Another potential drawback is in economies of scale. Theoretically, market-dominant and tightly integrated companies can produce more for less while every piece of the puzzle just fits together.
Personally, I have a pet theory that economies of scale fall start working backwards once a company reaches a certain size because so many employees become so disconnected from the actual activity that makes the company money that 1. Various management types try to do good but instead accidentally impede the money making process, 2. Various inefficies emerge just due to the sheer number of people involved and miscommunications are amplified 3. You reach a scale where lots of B2B products (especially SAAS products) start making sense, but B2B generally charges you a premium for the convenience compared to doing it in house, so the cost benefit can quickly get out of whack while lock-in and corporate intertia makes it harder and harder to change
That’s a really good point. I’d add to that: instead of performing well in a narrow domain and being able to scale just on that specialty, large orgs tend to diversify in order to expand into other markets and make more money. Those different business goals can be in conflict, like we see with Google’s ads vs search vs cloud vs AI.
Personally, I have a pet theory that economies of scale fall start working backwards once a company reaches a certain size because so many employees become so disconnected from the actual activity that makes the company money that 1. Various management types try to do good but instead accidentally impede the money making process, 2. Various inefficies emerge just due to the sheer number of people involved and miscommunications are amplified 3. You reach a scale where lots of B2B products (especially SAAS products) start making sense, but B2B generally charges you a premium for the convenience compared to doing it in house, so the cost benefit can quickly get out of whack while lock-in and corporate intertia makes it harder and harder to change
That’s a really good point. I’d add to that: instead of performing well in a narrow domain and being able to scale just on that specialty, large orgs tend to diversify in order to expand into other markets and make more money. Those different business goals can be in conflict, like we see with Google’s ads vs search vs cloud vs AI.