The debate

I often hear leaders of large organizations using words like flexible, agile, and nimble. They use these words to describe the organization in the future and as part of their overall vision to strengthen market positioning and adjust to the new fast paced digital age. The root causes of this desire to be more flexible, agile, and nimble come from the perceived need and/or desire within the organization for faster decision making and, therefore, greater empowerment.

In truth, this is easier said than done. It sounds good on paper, but when push comes to shove, it is very difficult to implement. Even in large organizations, that have less industry regulation than others, it is difficult to empower people sufficiently to make decisions rapidly, without going through various governance checks and balances, to achieve some semblance of flexibility, agility, and nimbleness.

What is often misunderstood is that large organizations have grown ‘cumbersome’ over many years, and often decades, with a commensurate change in the culture, into something that doesn’t easily recognize, reward and embrace rapid decision making. The bureaucracy has grown precisely because of the need for stronger governance protocols and accountability as the organization expanded. That is exactly what was needed in large global organizations operating across many borders in different jurisdictions responding to the demands of a wide range of stakeholders. The strength and competitive advantage of these businesses is not flexibility, agility, and nimbleness (and most likely never will be). They have so many other competitive advantages that others cannot easily emulate.

Why then do leaders insist on introducing flexibility, agility, and nimbleness into the psyche of the organization? What are they seeing that is potentially constraining the further growth or, in some cases, the survival of the current business?

I observed a very large global organization embark upon a brave new project sponsored by the Chief Executive Officer to consider the characteristics of the future market and what, if anything, the organization should do to respond to such a market. Teams were appointed from all over the world and there was palpable excitement as people engrossed themselves for many months in a journey into the future. There was great expectation from this project and the results were presented at a global meeting to extraordinary fanfare. The long and short of the presentation was that organization needed to exit parts of its current business and develop a new model which would better serve the market of the future. Unfortunately, whilst there were strong arguments as to why the current model would not be relevant at some, undefined, point in the future, there was little substance about how this change should be executed, what it would cost, the impact on people’s lives and so on. The result: The organization made very few changes arising from these recommendations and, by and large, continues to function as it always has. The lesson: Change is hard.

Enter the smaller business!

These businesses have exactly what the large global organizations want – flexibility, agility and nimbleness. What they don’t have is reach, funding, access to resources, brand, stability and so many other resources that the larger global organizations often take for granted. The only way for the smaller players to compete is to be more flexible, agile, and nimble. They must develop and bring new ideas, new products and innovative services to market rapidly, remain fleet-footed, price wisely and deliver excellence to capture market share. That is exactly what the digital world is enabling and more new entrepreneurs are emerging each day. Access to many resources, such a knowledge and new markets, is no longer limited to the privileged few and is easily accessible to those wanting to make use of them. For example, small businesses with great ideas can reach new global markets through various forms of social media and are no longer restricted to customers within a small radius of the ‘home’ operation. This is changing the economic environment and, obviously, the value of the smaller business.

Now, let’s come back to my earlier question.

Why do leaders insist on introducing flexibility, agility, and nimbleness into the psyche of the organization? What are they seeing that is potentially constraining the further growth or, in some cases, the survival of the current business?

The answer lies in a study of history, which has shown that organisms that do not adapt to change will eventually die. Leaders recognize that they have no option – they must implement change to keep pace with the changes being introduced around them. The challenge is not that organizations cannot change, it is the pace of change which is accelerating so rapidly. Large organizations are simply not designed to absorb these changes fast enough.

The dilemma

On the one end of the continuum we have the large global organizations that have many resources but not the flexibility, agility, and nimbleness they so ardently seek to get ahead of the digital phenomenon. On the other end of the continuum we have the smaller organizations that don’t have the size, reach etc., but have flexibility, agility, and nimbleness to manoeuvre in a fast paced and ever changing environment. Both large and small organizations are facing challenges. The smaller organizations must find a way to learn and develop faster than the pace of change to remain in the game, while the larger organizations need to ‘unlearn’ and ‘re-invent’ themselves faster than the pace of change if they are to remain relevant.

The solution

As these organizations become more prolific and, indeed significant, their value will be recognized. It won’t be long before large businesses will realize that the only way to operate in the future will be through some form of hybrid model, where smaller businesses retain their flexibility, agility, and nimbleness whilst accessing the substantial resources of the large global organizations and the larger global organizations achieve flexibility, agility, and nimbleness by associating with selected smaller business partners. I am not suggesting that the larger organizations acquire these smaller businesses. In doing so, one would defeat the objective, as they would simply be absorbed into the larger more constraining culture of the bigger entity and value deterioration will occur rapidly. I am suggesting that these smaller businesses retain their independence and culture and establish a collaborative/partnering type relationship with larger organizations. In this way, organizations benefit by achieving the best of both worlds. Large global organizations may also consider disinvesting and/or unbundling components of the current monolithic structures into smaller more ‘self-standing’ businesses with some sort of link back to the mother ship. The point I am making, is that there are many options to explore a more viable business model in response to market changes. These must, however, be done in a carefully structured way to avoid introducing additional risk factors such as, uncertainty and anxiety, into the system.

To be fair, many large businesses are already working on some form of these models and experimenting with various possibilities, from outright acquisition to loose alliance arrangements.

Conclusion

I believe that this type of business model, with a more formalized relationship between the larger global organizations and smaller businesses, will become more common in the future. Those organizations willing to enter this new world will reap many advantages down the line and find it much easier to adapt to the new digital world.

Here are several questions which leaders should consider:

1. Is there a clear strategy defining the approach to this type of business model – what is the preferred arrangement;
2. Does the governance structure support this approach;
3. Has the organization defined specific areas it wishes to ‘invest’ in or ‘divest’ from to strengthen its brand and positioning;
4. Has a clear role and clear responsibility for the execution of this strategy been allocated to a specific person; and
5. Has the organization defined the outcomes it wishes to achieve through this strategy and are these outcomes properly measured, monitored and reported.

These are some of the questions leaders should be asking, but I am sure there are many more and would welcome any comments as we develop this thought stream further.