The fractal box model of companies

Companies are boxes. Customer feedback and market data come in through one side of the box; employees come in through another side; product goes out a third side; and (hopefully) profits redistributed to shareholders go out the fourth side.

The company’s job is to make sure that it uses its two main inputs — its market understanding and its employees’ skills — to most efficiently produce its major outputs — product and profit.

You might think of the company box as being “thin” — opposing sides are close together — if the company’s product is  easy to produce. This can be correlated with, but is not the same as, the technical complexity of the product.

The company box is large if the company’s product is hard to replicate — either because it’s highly complex (Tesla), or because it has some other attribute, like a large userbase, that are hard for a competitor to gain quickly (Instagram).

The model is fractal. Departments and teams are boxes within the larger company box. They have a similar structure to the company box, including market intelligence about their customers (internal or external), a set of employees to produce their products, and their (hopefully positive) contribution to the bottom line.

Different levels of managers operate at boxes of different sizes. The CEO is responsible for the entire company box; a VP might be responsible for a large box that holds several smaller boxes inside it.

The key thing for each manager is to realize that their job is really to most efficiently produce their box’s outputs from its inputs.  Managers often define their role as simply the “human resources” part of management: performance reviews, 1:1s, skills development, etc. It’s easy to forget that if your box isn’t producing anything useful, you’re not doing your job, even if you’ve got the employee development part of your job down pat.

“Managing” a team really just means “being responsible for delivery” of that team, and while the human aspects of management are important, they are in service of the goal of creating the team’s product as efficiently as possible.

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