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November 21, 2016


Robert Cohen

Thanks for the interesting thoughts about the nature of the firm. A number of economists who studied the multinational firm tried to push their thinking beyond Coase, concerned that the firm faced far more complex challenges and a need to manage them in a more sophisticated way. The challenges in the age of digital transformation are even greater and difficult to address. My own research suggests that given the shortages of data analysts, software programmers, and orchestration managers for cloud computing, large firms have an easier time attracting and building substantial specialized teams with the new skills required. This would also contribute to a more rapid growth of bigger firms than smaller ones, one of the very interesting facts you note at the beginning.

John Hagel

Thanks for pointing out the evolution of Coase's perspective. At the Center for the Edge, we have written extensively about the need for a big shift from scalable efficiency to scalable learning as the rationale for large organizations - https://dupress.deloitte.com/dup-us-en/topics/innovation/institutional-innovation.html This is very consistent with Coase's view of the firm's ability to accumulate collective wisdom over time. The point that we emphasize, though is that scalable efficiency and scalable learning are in fundamental opposition with each other and firm leaders will need to choose which rationale they will use to drive and sustain the growth of their enterprises.

John Reiners

Lots of interesting ideas. One of the most important recent changes that you refer to in earlier posts is the growth of digital platform businesses. They promise to dramatically lower the costs and friction involved in accessing markets and delivering solutions, through effective collaboration. This will have significant impact on the nature of the firm and the responsibilities of managers. For platform owners, as well as participants, management of a firm's own resources is just one success factor. It may be far more important to manage the market by orchestrating a network of collaborators. A whole new set of skills become important - network management, curating content, ensuring effective market matching between supply and demand - + a whole additional set of KPIs. In particular managers will need to focus to a much greater extent outside their own firms.

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