Monday, June 01, 2009

On the GM bankruptcy: Stay small, think big

Today GM files for bankruptcy protection in an effort to "create a leaner, quicker more customer and completely product-focused company, one that's more cost competitive and has a competitive balance sheet," according to CEO Fritz Henderson. What happened today is only a sequel to many previous episodes where big companies have failed big. Remember Enron? Air Canada? American Airlines? Circuit City? Lehman Brothers? Washington Mutual? WorldCom? Chrysler? Texaco?

Ironically the terms GM CEO Henderson described the future of GM as are "leaner", "quicker", "customer focused", "product focused", and "competitive" which are some of the terms that describe small companies today, in the present not in the future - and after filing for bankruptcy protection.

Too Big To Fail?

Although it is probably applicable for many industries, with regards to technology firms, is small the new big? Why do extra large IT firms lack the creativity and drive to implement the cool applications of today? Why are these cutting edge and innovative applications being created in basements and college dorms nearby by a handful of people? Think Google, Facebook and Twitter for example.

Before the Internet it paid to be big. Big sales team, big headquarters, big advertisements, big, big, big, big and big. Yes I'm talking about economies of scale. Today though, are economies of scale as important as they used to be? Probably not otherwise these big companies such as GM and Enron would not have failed big since they supposedly enjoyed big economies of scale. "Too big to fail" is now a myth of the past. You don't need an army of developers and IT professionals to build successful applications used by millions.

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