Schumpeter’s Law

Any strategy, scaled big enough, cannot be sustained, and it will be replaced by a new set of conditions, players, and rules (from This is Strategy by Seth Godin).

This is Schumpeter’s law. It explains why the business that scales to thousands of employees often loses touch with its customer base, who start complaining and reminiscing of the old days when customer support felt personal and responsive.

Change happens constantly, and the business must not remain “stuck” in old ways of thought and behavior which would create stasis (losing quality, momentum, and market share) in the new paradigm. But it needs to acknowledge and accept the changes and adapt the strategy accordingly.

Strategy is the set of choices on how to play the game of business, which varies over time because the game’s rules and landscape are constantly shifting due to internal and external factors.

In private life, say you made a lot of money and buy a huge property with a house and other amenities. Such a purchase has implications for your lifestyle. You’ll likely consider hiring a team of people to take care of the lawn, the swimming pool, clean the facilities, install security mechanisms to prevent unwanted visitors, and more.

Choices, especially when “scaled” (something that becomes more complex, with many interconnected elements at play), have multiple order effects and implications that have to be confronted. Some effects are desirable to you, others less so. All real effects nonetheless.

Disruption happens all the time, whether you cause it or something else does. If you think you want to scale, grow, increase impact, are you onboard with the implications of such a choice?