Publication date: 2020-06-13
The term "economies of scale" is widely known. It means that the bigger the quantities you're doing something, the more cost effective you become. A good example is ordering goods. When you're ordering in large quantities, you are getting discounts and preferred treatment so that the cost per piece goes down.
However, there are caveats when intending to apply "economies of scale" in all contexts. When applied in an engineering organization it can actually cause a stunning effect: organizations can become slow and lack innovation.
So why's that? To apply "economies of scale" in an engineering organization one needs to aim at homogenity. This could be in the form of standardized, homogenious processes, in the form of strict governance on the technologies allowed to be used, or in the form of other means. The good thing on that is that such standarization reduces variety. Any improvements applied to things done at scale immediately bring significant benefits. So far so good. But on the other hand, there are also quite some caveats. If too much standarization is done, the standard often is a compromise: not fitting perfectly in many places but something where a lot of parties were able to agree upon. If something is used everywhere, a lot of effort goes into optimizing it. Doing such optimizations is a lot of effort since a lot of parties are involved and many rounds of discussions become necessary even for small changes. And maybe worst of all, you might get stuck in a local optimum. Doing disruptive changes on topics that have evolved over time and that were optimized over years in very small incremental steps is only done and risked in case a strong external driver comes up. Doing things differently and innovating is not done since scale and optimizations would be lost. The organization is stuck and from the viewpoint of an external observer looking stunned.
We have a classic dilemma here. On the one hand, scale is good. One the other hand, scale can have undesired effects and is dangerous to be applied in any context. The target in an engineering organization should be to find a proper balance. Where the sweat spot is depends on topic and context. Another important measure is to allow innovation to happen and welcome change, e.g. in the form of light-weight proof of concepts in certain areas - explicitely not demanding to consider scale and optimizations from the beginning - and to allow promising innovations to evolve at their own pace.