Size Matters

The building of the General Motors Headquarters in the 1920's. A textbook example of the big Firm

A couple of years ago I read the book “De eeuw van mijn vader” (“My father’s century”) from Geert Mak. In this book he describes how the Dutch society has changed from 1900 to 2000. One of the passages that struck me most was his statement that the majority of people in 1900 were not an employee at a firm. Many people were self employed as sail maker, baker, carpenter and other craftsmanships. Other were employed on a temporary basis as day laborer. For many people this independence meant of course mainly insecurity and near starvation.
It did open my eyes that the big Firm as a way to organize work is something relatively recent and started around that time. Before the Firm work was done by many individual and small informal companies, afterwards much of the work is done in large companies with often an emphasis on management and control. At the same time there was the shift from mainly local transactions to global transactions.
These days we again see a move towards smaller size of companies and and more informal contacts to coordinate work. Most important example is of course the explosion of Independent Professionals. But also many examples of small companies that supply a specific service, often on a global scale, like BasecampHQ, Evernote and others. My conclusion is that the Social Media and Cloud and the themes they bring forth put pressure on the size of Firms. Big is beautiful nor efficient anymore.
In 1936 (Nobel price winner) Robert Coase wrote the artikel “The nature of the Firm”. In this (very famous and often cited) article he states that the size of a Firm is based on the difference in transaction costs between the market (buying the service) and organizing the service yourself. He describes the relation between transaction costs and size as follows. The firm grows when:

  • the less the costs of organizing and the slower these costs rise with an increase in the transactions organized.
  • the less likely the entrepreneur is to make mistakes and the smaller the increase in mistakes with an increase in the transactions organized.
  • the greater the lowering (or the less the rise) in the supply price of factors of production to firms of larger size.

Transaction costs in this are all costs associated with a transaction: communication, contracts, delivery, etc. If we compare these with the themes Scalability, Communication, Cooperation, Anyplace and Anywhere and Transparency it is clear that these themes are lowering the external transaction costs dramatically.
Scalability: the advantage of the Firm has always been that within the Firm it is easier to share resources over several activities. Now many operational costs have become variable costs in relation to turnover this advantage of size is not valid anymore. The risks of major investments in infrastructure is therefore also largely diminished. Due to the high level of automated processes there is less advantage in high volumes of purchasing
Communication and Cooperation: Finding people has become easy, contacting them has become easy and exchanging information on specifications and expectations has become easy. This means that transaction costs go down. This holds mainly for external costs since internally searching and working with people was enabled by the Firm.
Anytime, Anywhere: The Firm creates a context where it is easier to know what to expect from others and has a management structure to enforce compliance to this context. Social technology now enables us to contact everybody from everywhere at any moment. A natural advantage of the firm was that it was easier to do business within the Firm on a global scale. Now small companies can do the same in a virtual enterprise.
Transparency: We now see reputation mechanisms to build trust without previous experience with that person of service. We see reviews of previous experience of others that are similar to us. We know we are looking at the same data stored in the cloud. I know where you really are because of location based services. This transparency drives down risk immensely.
From all of the above it follows that due to social and cloud technologies Firms will shrink in size. Small will be more efficient. This also has a lot of impact on middle management whose role it was to coordinate work in the Firm. This coordinating role of management will evaporate and thereby create flatter organizations: Pancakes!

Variations on a theme

Fractals create fascinating pictures. On the one hand they look very structured and symmetrical but when you look closer you see that the pattern is repeated in a different way on every level. There is order and there is chaos simultaneously. The math behind fractals is surprisingly simple. The trick is that the factors in the equation repeat themselves in a recursive way (meaning that the formula calls itself withing the formula).
For example, the formula for the fractal on the right is “(1 − z3 / 6) / (z − z2 / 2)2 + c” (for more info on these fractals go to: Many of natures most beautiful expressions are based in Fractals, e.g. leafs , trees and flowers. Here the relatively simple codes in the DNA create fascinating structures in the organism.
The mechanism is similar with the effects of new technology on our way of living and working. At the moment we see many fields of business changing in very profound and different ways. Often due to wide spread implementations of new developments like Cloud technologies (that impacts how business interact) and Social Media (that impacts how people interact).
However, the driving forces behind this change are relative simple. The basic variables that are impacted by this change in technology are:

