Is Bigger Really Always Better?
Posted in Entrepreneurship & Work by B
In our culture, we often equate the concept of bigger with being better. Getting a large ice cream cone will yield us more satisfaction than a smaller one, making $200,000 per year will make us happier than $100,000, and having a larger… well, you know.
It’s natural that the same idea applies to when you’re launching a new business. Oftentimes, before you even start, you’re already thinking about how you’re going to expand.
I found myself doing just that last year. When I was working with a partner on launching a hostel in New York, our plan from Day 1 was to go to about 5 locations within 5 years. We wanted to get the first one right within a year and a half and then begin to aggressively expand in other cities.
Thinking back to that moment now, I was struggling to figure out why was this the goal. Did running one location somehow feel inferior or was going to be less satisfying than 5? Was making more money worth having 5 times the headache? Was it worth spreading ourselves thin and potentially sacrificing quality in the never-ending pursuit of growth?
I’ve had a few answers for this. I suppose that it would’ve been more of a status symbol to be able to say that I own a national chain of hostels, instead of a single location in New York. And perhaps it would be interesting to be able to operate in different cities, as a learning experience. Finally, it’s also likely that having a larger chain would make it a more attractive business to be acquired down the line, so it would yield a bigger pay off. But, the most subtle yet powerful reason would probably be boredom. Within a year or two, if you build your business right, it ends up running yourself and you begin to seek out other challenges,
But would it make work and life more satisfying and happier? I ultimately don’t think so. More was not necessarily going to lead to a more fulfilling life.
Working in the current startup, we’re in a similar mode. The plan is to expand and become bigger and service more people as soon as we possibly can. Yet I can’t help but feel that we’re doing this on an autopilot, where we automatically equate bigger with being better and more successful. What if we only remained in one city, but did it really well? What if we never grew beyond a small staff of people and a base of loyal customers? What if it was a lifestyle business where you’d be able to keep a normal balance between life and work? Is that inherently bad because it doesn’t go with the “grow, grow, grow” mantra?
Ultimately, if becoming larger is something that you think will make your life and the business better, than by all means – go for it. However, before expanding for expansion’s sake, think about the true motivations behind this. There is a lot at stake.
Did you like this article? Share It!
Andrey says:
Somehow I doubt that at 25 you’ll be satisfied with running a business that is not going anywhere. I know how excited you get when new and interesting opportunities present themselves.
For better or for worse, our whole economy is built on innovation. if people were not striving for bigger and better things, to grow and come up with new ideas, you would not be writing this blog. You would not be flying to far-away places. In fact, you would probably be farming a piece of land with a primitive stone tool.
If you need a more realistic example, consider Soviet automakers like Lada. These organizations existed for the sake of employing people and offering them a certain lifestyle. They also produced the same cars for 30 years. Every single year the same exact car. They didn’t want to grow (outside of the need to compete with the West) and they certainly didn’t want to innovate. While it was a more stable and certain existence, personally, I would never trade it for the crazy environment we find ourselves in these days. We also know what happened to these organizations after a little while.
While this is your blog and your ideas, I just want to remind you that with the topics you are discussing, there is unlike to be a single right answer. While one can argue that there is an “optimal” way of living your life, people have different things that make them happy. You are making a huge leap of faith assuming that other people are not happy just because they don’t go to South America for 3 weeks or work crazy hours to grow their business. I urge you to keep this in a back of your mind when writing your next post.
Boris says:
Thanks for the thoughts, Andruha.
You’ve mentioned that our whole economy is built on innovation. I completely agree with you on that. What I don’t necessary agree with is the “striving for bigger” element.
If you develop a revolutionary new technology that impacts the lives of others and you are able to reach 10,000 users – is that inferior when you compare it to a business that reaches 25,000? Or, think about a completely different business like a specialty travel provider, such as Tour d’Afrique that puts together 3-4 travel tours/expeditions per year. If they increase it to 10-15, do they necessary “better”?
This is where I think we go in separate directions. I just don’t think that innovation and scale always go side by side.
The comparison with Lada is not entirely accurate. They didn’t lose in the auto race because they didn’t increase their production threefold. They didn’t want to change along with the times which led to their downfall. And it’s a great example of what happens when you become stale.
But the question here is about being bigger… having larger “volume”. If we’re talking about auto makers, think about something like a Lamborghini or another super high-end car – which gets produced in extremely limited quantities each year. They are very innovative and you can’t argue that their cars are not a huge hit with the small quantity of people that can actually afford them. However, by the logic of “bigger is better”, until they start producing the same quantity of vehicles per year as Ford, they aren’t as “successful”.
You’re absolutely right that there isn’t a single right answer. And you’re right that different people need different things to make them happy. However, I don’t think that I can write something that will please everyone at all times. I can only write about things as I see them. I’d rather have people either strongly agree or strongly disagree, then try to fit somewhere in the middle.
But as always, your thoughts are very appreciated. Thanks!
Andrey says:
I think you are missing my point. Lamborghini is a highly niche product. There are a lot of fixed costs associated with production of cars and for Lamborghini to build another plant, etc. it would have to increase the volume many more times. I don’t think the leadership of the company would be against selling twice the number of cars each year.
For most products, you innovate when you compete with others. If you product/service is superior, more consumers/business will buy/use it. This is where volume comes in. A revolutionary technology that reaches 10,000 people is not inferior but if it is revolutionary and has a potential to change many more lives, why would anyone stop at 10,000? Do you refuse to sell that product/service to the 10,001st customer? If you will, that customer will go to your competitor.
Also, keep in mind that your competitors are not standing still. Even if you have a mini “monopoly” on something through a patent, that advantage is bound to erode over time. Your competition will come up with newer and better things and will eventually start to eat into your 10k customer base. You can (and should) focus on superior customer service but that alone is unlikely to reverse the slide.
Lada had plenty of volume. It didn’t have competition because it limited itself to a single market and was protected by the government. If it was more competitive outside the country, it would have to produce more cars because more people would want to buy them.
Same logic can be applied to entire countries. Why not just stop looking at the GDP growth and focus on happiness, or social services for the existing population? You can even put in place policies that will slow down the population growth. Would you want to live and work in such a country?
Just my two cents.