Riding the conceptual coat-tails of my last post… I’ve been spending some time lately thinking about company size. A few different events have been fueling my thoughts:
1. Attending the Triangle Gaming Conference
I’ve been out of video games for 8 years at this point, but for a variety of reasons I’ve been getting pulled back towards that industry again. When I left, one of the hot issues was growth for the sake of growth. The game side of Rainbow Studios had grown from 30-40 people to 120 so we could “do more titles”. The reality was that we failed miserably to manage more than two projects at a time with any level of efficiency. Teams got bloated, budgets got burned up, deadlines were missed etc etc etc. While gross revenues went up, our margins definitely went down and life became a lot less fun.
2. Reading “Snowball”, the biography of Warren Buffet
If ever you want to read about single minded focus, absolute thriftiness and insane return on investment, check out Mr. Buffet’s life story. The original partnership behind Berkshire Hathaway started with about $100,000. The market cap of Berkshire Hathaway today is $145 BILLION. And the company is managed by a handful of people in a relatively small office in Omaha, Nebraska.
3. (Still) Reading a biography of Sam Walton (the Wal in Walmart).
Like Buffet, the single minded focus and absolute thriftiness is remarkable. But also like Buffet, so was the focus on size and efficiency. When there were a dozen Walmart’s in existence (plus a handful of other variety stores that Walton owned), the business was doing about $10M a year in revenue. Each store had a single manager and they all reported to Walmart HQ. The headquarters was a tiny office in Bentonville, AR, with FIVE staff, three of whom handled the accounting (no computers at that time).
In my own experience, teams much larger than 20-25 people are very difficult to manage with any real efficiency, and even that size gets pretty tough. The work you can get done with a strong team of 2-5 is often far greater than what a team of 10 or more can accomplish, provided you have some focus.
One of the negative legacies of Web 2.0 and excessive/exuberant VC funding is the concept that you have to be big to win. And just as VC funding isn’t the only way to build a business, growing huge isn’t the only way to be successful either.
Besides, growth is also a one way street: you can always grow bigger if you have to, but getting smaller always hurts.