  • Unlimited Scalability: Technology and processes become scalable. IT costs become a variable costs. This means that a company can start small and grow evolutionary. Communities can be scaled up from a few to hundred thousands of people in a short period. This flexibility gives rise to new competitors and new services that had not been possible before.
  • Ubiquitous Communication: (Social) Technology makes it possible to find the person with the right knowledge instantaneously. Communication channels are easy to access for broadcasting to targeted audiences as well as direct interaction.
  • Seamless Cooperation: We have now been given the freedom to work and cooperate everywhere. Where in the past closed systems made it difficult to work together it is now made possible by standardized tools in the cloud. Sharing data, sharing tools and sharing contacts is now possible.
  • Anytime, Anywhere: Instead of real-time communication in a specific place we are now free to interact wherever and whenever. Many of our tools support direct communication (chat) as well as a-synchronous communication (e-mail). Changes made in an online document are always seen directly by all so they can be reacted upon. In many ways we overcome the limitations that a physical world imposes on us
  • Maximum Transparency: With the use of Cloud technology information can be visible to all and often is.  In the past systems were closed by default since databases could be accessed only from a few places. Now all you need is an Internet connection and a browser. Also by sharing much of our thoughts, activities and trivialities a sometimes unexpected amount of transparency is achieved, though sometimes accidentally.

All these themes create tremendous opportunity but also unexpected risks and consequences. As society and as businesses we have to learn how to optimize these themes to create good and sustainable outcomes. The differences between MySpace and Facebook were small at the start …

Our tools shape us

Last few weeks I have been trying to integrate a lot of ideas I have been working on in the last few years. Partly in research programs on SaaS, partly and several project around the adoptation of technology and partly from my own company. Below is the (extend) set of sheets I have made out of this. Next period I will be writing a bit about the different parts of it.

Opleveringspresentatie HAN voor wireless Arnhem

Gisteren hebben we de eind presentatie gehad voor het onderzoek naar de positionering van Wireless Arnhem in de binnenstad. Goed rapport geworden waarbij we het advies hebben gekregen om minder op het netwerk en meer op de marketing kant te richten. Een advies dat we van harte gaan nemen!
De studenten die het project hebben uitgevoerd zijn:

Stefan Gerrits,
Tijmen Kuster,
Robin Meulenbrugge,
Armin Zwilling

The future is old

We all know that in our western societies we have an age problem. We have more and more elderly and less and less young people. In many ways this is an achievement of our societies (who does not want to become old) but it poses us for new questions. When we get old, who will do the work needed?
You can calculate that in 2025 the workload per employee that takes care for elderly people will be twice as high. I think that is one of the challenges we have for the next decades.
ICT will be one of the means to deliver an answer to this challange. ICT to increase productivity (like care from a distance) but also ICT that gives more control to people so they can take care of themselves (e.g. with social media).
Last week we started a program focused around these two types of potential for ICT in the elderly care. In this program we bring together people from healthcare organizations, universities and companies ( During this kickoff we had around 50 people of management level together.
One of the interesting discussions we had was about the role of commercial companies. My statement is that we need commercial companies to grow from all kinds of well meant pilots to mature markets. Only in a mature market there will be technology available for everyone and not just in a subsidized pilot. In this discussion it was clear that in the world of care there is some tension between commerce and care. I hope with the Health-lab program we can lower the barriers between these worlds.

In the news

With the company ReMarketable we are working on a “Medical Data Recorder” for operating rooms. Just like the flight data recorder (aka the black box in a aeroplane). I The flight data recorder is an important aide in the safety culture of aviation since a) pilots know that all actions are recorded and can be reviewed and b) after an accident there is always objective and factual data on the condition how things went wrong. There is of course a difference between pilots and surgeons. However, the way the safety and quality culture can be enhanced looks very much the same. A medical data recorder will play an important role in this.
Today an article is published in Spits about the medical black box and a radio interview was held with us on Radio 1 at the AVRO.
You can find the article here.

