Exploring Scale: The Advantages of Thinking Small

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When it comes to thinking about scale, the assumption of corporate leaders since Henry Ford's day has been that bigger is better. And in many situations, such thinking is inarguably correct because of the cost efficiencies that size provides. But sometimes efficiencies can mask opportunities.

In their research, the authors found that small-scale operations provide significant advantages in four areas. They allow companies to locate hot spots and tap into local knowledge networks; they make it possible to respond more rapidly to customer needs and to trends in regional demand; they enable companies to monitor potentially disruptive technologies; and they help hold down labor costs while developing managerial talent. Using case studies, the authors illustrate how companies in a wide variety of industries have found the hidden benefits of small-scale approaches to corporate needs. They conclude that executives who develop a deeper understanding of scale and learn when it is better to think small can have a potentially huge impact on their companies' long-term success.

Frits K. Pil is an assistant professor at the University of Pittsburgh's Katz Graduate School of Business and a research scientist at the university's Learning, Research and Development Center. Matthias Holweg is a Sloan Research Fellow at MIT's Center for Technology, Policy and Industrial Development and a senior research fellow at the Lean Enterprise Research Centre at Cardiff Business School in Wales. They can be reached at fritspil@pitt.edu and holweg@mit.edu.

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