In this article, we explore the concept of huge companies and their scale, reach and power. This is an introductory article to make you start thinking about the market and societal context and impact of these immensely powerful entities.

This article is the first in a series about large enterprises and the complexities behind the B2E industry. My intention is to help you start to understand your customers at the full enterprise scale, beyond the explicit market, buyers and users you would normally target. No matter how good your pitch and your product are, your salespeople still have to go through Enterprise procurement, and that’s just the last step of purchasing (which is also still not the final step).

Disclaimer: While some of these concepts can transfer to Governments, I would recommend that you look for someone who is an expert in B2G to give you that context.

Take a minute to think about the brands that you know.

Chances are that you’ve listed huge brands that exist within huge companies. These brands are usually subsidiaries of much larger entities we casually refer to as “enterprises”, or if you’ve ever met me, my favourite word: “megacorps”.

For the sake of simplifying this discussion, let’s focus on the word “Enterprise” as companies with over 5000 employees.

Note that in the classical definition of enterprise, it is any for-profit company of any size. However, in product parlance, we commonly use the term B2E (Business to Enterprise) to distinguish huge organizations as the major target.

The MegaCorp

MegaCorps are EVERYWHERE

There is no part of your life that does not touch a MegaCorp. They have a hand in your entertainment, healthcare, appliances, food, banking, work, home, and everything that the government touches.

In order to sell something to a MegaCorp, chances are that you’ll need to be large enough for them to accept the risk of bringing your organization on as a vendor. Generally speaking, it is much, much easier for a MegaCorp to sell to a MegaCorp. It’s MegaCorps all the way down.

You can see this on your work computer if you work for an Enterprise. What software do you use? Pick the most niche one and see who makes it. Chances are they’re a smaller company that’s been acquired by an Enterprise. If not and if you keep using them, they will likely be acquired in a few years’ time.

Visualizing the Scale

The thing that never really hits you is the sheer scale of these Enterprises, and how that scale perpetuates itself.

5000 people is a lot of people. [Link: This site has a really good way of visualizing how many people this is]. It’s the size of 2 small towns in Canada. This is a small Enterprise. The largest company I have ever worked for had over 245,000 employees in the US alone. The entire company had more employees than the country of Malta. Let that sink in a bit.

So let’s take this sense of scale and translate what this means at a human level.

• It is suggested that the limit of human cognition allows us to maintain stable social relationships with up to 150-290 other people.
• In a company with 100K employees, you make up 0.001% of the company.

Key Features

At a certain scale, it becomes unrealistic to align everyone under the same set of workable goals. The corporation is split into business divisions, usually along segments that make sense. For example, a hospitality corporation might split its businesses into these market segments: corporations, education, sports and military. A bank may split between consumer banking, business banking, the investing arm, and the insurance arm. Each of these divisions essentially operates as an independent business with its own respective goals, with shared corporate divisions like M&A, IT, HR, accounting, legal, etc.

For multi-national corporations, legal entities are set up on a per-country basis as needed, primarily for hiring, ease of sales and taxation purposes. These entities generally have minimal impact on the actual business divisions IF the divisions operate globally. Local HR constraints may have an impact on your ability to hire specific individuals in those jurisdictions, like your candidate’s proximity to offices if in-office work is mandated, even if they don’t work with anyone in that country.

Despite these divisions, the Enterprise still operates as a cohesive company, with a common set of vision, mission, and values. It is unlikely for a company with a portfolio of rail lines to start selling used books. The perks of massive scale only work in specific ways, and sometimes it makes sense to even descale (ie, divest or dismantle entire divisions) for targeted focus in other high growth/opportunity areas.

The Perks of Massive Scale

Size allows huge companies to do things that would otherwise be unthinkable. It takes a lot of capital to build to that size. That capital gives these huge companies the ability to pay their way to success, either through external investment, much higher budgets on prime strategic initiatives, or acquisition.

Startups spend a lot of time talking about their exit strategy. The end game is almost always an IPO or acquisition by a huge company (with a few PEs in between). MegaCorps have the money to throw around, and once your product is embedded into the larger system, your product is there for a very, very long time.

