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If one looks back a few years, then the accepted axiom was that large companies had the best chances in the market. Size was the usual guarantee for success. In the past three decades, however, many companies have failed in spectacular fashion. By and by, one came to the realization that those companies that were probably in the best position to succeed were those who could adapt the fastest to new circumstances. The digital revolution further strengthened this opinion and I think that the speed with which businesses can adapt is the key element in meeting the needs of the customer. In businesses large and small.
How does a business executive create a company that can rapidly adapt? I think the following points in this non-exhaustive list are important.
The socialization of many older employees occurred during the economic boom; these employees were indoctrinated with the paradigm of economic growth, a stable environment and the existential constants. However, the recent decades after World War II were an exceptional period economically; during this time frame of secure employment, steadily decreasing workloads with consistently increasing prosperity a material reality was created that in actuality doesn’t exist. In today’s saturated markets this stability has begun to crumble – permanent change has once again become the norm. This is a good thing, as it creates an awareness of permanent adaptation to new circumstances.
The way a company’s employees mentally react to this change is defined through the (employee) culture. If you as CEO have many older employees who were socialized during the afore-mentioned time, and who have perhaps convinced younger employees that this time period represents reality, then you have a cultural problem. It’s very difficult to establish this willingness to change within a company, especially as it’s only natural that it is accompanied by a large portion of perceived insecurity. Love’s labor is pretty much lost here, as different cultures clash. It is your social responsibility to pick up these employees along the way to change as well. However, it is also your responsibility to avoid forcing your views of the world on these employees. This is an area of conflict that sometimes makes an acceptable solution for everyone nearly impossible.
Today, organizational structures are the key element in whether a company is flexible or not. I no longer believe in multilevel management structures or an unlimited number of departments. I see on a daily basis how the entire organization of large companies stands in the way of the actual “doing” and how quickly the employees, including the good ones, get lost in this universe of self-defined rules and processes – at the end of the day, they aren’t even sure if they did something to improve the company. Of course this is somewhat exaggerated, but at the heart of the matter it reflects reality. Instead of supporting such rigid structures, one should create small, results-oriented, autonomous teams. The difficult aspect is that this can only work if every individual employee exhibits a high degree of personal responsibility.
The time of large investments is over. Investments are always made based on a presumption about the future. As the pace of change is accelerating and new technologies alter the parameters ever more rapidly, one is in danger of being financially committed too long to a defined strategy – at least if the initial investment was very large. And, if for example a new technology is introduced that changes the market, this can rapidly have disastrous consequences. A good example of this is nuclear power plants and dams. Both must be amortized over decades, as the enormous construction costs can’t be written off any other way. If one were to look, say, 50 years into the future, what is the probability that a new technology that can produce electricity with less effort and at a cheaper price is market-ready? The likelihood is very high simply because technological developments occur on an exponential curve – something we don’t realize though, because we use the past as a guideline for the future. It lies in the very nature of exponential development that it takes a very long time to even realize that the development isn’t linear. For this reason our criteria for investing are based on this historically linear perception. We are therefore fundamentally deceiving ourselves, which is exactly why this is so dangerous.
Consequently, you should be radically careful, you will benefit from taking small steps, but taking them often.
With agile, the culture of small steps isn’t very far away. I actually think that agile processes create more flexible and nimble companies. There are only very few companies, especially outside the technology industry, that have made the transition from rigid processes and structures to agile methods and teams. Admittedly, it isn't easy.
I hope these points can help to make your company agile and quickly adaptable. Your company’s size does indeed have its advantages, but in the process of change to a more agile business, it is a mortgage that must be paid off first.
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