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In search of Economies of Skills

Anthony Williams  16-09-2013

IBM discovered decades ago that adding programmers to an IT project that was large did not help. Indeed, both progress and performance slowed even more.

Talented resources fuel innovation

The "scale-driven mindset" sometimes known as "throw more people at the problem" is limited. Yet this mindset has so dominated the business executives’ agenda in the last 6 years that it has clouded our consideration of many situations, such as outsourcing business functions to leverage labour arbitrage and economies of scale. But, talented resources (precisely because they are talented and scarce) fuel innovation in two ways: through entrepreneurial and social-network approaches, and because teams often produce better results as a direct result of the talent. The human mind is most productive when focused. Better focused we are, more likely to recognise an unexpected idea. Witness the outcome of a Cold War-era race between General Electric and BMW teams to design adequately cooled jet engines. The U.S. team had a virtual blank cheque, used the most advanced materials and spent nearly twice as much as the German team did. The German team, which had significantly less funding at its disposal, came up with a simple yet elegant design principle that remains in use to this day.

Solving client problems

History tells us that economies of skill are a far better weapon to address today’s complex business problems than economies of scale or large pool of labour. For example, does it matter how many hundreds of consultants a company has and how many languages they speak when the real task is to solve a client’s most demanding and complex problems?

There will be always the needs for low-cost labour, but without the talented people crafting new way of doing things, low-cost labour will only produce average quality produce at best and eventually costing companies more. 

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