Saturday, April 5, 2014

The K-Landnews nuisance theory of optimal company size

We have toyed with inventing a theory named after the krautlandnews and call it branding.

After no research whatsoever, we found the subject "what is the optimal size of a company you want to deal with as an individual consumer from a point of minimizing nuisance when a service or hardware are no good"?

Have you thought about it beyond "big is bad, and small is beautiful"?
Since we have a no-cost, no-research philosophy, we can give you the result right now.

The lower limit of optimal company size is about 10, the upper is around 5000 employees.

How do we arrive at this?

Since we deal with B2C (business to consumer) only, for example, mining companies are out, medical suppliers to clinics and hospitals are out of scope.
Free services or goods are not considered either. They can be very important but we do not have an adequate conceptual framework for them - not enough intellectual horsepower. So, we accept the free operating system for our PC or all the free apps without spending time on the best way of making them or on recourse when they fail to work properly.

The next set of variables is the kind of product or service offered.

Think difference between getting a haircut or a gallon of milk and buying a 20 000 dollar central heating system or putting a complete new roof on your house.

The value of a service or product is not necessarily the main concern. You can buy 100 K worth of stock or a light bulb on the internet with the same ease. The deal is done. If the bulb arrives broken, you return it, end of story. If you don't like the stock, two or three clicks on a web page get rid of it.

But that 30 dollar monthly internet subscription requires at least some follow-on service capability for a few years.

How do skills play into this? For example, you can be a highly skilled doctor and still practice on your own, or you can be a highly skilled football player and -- rules are rules -- need a team. Rules are as important than skills.

What role does technology play? TV repairmen have become rare because of it, and some previously solitary professionals have joined forces because some new tech is too expensive for individuals.

Another difficult to assess variable is cultural. How big should a small business be so the consumer is not to be left stranded, is there a measurable difference between a small plumbing business in the US and Germany based only on the notion that flexibility and customer focus are perceived as greater in the US?

For some services, such as barber and physician, the lowest practical number of "company size" continues to be 1 although changes are afield for medical service in rural areas. For any service or product that needs a group of people or that is generally offered by a "company" of professionals, we peg it at 10.

We arrived at "10" by looking at problems when something goes wrong.  That new faucet is leaking and the father and son plumbing shop simply fails to return your calls?
If you deal with a very small company, there tend to be fewer options of remedy, making total frustration or full on legal escalation more likely.

You ask: What if these 10 are the family patriarch and his seven sons and two grandsons? That's an edge case, we ignore it because we would call this a mafia family or a political dynasty. In some regions both at the same time.

The upper limit is somewhat flexible, but we would say it is reached once a company makes so much money it can afford to out-lawyer every individual customer.

Reading this post again convinced us that it has the hallmarks of a cute theory.  When it gets specific, we immediately set forth a few additional conditions and caveats, opening up a way out of arguments that could pin it down.

Another sign of cuteness is that we provide some numbers in the theory, but they are small, easy.

The conclusion is [imagine Irish budget airline Ryan Air on-time-cheesy-fanfare-sound-here] that "big may not be all bad, and small can be evil".

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