2(.0) many communication channels

Sometimes I have the feeling there are too many communication channels. Lately I have been using twitter a lot and I see that it distracts me from writing the blog. You can only spend you time once.
Nice thing about the blog is that it forces you to think about a (small) subject and in order to say something coherent about it. Twitter is much more instant gratification it seems: fun but also easily flushed. Let’s see if I can switch back to the blog a bit more.

Reality can be improved

This is sooo cool. People at made a special augmented reality browser, called Layar. What is does is that is show you digital reality over the physical reality in the screen of your phone. For example you point you phone at a house and over the camera picture it is shown if it is for sale and what is the price. Look below.

All kinds of interesting applications can be made with this. In a project in the Amsterdam Living Lab we are piloting an application like this to find out how people will use such a service, especially when they are able to leave digital information behind that others can see with their phone. It may be that we will use the Layar technology instead of the home grown one. Of course a phone with and a GPS and a compass is needed like the Google phone or the latest iPhone 3gs.

Structured or unstructured


Regarding privacy a lot of fuss is often made about the information that the government collects about this. And I must say the government collects a lot.
An interesting case recently was with two criminals in the Netherlands. After stealing 21 cars they have been apprehended. The police stores every license plate in a database of every care that drives on the highway at Zwolle. It turned out that each time a stolen car drove by the same car was just behind it. This is the first time that the judge has to decide if this large database of car movements in the Netherlands can be legally used to search for clues.
As for the storage of personal information we can distinguish three domains who has access to the information: the government, (networks of) companies and the Internet.
As for the Government I am not that worried. I do believe that we have a strong democracy that will correct itself when information is misused too often. Of course that government may change. However, when it changes the government would start to implement a lot more means to spy on us anyway. As long as the use of the information is transparent I won’t lose much sleep over it.
As for companies it starts to become more complex. Banks, Supermarkets, web-stores, Google and others collect huge amounts of data. When companies combine this information it makes you feel digitally naked. Sometimes this is information that is collected without the person knowing that it is collected.
The website had collected the IP addresses of people that signed a petition with false names after a post at another website, that asked people to invalidate the petition. These IP addresses where than supplied to other websites in order to block the people behind it. The CBP has taken action in this case.
There are rules to what kind of information can be combined but it is often a shady area. In the example above it became transparent but especially in commercial environments it will often be hidden. The risks are significant. Much of this information in the hands of insurance companies will lead to a risk selection that is, from a societal point of view, not what we want. The acquisition of hospitals by insurance companies is a dangerous move in this respect.
In this case we are talking about information collected by (fairly large) companies. And companies can be found and are subject to regulations. This means that with a good legal framework it is a subject that can be controlled to a large extent.
As for Internet things are getting messy. The Internet is more and more used by people as the context to interpret information. If someone applies for a job he or she is googled. If a social worker is looking into a case it is not only the “kinddossier” that they look at but also hyves is checked. Internet has become the context in which official information is interpreted. And context information may be more important than the official information…
Problem which information on the Internet is that it is much harder to control in presence and in use. You can not stop a company from using the information on a potential pregrancy of a candidate that they have found. And you often can not have information removed that you do not like. And sometimes people leave information on websites that is plain false in order to harm someone.
People should become much more aware how much information can be found on them. Tinkebell recently published a book with all the hate-mail she got combined with personal information of the people that had send this e-mail. The people sending the hate-mail had the idea that they could send their messages in anonymity. Of 30% of the hate-mail she has received she could find extensive personal information on the net and has published this personal information together with hate-mail. I think a brilliant action.
We can not stop the amount of personal information on the Net. It is not just the information you publish yourself but also information others publish about you. What we need is some sort of digital mirror that shows us how the world sees us through the eyes of the Internet. Just like the mirror that hangs in you hallway and where you check your physical representation before going into the world. And like how we use clothes to create an image to the outside world we will pro-actively plant information on the net to create the image we want.
Have you already checked you profile?