is ultimately bad for business life, should we even continue to advocate it – as if it was the natural and expected aim of every business? Is this preference for the term scaling, as if by using the word we could make it possible, a symptom of a wider form of wishful thinking?
Because governments want their economies to grow they create departments and organisations tasked to encourage and assist businesses to grow. But do the people concerned then think that businesses ought to be trying to grow – as if in some way it was their natural state? It used to be thought that plants had a natural drive to grow and therefore that young plants had a sort of growth imperative and, given sunlight, nutrients and water, would grow.
But Nicholas Harberd, in his book Seed to Seed, describes how he found growth inhibitors in the DNA of the plan he studied. These inhibitors normally prevented growth but could be negated by hormones which the plant would produce in appropriate conditions That might seem strange but he suggested that those growth inhibitors served to prevent the plant from growing in situations where, because of limited lasting resources, a bigger plant might not survive. So do many business owners also value survivability more than growth for their businesses – and is that, rather than a constant search for growth, actually the norm?
Should we therefore try to encourage and assist, not business ‘scaling’ or growth, but business success, whatever that might be for the people concerned? Or have we become too accustomed to the pursuit of growth despite the increasing evidence that our world has finite resources?
Nicholas Harberd, Seed to Seed: The Secret Life of Plants (London: Bloomsbury, 2007)
Edith Penrose, The Growth of the Firm, (Oxford: Oxford University Press, first Edition 1959)
Geoffrey West, Scale, (London: Wiedenfield & Nicholson, 2017)
