It’s time to think small: The case for micro-enterprises

Main visual : It’s time to think small: The case for micro-enterprises

Large businesses have a challenge.

I call it the ‘big enterprise dilemma.’ As organizations grow they often start to experience acute slowness, painful processes, and a chronic, immobilizing amount of internal bureaucracy.

Some leaders hate it because it turns their business into lumbering dinosaurs, unable to react to market changes. Employees hate it because it surrounds them in red tape, stifling their creativity and ability to make an impact in their career.

Worst of all, the problem is more common than you’d think. Scaling is a necessary process for most successful companies - but as many as 93% of organizations lose their agility as they grow.

The challenge is further amplified in the midst of the Coronavirus pandemic, bringing a heightened level of urgency to business leaders tasked with finding solutions. In a disruptive, ever-changing business environment, lack of agility is a dilemma that must be solved.

Big things come in small packages

In the early days of Amazon, Jeff Bezos had a golden rule: teams must be small enough to be fed with just two pizzas.

It’s no coincidence that Amazon became one of the world’s most valuable companies. One that’s multi-faceted, disruptive, and can move with incredible swiftness – despite employing a staggering 600,000 employees.

The moral is simple: it’s time to think small.

Increasingly, I’m seeing companies turn to micro-enterprise models. This involves breaking off employees from across the organization – whether it be creative, finance, marketing, or HR – and compacting them into their own ‘micro-businesses.’

The benefit of micro-enterprises is that they exist both within and outside a business.

They can use the talent, resources, and industry muscle of their larger counterpart while bypassing the layer of middle management that comes with being a larger business.

Importantly, by being freed from legacy structures, micro-enterprises are free to refocus their attention on what really matters: customers. In fact, in my experience, customer satisfaction is highest when served by these business offshoots.

Furthermore, micro-enterprises flourish culturally. Teams are tighter, job engagement is higher, and employees take on responsibilities that otherwise wouldn’t be available.

In short, even if they are dinosaurs, businesses can preserve a disruptive, ambitious start-up mentality.

Divide and conquer

Before creating your own micro organization it’s useful to look at other businesses that have made the leap.

The most famous example I can think of is the Chinese appliance firm Haier.

Haier was aware of the danger corporations face by being dominated by just a handful of monolithic businesses. To prevent being blindsided by agile disrupters, the organization divided itself into more than 4000 micro-enterprises.

Most of these micro-enterprises have no more than 10-15 employees, with decisions made by small, autonomous teams within them.

These micro-enterprises are split into three categories: ‘transformers’, tasked with transforming legacy brands for the digital age; ‘incubators’, which are entirely new businesses; and ‘nodes’, which are responsible for selling component products/services to the market-facing enterprises.

The business structure is modular, yet coordinated. Units can evolve in the direction they wish, yet are loosely guided to ensure they achieve common business goals.

The results have been astonishing.

Over the past decade, Haier's gross profits have grown by 23% per year, and revenue has increased by a whopping 18% annually. And their ability to quickly rebound from the Coronavirus pandemic has been commended.

One (micro) step at a time

As you can imagine, replicating Haier’s success isn’t easy.

But businesses need not undergo such drastic restructuring to see the benefits of micro-organizations. By starting small, an organization can experiment with what works for them, and start to scale once they see results.

And in my experience, it takes as little as two years for a micro-business to become profitable.

The most challenging part of the process is getting buy-in. Large businesses are, by their nature, resistant to change. Only a compelling business case can break processes that, in some instances, have worked for decades.

Doubtless, granting units such autonomy will make some execs feel nervous. But in my experience, given the opportunity, employees really step up to the challenge.

So unshackle your workforce. Trust your stakeholders. And empower employees to take your organization into a more agile future.