Despite What They Say, Size Does Matter…

AIG, Bear Stearns, Fannie Mae, Freddie Mac…the list goes on.  Company failures are now a regular experience.  But what do all these companies have in common? 

I was listing to commentator on the radio who said, “we were told that Bear Stearns was too big to fail, that AIG was too big to fail…”

Too big to fail?  From my point of view, these companies are too big to compete in the market.  I have been saying for a long time that the information and technology age provides tremendous advantages to companies that are smaller, more nimble and can embrace innovation on the fly.

On August 11, 2006 I wondered "Will Large Companies Be Able to Compete in the Technology Age?"

One of the interesting things that have occurred in our new technology age is a shifting of competitive balance. Small and medium sized businesses can now afford the same topflight technology deployed in the largest corporations, especially in the services markets. Hardware and software costs continue to come down. A small business can deploy the technology necessary to become a paperless office, for instance, for a couple thousand dollars or less.

On 07-22-08 I wrote, "Large Law Firms Can’t Compete with Small Law Firms"

... I have often said that small law firms have a tremendous advantage in the current market because they can deploy technology and rework their internal processes in such a short period of time.   Large law firms are typically stuck with their software purchases and attendant process for three to five years after commitment.  Then they have the nearly impossible task of getting everyone to buy into the new system and use it...

On 07-07-08 I announced in the blog Fully Integrated Web/Blog: A Law Firm Website

Traverse Legal is proud to have launched one of the first fully integrated website/blogs of any law firm.

On 09-04-08 I posted the controversial topic Can You Really Learn To Be Lawyer At Big Law? Small Firms Offer Experience You Can’t Get Tied To A desk

...I started my career working for some of the largest and most prestigious law firms in the country... The number one complaint by mid-level associates is that they don’t get to do anything.  They don’t get to go to court.  They don’t get to argue motions.  They don’t get to take depositions.  They don’t get to craft legal strategy.  They don’t get to make decisions about how their law firm runs as a business or set policy.  There is no room or flexibility for any business process outside what is already established...

On 09-08-08 I followed up with this post Big Fight About Big Law: Are Law Students Really So Indoctrinated That They Think Prestige Can Only Be Found At Big Law?

One person going by the name of “law student” took umbrage to the suggestion that you can obtain both experience and competitive pay outside the big law club.  I worked at big law out of law school so I know how sensitive these issues can be.  To suggest to a big law associate that many other lawyers measure “prestige” beyond the firm letterhead, strikes the very foundation of everything they have come to believe about the law.  Law schools are complicit in holding out big law as the ultimate prize. 

08-11-06 The Relationship Between Technology and Business

...Businesses readily see the benefit of technology, for instance being able to communicate instantly with clients and customers by email or scanning documents into pdf files. But there is so much more to technology than speed...

...Yes, technology allowed for the scanning to occur. But a shrewd businessperson understands that the technology allowed for drastic improvements in the internal processes in order to improve quality and reduce the risk of inadvertent error. Virtually all technology, which is implemented in the office, creates new opportunities to improve your business process and therefore increase your competitive position in the market. Challenge yourself to think about whether or not the process that is surrounding your technology is really the one that makes sense. We are no longer in the industrial age. Industrial age processes will soon be obsolete. The most competitive businesses will be the ones that merge technology and process, creating new forms of business altogether...

On 05-16-05 The hourly billing model is like dirt under your fingernails

...I love technology!  One of the best parts of my new life is being able to evaluate and integrate technology on the fly, without having to worry about obtaining partner consensus or having to train a bunch of people. I wonder whether big firms will ever be able to compete when they are stuck in low gear when it comes to new technologies?...

In our old industrial-aged economy, of which these huge corporations were born, momentum, political access and raw size were market advantages.  Small and medium-sized companies had difficulty getting traction within most markets because of the significant investment required in machinery and technology in order to even get in the game.  Well, folks, those days are long gone. 

A law firm can be one of the most technologically advanced within its region on a $20,000.00 initial spend.  A much smaller investment can even get you there.  Small and medium-sized companies can not only identify and integrate core technologies which improve service, quality or fulfillment.  Large companies simply cannot.  Integrating simple digital dictation across a large company is a Herculean task which would be met with huge pockets of resistance and limited adoption on a person by person basis.  A small and medium-size company can identify the latest, most cost-effective digital dictation software in the world, have it implemented by the afternoon and place the technology within a workable business process within days.

I’ve said it before and I’ll say it again.  Large companies cannot compete.  They are behemoth whose structure and bureaucracies preclude them from achieving the very things which have become most important in this new world economy.  We will see far more large companies fail over the coming years.  From my point of view, this is a good thing.  This is the market at work.  This is the market rewarding capitalism measured in terms of value, quality and innovation rather than momentum, political power and ego.