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 organizational form, the organizational 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-powered solopreneurs and founders of startups can start, grow and scale their business with a virtual organizational design using ICT including AI to grow and scale online without becoming too big, slow and ‘Fat’ and have lower organizational costs than these existing large, slow companies.
‘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, to become an AI-Powered Bank & and to found, grow and scale a succesful AI-Powered Startup for founders.
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If you have a question or request about how you can use AI to reduce your organizational costs, how to become an AI-Powered Company by quickly redesigning and right-sizing your business model, organizational design and business ecosystem using AI, please do not hesitate to call me on 06-34387806 (whatsapp), or email me here.
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