Small Is Good.

posted Jun 19, 2014, 4:51 PM by Harry Hawk   [ updated Jul 9, 2014, 7:44 PM ]
Small teams, small business units, and small changes translate into small risk. The "smaller is less risky" theme resonates throughout the book Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb, an academic who often eschews other academics. His larger-than-life personality wonderfully and at times bombastically fills the pages of his book, which is aimed at the general populace. A freely available textbook covering the mathematical underpinnings of this theory is also available.

I applaud Taleb. His stories are interesting and fun, and they grab your imagination. I like his idea of separating his academic text from his general writing. Some things, like fine china, are fragile. If you stress them, they break. Some things, like steel, are robust. You can stress them a lot before they break. And some things, like muscles, are antifragile. When you stress them, they get stronger. Taleb says antifragile organizations and policies get stronger in the face of adversity or challenge.

Small changes, ideas, and projects generate minimal risks. And companies can easily expand
and extend them to create bigger rewards.
(Source: Scott Beale, Laughing Squid)

His work helped me understand why I like marginal improvement. A small change may get decimated; there is no promise that it will be robust or antifragile. However, organizations that make small changes can become antifragile. A small change can't harm the enterprise, because the harm is limited or reversible. When the enterprise learns from failure, it gets stronger. In other words, it's a win-win scenario.

There are two ways marginal improvement makes businesses stronger: marginal improvements that succeed, and small failures accompanied by learning.

What is healthiest for business -- monolithic opposition to change, monumental episodic change, or continuous marginal improvement? An enterprise that deploys marginal change on a steady and regular basis will become flexible and will respond faster (or at least periodically) to changes in the marketplace. Staff and managers will be accustomed to trying new things, new processes, and new business rules. They will understand that limited stress leads to learning -- a great strength. They may even stop watching for failure and start looking for learning.

Flexible businesses that use marginal improvement can implement new ideas sooner. They build up expertise as those technologies, practices, or methods evolve to become useful. Once a new idea proves useful, the business already has acquired the knowledge that gives it lower risk in pilots and larger deployments.

Marginal improvement can help any area of business, but it especially helps technology. In about 1987, I was a member of the team helping EF Hutton CIO Bernard Weinstein build a broker workstation through the steady introduction of an expanding collection of already working parts. Some parts were built in-house. Others were brought in from the outside. And we had a limited budget. Competitors had spent hundreds of millions of dollars trying to build similar systems from scratch, but they had failed.

As we look at the future of social media, real-time advertising, cloud services, and mobile devices, we should heed the antifragility of marginal improvement. We must make small changes often while exploring new concepts and adapting these ideas and our businesses until we create new levels of learning and profitability.

Written by: Harry Hawk