Here are some of the key benefits to scale to this size:

Streamline Operations

Say you have a 1000-person company. You have Talent & Recruitment, Payroll, IT and Legal. A larger company acquiring your smaller company would already have all of these functions, and all of these roles tend to either get absorbed or laid off at the end of the acquisition process (“Transfer of Business”). You still get the same revenue, but your operating costs are now lower because you, theoretically, have a more efficient and robust operations team.

Don’t Enterprises often outsource? Fully-scaled in-house dedicated teams are generally cheaper, but there are legitimate reasons to outsource:

• The vendor can do what you do at a reduced cost due to:
  • Off-shoring (operating out of a lower-cost labour market)
  • Scale of operations (like shared call centers or delivery fleets)
  • Technology
  • Venture capital backing so they can operate at a loss (Venture capitalists allowing their investments to operate at a loss is much less of a competition issue given the current market climate in July 2023.)
• Exceptional talent that you can’t bring in-house, or would take some time to hire.
• The vendor absorbs the risk of doing that work.
• Investment in this area does not make sense for the direction of the overall company’s growth.

Your vendors make a profit. At a large enough company size, it might make sense to bring scaled operations in-house, especially when it’s a service instead of tooling. The people become dedicated experts in your specific field, instead of people for hire.

Streamlining operations allows you to make the same revenues with lower operating costs. Sure there are additional costs to scale, but many companies measure performance primarily on EBIDTA, and lowering operating costs improves that metric.

Read more: Proctor & Gamble centralized their in-house marketing operations to stop outsourcing to third parties.

Purchasing Power

When you buy and sell hundreds of thousands of bananas a day, the unit price can seem rather exorbitant. - Scene from Arrested Development.

(These numbers are not real. Corporate bulk pricing agreements are strictly confidential knowledge.)

As a consumer, typically we pay $1.50 for an individual 355 mL (12 fl oz) can of Coke. We could save some money by purchasing a 12-pack of Coke for $6 at the local convenience store.

The local convenience store goes through a lot of Coke, let’s say 600 single cans and 300 12-packs a month, so they get a discount from their supplier, say $4 per pack. Enough to make a total $1300/month profit from Coke alone before labour and operating expenses.

The national grocery store chain sells 1 million 12-packs of Coke per month, but also all the other brands. They negotiate with Coca-Cola directly for prices and agree on, say, $3 per 12-pack. They sell the 12-pack for $4.75, to make a lower margin of $1.75 per pack, but at a much, much higher volume. That’s $1.75M from Coke alone. They would not be able to offer the lower rate if they did not get the volume discount. The chain could simply stop selling that brand and the supplier would take a heavy hit to their revenue.

The national chain also has the ability to use loss leaders. They might sell the 12-pack for $3 as a door crasher promotion and make a loss on the labour and logistics, but that brings a lot more people into the stores, who buy other things to more than makeup for the margins.

The convenience store does not get the same discount and purchase price because they don’t have the same buying power. This is why we’re also seeing consolidation of corner store brands, like Circle K. Imagine if they could keep charging the convenience rate but with a higher purchase discount.

Purchasing power is no small feat. As a large enough buyer in the market, you begin to set your own rules for how your vendors behave. The more you buy, the more negotiating power you have to use against your vendors.

Read more: Gloves on the Boardroom Table

Market Coverage

Here’s a list of Nestlé brands: Wikipedia, Nestlé. It’s almost impossible to buy a week’s of groceries and not purchase a Nestlé product unless you buy no processed food, or you’re shopping at an activist grocer.

On the business software side, what are the big names? Google, Microsoft, AWS, IBM, Salesforce, SAP, Oracle, Service Now. Why? Because their product lines check all of the boxes. They’ve built and acquired enough to cover almost every single use case that their clients would want, resolved in a single contract with bundled pricing. (I promised myself that I would not go into Enterprise sales in this article. It is a crazy world.)

Here’s an ancient IBM commercial showing this:

Is there a competitor that covers a niche and would actually work really well with your current product? Start with a partnership, then acquire them. Does it not work out? Acquisition to remove a competitor is also something that happens. The nice thing about being in an Enterprise is that you have access to the full company’s capital to do these activities. Enterprises always have dedicated M&A teams because that’s generally how they grew that large. At a certain size, you generally acquire to grow.

