What Is The Law of Diminishing Firms?
According to the so-called ‘Law of Diminishing Firms’, introduced by Downes and Mui in , the well-known ICT-related laws of Moore and Metcalfe have reinforced each other.
The Law Of Diminishing Firms states that companies can become smaller and smaller by using ICT and digitally transform themselves in an integrated way from a traditional hierarchical business organization to a virtual organization. As most corporates actually had to do to some degree in 1 day due to the Covid-19 crisis and the obligation to work online from home.
As the online platform economy grows, the impact of AI on organizations increases and online and offline markets become more efficient, the organisational form, the organisational design, (with its complexity) of the traditional large company becomes uneconomical, as companies can only exist and survive to the extent that they can create more customer value for their customers and more effectively reduce unnecessary costs including unnnecessary organizational costs than competitors and newcomers.
The good news is that AI-Leaders can start, grow and scale their business with a virtual organisational design using ICT including AI by implementing a new aligned and integrated AI-powered business model with an AI-powered organisational design to grow and scale online without becoming too big, slow and ‘Fat’ and with lower organizational costs than these existing large, slow companies if they use the right AI-transformation tools.
‘Growing without growing’.
In conclusion, knowing and understanding The Law Of Diminishing Firms is key in fast & successful AI-Powered Digital Transformation to become an AI-Powered Company including an AI-Powered Bank & and to found, grow and scale a succesful AI-Powered Startup or AI-Powered Scaleup.
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If you want to learn how to reduce your organizational costs and how to become an AI-Powered Company by quickly redesigning and right-sizing your current business model, your current organizational design and current business ecosystem using the AI-Model Canvas, please do not hesitate to call me on 06-34387806 (whatsapp), or email me here.
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