With most economic indicators suggesting that the Great Recession is coming to an end, it’s tempting for a business that has successfully weathered the storm to breathe a sigh of relief and look forward to business as usual. But experience tells us that complacency is the worst mistake a business — especially a startup — can make.
Just ask Digital Equipment Corporation (DEC), the precursor to Microsoft and Apple and creator of the minicomputer. By 1990, DEC was riding high, ranked only behind IBM in the computer industry. But under the leadership of Ken Olsen — who once famously derided the emerging personal computer, saying, “There is no reason for any individual to have a computer in his home” — DEC stuck with its original vision and its product lines, which were incompatible with emerging operating systems.
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Olsen was removed from the board in 1995 and DEC was purchased by Compaq in 1998. By then, the company had lost money for five of its last seven years.
Complacent companies believe they have figured out the formula to success. In reality, there is no business as usual, no magic formula that leads to sustained high performance and financial success at companies. The long-term and repeated successes of high-performing companies are actually due to constant reinvention — their agility.
Most entrepreneurs start with a culture of agility and a commitment to be responsive to the changing needs of the clients/customers. But as organizations grow and evolve, much of that entrepreneurial daring is replaced with a dogged fixation on “The Plan” — or, in the other extreme, thrashing around in the face of crisis and trying to adapt with urgent, costly and often ineffective crisis management and organization restructuring.
An examination of hundreds of businesses over 20 years of operations has shown us that rather than digging in their heels, successful companies do a better job at four things: establishing a climate for revising strategies, perceiving and interpreting environmental (external) trends and disruptions, testing potential responses, and implementing the most promising changes.
They have a culture of continuous agility. In essence, they have “agility routines.”
With recent research suggesting that the expected life of a new American company is about six years, entrepreneurs who have enjoyed some success, but want to take their business to the next level, must adopt a culture of agility to survive.
New business owners must first focus on establishing an aspirational purpose, developing a widely shared strategy and managing the climate and commitment to execution. While it sounds obvious, too many entrepreneurs are focused instead on goals: being number one in the market or meeting threshold monthly financial targets.
An agile organization develops a dynamic strategy with change in mind and has a process for modifying the strategy in the face of change, based on aspirational targets — beyond profitability — that unify and inspire stakeholders.
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Next comes the process of broadly, deeply and continuously monitoring the environment to sense change and rapidly communicate these perceptions to decision-makers, who interpret and
formulate appropriate responses.
Agile organizations use the perceiving routine to assess what is happening in their environment better, faster and more reliably than their competition. Entrepreneurs, in particular, fall in love with their products and ideas, and with the original business plans that back them. But this does not allow organizations to be agile. After all, if you’re producing croissants and the marketplace suddenly wants donuts, you’d better come up with a cronut & quickly.