A relentless obsession with size

The economic prosperity of our recent past has impressed upon numerous business managers and executives the importance of developing sustainable growth strategies in order to be internationally competitive. Determining the volume of expected growth has given rise to more than one business strategy which later contributed to the organisation’s structure and the resources required to achieving that growth. Predicting growth is an integral part of more than one business strategy as it determines what resources are required to achieving that growth and contributes to the organisation’s structure.
One example of this process is the plethora of corporate buy-sell transactions we are witnessing. We ought to ask ourselves how many of these transactions have truly added differential value to organisations, and conversely, how many have actually destroyed value.

Personally, I take a more flexible, eclectic approach to this ‘management certitude’, and I refuse to accept the idea of a ‘one size fits all’ solution for all companies and in all areas of business. It is true, though, that often a company’s size allows it some competitive advantages, which makes it crucial to design growth strategies at any cost. This, however, is not the case with Basque industry.
Every company has a minimum efficient size that allows it to compete profitably and sustain its business project over the long-term. Considerations when ascertaining the size should include the client segment they serve, or plan on serving, the markets they can focus on, possible partnerships or collaborations, available capacities and resources, the nature of the competition, etc. We must be aware of the implications of the competitive dynamic of the markets in which we compete, both today, and tomorrow.
Increasingly, we find organisations around us specialising in client segments with specific needs. Primarily, these needs are the adding of value to the product, an excellent quality of service and ongoing innovation. Instead of being obsessed with size, as some players in emerging countries are, these companies need to come up with their own business model. This unique model should be based on the key traits of their competitiveness, which are found in the value proposition, the mechanisms of relationships with clients and the creation of differential competencies and partnerships.

The key to determining the size of our company lies in the degree of differentiation that our organisation achieves as compared to our competitors. In essence, we need to rethink what our unique traits are. Once this is established, we then need to structure our business model around these traits which set us apart from our current and possible future competitors. The permanent and ongoing quest for uniqueness is the very lifeblood of competition. As the Ogre in children’s tales used to say: “Where is my beauty?”, to which it is easy to reply: “I am different from the rest; I have a unique beauty.”

Although some business management commentators would find what I am saying taboo, I would, nonetheless, still encourage business leaders to probe more deeply for differentiation as an element of competitiveness. For companies to become more profitable over the long-term, I would also advise them to tailor their organisations to their minimum efficient size whilst bearing in mind the growing trend towards business co-operation: open and connected organisations; ‘porous’ and ‘promiscuous’ organisations, etc.

By better understanding the unique nature of our competitiveness, we will be able to manage our organisations and its size more adequately.

 

Sabin Azua

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Read Sabin´s CV here

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