From a pure Survival of the fittest viewpoint, smaller interconnected companies should be more productive than monoliths. Why? Because monoliths are slower to adapt ( See all the new tech startups beating the giants ), and smaller companies can “replace parts” fast and efficiently. However giants still have a high survival rate. Google has proved it with Gmail, Google Calendar, Google Docs. They are all different services that don’t overlap in requirements, and as such there is no need for them to fall under the same umbrella company.
I believe there are 2 main reasons for this:
- Branding is powerful in selling new services: anything Google creates will be tried by a solid fan base, however this does not apply to a Startup nobody heard of.
- Pricing: negotiating prices between small companies creates friction, which does not exist when a company provides all the parts.
Point 2 seems harder to address: pricing is a tough problem in any Illiquid Market. Point 1 could be solved though: could branding be provided to small companies? It feels like this is already, partially, being done by the likes of TechCrunch and VC companies