Understanding the Shift from Scale to Scope

Economies of scale, the driving force of the industrial age, focused on mass production, standardization, and a relentless pursuit of cost reduction. This model was instrumental in catapulting the global population from one billion to over eight billion, fueling unprecedented growth. However, this came with a hefty price tag: environmental degradation and a widening social divide—a divide that is at the heart of much of the political upheaval we are experiencing globally and at home.

The transition to economies of scope presents a more sustainable and inclusive alternative. Unlike scale, which leans heavily on uniformity and volume, scope emphasizes diversity, specialization, and collaboration. It’s an approach that fosters innovation and efficiency by harnessing specialized skills and minimizing waste. This model isn’t just environmentally prudent; it’s also economically advantageous, as it leads to reduced costs and fosters rapid innovation. Scope also creates opportunities for growth that will allow us to bring onboard an additional four to five billion of the planet’s inhabitants without the devastating ecological, political, and human consequence of scale.

In healthcare, for example, economies of scale have lead to mega-mergers that are intended to create reduced costs for healthcare providers through the use of shared services. However these mergers only serve to increase the bargaining power that large providers and exert on insurers, ultimately driving up costs for patients while also reducing access to healthcare through the elimination of many community hospitals that are already running on single digit margins. These larger healthcare institutions also result in reduced positive outcomes since the patients they treat are largely anonymous. 

In an economy of scope smaller hospitals would have the option of using third party technology providers, such as Optum, to seamlessly integrate vital services such as claims processing and information technology into their operation, thereby shedding everything but their core competency of patient care. Preserving these smaller community hospitals increased access to healthcare for a larger population, create bonds between patient and provider that are critical to continuity of care, and ultimately deliver care in a more compassionate and patient-centered manner.

This shift to scope has far-reaching implications. Economies of scope prioritize waste reduction and lower environmental impact as core operational principles. They are agile, adapting swiftly to emergent markets and rapid changes, crucial in a world where ecological challenges are dynamic and unpredictable. The focus on digital ecosystems and collaborative problem-solving is central to this model, promoting efficient resource utilization and innovative solutions with minimal environmental impact.