40 Years of False Efficiencies
Brought General Motors to Chapter 11		  
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Economies of Scale
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Are these the corner-office pains you feel?
  • Projects take entirely too long. 
  • Projects cost too much. 
  • Real productivity is low. 
  • Projected revenues often are not realized. 
  • Requests for more headcount are everywhere.   
  • Opportunities are lost. 
One thing, at least, you might find reassuring:  The monolithic-silos of your corporation are every bit so effective today as they were fifty years ago, at providing you with their economies of silo-scale.  By virtue of its aggregated size, each silo's mass distorts the vendor-space intensely, toward the discount-deep.  The savings from the deeper discounts, which are but one component of your silos' contributions to economies of scale, are significant indeed.  Therefore, dissimilar businesses and distinct markets notwithstanding, each silo-monolith contains corralled one great aggregation of similar resources, such as all the corporate resources needed for development, or all the corporate resources needed for manufacturing.  Massive!
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Today, most businesses succeed by providing better products faster and for less, to their respective markets.  Although competition makes this triad of criteria rather central for your corporation's many businesses, the few competitors who can sustain much greater speed inevitably set a pace quite fast for all.  These faster few leave "better and for less" unscathed, as they make paramount your corporation's business-speed.  But, your monolithic silos' lack of business-speed notwithstanding, you can take heart in all those savings, which your monolithic masses muster every year.  After all, what's a few percent or two in market-share, when every year economies of silo-scale abound. 
 
Take heart as well in precedential power.  Much larger corporations have carried silo-stones for years, and more.  In 1992, Jack Smith hoisted the monolithic-silo structure upon the shoulders of the North American operations of General Motors (Garvin, 6).  Smith expected General Motors to regain a measure of competitiveness in its many North American markets, with the monolithic silos' and their economies of scale.  That company surely would have gained some sliver of competitiveness, too, had it not been for all those speedier competitors from the distant shores of both our ponds.  Besides, despite his global corporation, Smith used his silo-stones in North America alone.  These could afford economies of continental scale but certainly not of global scale. 
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In 1998 Jack Smith did expand the continental-silo monoliths far beyond the shores of ponds throughout the globe.  In addition to the existing aggregations of similar resources from the North American operations of General Motors, the resulting global silos aggregated like-minded resources from General Motors' operations in Europe, Asia-Pacific, Latin America, Africa, and the Middle East (Garvin, 7).  Unfortunately, Jack Smith also left Rick Wagoner in charge of all the global silo-stones; General Motors filed for bankruptcy on June 1, 2009.  The outcome that might have ensued, had Jack Smith left the global silo-stones in any other's hands, remains a mystery even now. 
 
The cause of corner-office pains also remains a mystery, turning many corner-office occupants into chronic sufferers like you.  Despite all the salves, all the potions, all the spells and incantations crafted carefully by the well-established Merlin-schools, your corner-office pains persist.  One thought alone still brings placebo-like relief.  All its promise of performance, which the monolithic-silo structure brought to Smith and Wagoner, the monolithic-silo structure brings to yours and you. 
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References
 
Garvin, David A., and  Lynne C. Levesque.  "Executive Decision Making at General Motors." HBS No. 9-305-026. Rev: February 14, 2006 (Boston: Harvard Business School Publishing, 2006). Harvard Business Online. http://harvardbusinessonline.hbsp.harvard.edu, accessed April 2009.  <back>
 
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