Complete market coverage means that any client looking for a comprehensive solution will likely come to your larger company to solve everything in a single contract. It will also mean that even if a client drops one of your products, you still have the rest of the industry for them to buy into, and they stay active within your ecosystem, opening the door for them to come back.

Brand

Go back to the initial exercise. Enterprises have marketing machines targeting their demographic. Tiny consumer brands have a hard time getting traction until they get acquired or partner with a huge brand.

Think about where you see IBM branding. They don’t have consumer customers, so their branding is only seen where executives are: conferences, LinkedIn, sports stadiums (very specifically facing the IBM box), and billboards outside offices whose competitor contracts are expiring. Most outreach is direct, and physical marketing serves to retain the brand’s power, not to actually sell anything.

Here’s one such ad. What are they selling?

(I’m not shilling for IBM. Both videos came up during the same search and did what I needed. I like the e-business one better from a messaging perspective.)

The money, resources, and power to push a new brand makes a huge difference. People are more likely to talk to you during a cold call if they recognize your business. Other businesses are more likely to partner with you if it’ll give them a boost in recognition. The Brand is a major part of the whole product. What do you want the customer to buy, and what words do you want them to use in describing their success with your product?

Scaled Power

Between the sheer power of capital, streamlined operations, purchasing power, Market coverage, and brand recognition, scale allows huge enterprises access to an incredible amount of power. Since they all work with and sell to each other in some way, they collectively have even more power to fund and lobby for their mutual interests. Let’s look at how this impacts society next.

Enterprises and Society

Every time I meet new people in a professional context, about 5-10% of them say “Oh! Another IBM alumni!” That’s HUGE because it’s still a massive company in the software space. They cycle through a lot of people. These people go to different companies and bring their ideas with them. We still talk about IBM, even if we never worked with each other. Even though we might have left IBM a long time ago. I’ve seen this happen with all the big corps.

Take the sheer number of people across all of these industries and geographies, then add in cheaper operations, purchasing power, market coverage, brand, and the overall capital available to a larger company. This is what I mean by power. This is the power to influence a huge part of society.

When Enterprises talk about laying off 10% of their staff, this is a huge deal. Here are all of the publicly announced layoffs in 2023. That’s 200K+ individuals that were PUBLICLY reported as laid off in the first 6 months alone. These are people with families to feed, rent or mortgages to pay. They pay taxes which fund our services. They buy things to support the local economy.“It’s just business” doesn’t cut it when you talk about lives at this scale.

Sure, many Enterprises also push social impact initiatives like equity, anti-child and anti-slave labour, or environmental net-zero pledges. Some Enterprises mandate their vendors to sign onto similar commitments. Some of these requirements are legal in nature. Some are pushed by shareholders. Many are a part of the corporate brand. It’s generally a step in the right direction.

As people who work for these larger entities for a salary, I think it’s important for us to consider the place of policy in a world of rapidly consolidating corporate power. I would like to remind us of a time when Enterprises colluded to keep tech salaries low through non-poaching agreements when we had fewer options in tech. The US regulators just launched new guidelines for blocking future tech mergers, but have seen limited success in court. It will be interesting to see how this plays out.

What’s Next?

My intention is for you to start thinking about what this means for you: in your personal life and professional career, whether you work for a large enterprise, sell to them, or use their products.

For product people, Enterprises represent a huge market opportunity. Enterprises are vastly powerful, both in capital and in brand, even after new brands take over. Being able to sell and advertise your first Enterprise deal is what makes or breaks B2E software.

In my next article in this series, learn about Enterprise Sales and why they are so very, very hard (but generally still easier than government). Is it worth it to enter this possibly highly lucrative space?

Special thanks to Dee Bernier, Danie Maravalas, and Mark Wong for early feedback.

In Other News

I’ve wrapped up the projects that had taken over my time, so I am back to writing more again. The issue with writing about Context Soups is that each thing could turn into a book, and the articles never end. This article is the 4th article that spun off the initial idea, not counting the trashed ideas. I am enjoying writing as a process.

I am picking up my job search again. If you are a product leader or CEO looking to make your company operationally make sense for the humans who work there, please reach out for a chat. Just want to nerd out? Reach out anyway.