Economists tend to cite economies of scale when explaining how large corporations become dominant.
Per Investopedia, economies of scale explain the cost-effectiveness of efficient businesses. As these businesses extend their operations, they save money on their production. In return, their profit margins become larger. Alternatively, diseconomies of scale refer to businesses that become less efficient and cost-effective as they expand. Organizations suffering from diseconomies of scale have a lot of uncertainty on what lies next. It is essential for those who lead these organizations to understand their options. If it is impossible to continue making money under present circumstances, then what needs to change?
Martin Reeves, a senior partner and managing director at Boston Consulting Group, co-authored the book The Imagination Machine: How to Spark New Ideas and Create Your Company’s Future. Reeves cites quantitative research in attesting to the declining performance of large corporations over time. As a consequence, large corporations must not resist reinventing themselves if they seek to remain in business.
Take Nokia, for example. The Finnish-based company, which once dominated the mobile handset industry, demonstrates why organizational reimagination works. After suffering a defeat in the mobile handset market, the organization sold its handset business and pivoted to providing global communications infrastructure. Yet, because of their forward-thinking brand reimagination, Nokia remained in business.
While it may be true that the bigger the organization gets, the harder it falls, the fall need not be permanent. Reimagination allows organizations to learn from their past while expanding their brand. Below are some suggestions for leaders looking to apply organizational reimagination strategies to their long-term development goals.
The Reason to Reimagine
Reeves notices that the larger a corporation gets, the more likely they are to experience internally facing concerns threatening its livelihood. At this stage, leadership is likely to anticipate surprises in the market that shift their organization’s public appeal. When entrepreneurs pay attention to the customers who do not like their product?even when consumers (on average) are in favor?they begin to anticipate a reason to reimagine. Noticing the first five customers with a critique instead of the first one hundred allows leaders to change their brand before it’s too late to reimagine successfully.
The reason to reimagine does not necessarily tell the leader how to reimagine their organization. Instead, that initial anomaly serves as a trigger to have a meaningful conversation on the possibility of reimagination. For Reeves, it makes sense that companies struggle to discuss anything that goes against their current business model because they are beginning to step into unknown territory. To prevent hesitation, Reeves writes about twelve managerial games in his book on imagination. These games intend to encourage new modes of thinking. In practice, Reeves found that these games help leaders increase their awareness and reflection on what can and should change within their organization.
How Leadership Factors into Organizational Reimagination
When asked about companies looking to maintain their momentum in developing new ideas, Reeves discusses the concept of renewing a legacy. Large companies tend to focus on measurable business goals, such as growth rates and profitability. But, of course, optimizing their current performance might not always pan out as a leader might hope. In this case, what is next?
Reeves believes humans can either embrace a crisis or precipitate a crisis. Opting to embrace a crisis is far more effective. Leaders who embrace a crisis express an interest in the margin of customers who do not like their product while still respecting the customer’s opinion. Even when opinions are contrarian, their sincere respect causes them to value their present success as much as future urgency. Here, we see how a leader’s values impact their organization’s success. Successful leaders value the skill of finding, developing, and piloting ideas. In the long-term, these leaders also prioritize disrupting and self-disruption, followed by reinvention.
About Krishen Iyer
Krishen Iyer is a California-based entrepreneur and expert in insurance, marketing, distribution, and contracting. Iyer is a graduate of San Diego State University, where he earned his bachelor’s degree in public administration and urban development. He has nearly two decades of experience in insurance sales and creating traffic for affiliated insurance distribution centers. His experience includes the creation of Managed Benefits Services, a Fresno-based consulting firm specializing in health and pharmaceutical insurance clients.
After selling Managed Benefits Services, Iyer founded MAIS Consulting to continue supporting insurance clientele in California and the United States. The firm identifies knowledge gaps in their client’s operations and strategizes tactics to fill these gaps and achieve measurable business goals. MAIS Consulting is celebrating its first anniversary in business and looks forward to celebrating many more years of optimizing its clients’ performances.
