3 Stages of Organizational Growth: Enhancing Agility at Each Level

In recent years, due to the increasingly complex and volatile external market environment, “agility” has become a necessity for many companies, and “agile organization” has become a buzzword.

So, what is an “agile organization”? What does “agile” mean?

Viewing “agility” as an “organizational capability and culture” rather than a specific “organizational form” is more conducive to discussing how to enhance organizational agility. In other words, an “agile organization” is not a specific organizational structure but refers to organizations that possess the “strategic organizational capability and culture” of agility.

This article focuses on exploring the key points of developing the “agility” as an organizational capability and culture in companies at different stages of development.

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Stage 0-1

In the early stages of entrepreneurship, many companies often consist of a 3F (Family, Friends, Fools) team. With a small team, everyone needs to be a jack-of-all-trades. The founder can personally attend to everyone’s feelings, and there are no complex processes or systems in place. In this situation, the organization’s “agility” is sufficient. At this stage, a company’s success largely depends on the founding team, sometimes just one or two individuals with keen insights into the market and the environment.

Of course, some companies start their entrepreneurship journey with a well-equipped team. In one scenario, large companies incubate new businesses and transfer their top talents. In another scenario, companies operate in knowledge-intensive industries, so even though they are small, everyone has worked in large organizations and systems. They may not have experience building organizational systems, but they have enjoyed the “benefits” of large organizations and systems. As a result, they instinctively apply large company standards to the small company, creating a “small company, big organization” dynamic. Here, “big” doesn’t refer to size but rather to the complexity and weight of organizational work.

This demonstrates that even when a company is very small, without deliberate protection of agility, it can quickly become insular. The key to promoting agility at this stage is to quickly identify industry insights and establish customer-centric core business processes. Additionally, you can implement the following key organizational measures to cultivate organizational agility (note that at this stage, it’s more about creating agile teams rather than building agile organizations):

  1. The executive team should be willing to take on more responsibilities, be hands-on, and get involved in frontline work.
  2. Introduce concise and relevant values related to agility, such as “agile innovation” and “customer-first.”
  3. Most importantly, quickly identify industry insights and establish customer-centric, streamlined business processes.

Stage1-10

This stage marks the company’s beginning of rapid scaling and expansion, where efficiency and speed become crucial for success. Consequently, the need for control and standardization starts to emerge. At this stage, it’s essential to be cautious about the potential destruction of creativity and individual initiative in the pursuit of efficiency. This doesn’t mean that having standards is bad, but it emphasizes the importance of establishing rules carefully.

The work of organizational development is similar to raising children. If you want your child to not only excel academically but also be creative and have a healthy personality, you can’t simply enroll them in extracurricular classes, have them practice math problems every day, and focus solely on short-term exam scores. Therefore, sometimes, taking a slower approach can actually be faster. It’s about knowing when to let go and when to hold back to achieve a balanced approach.

Many companies at this stage often seek external consulting firms to streamline processes and establish a process-driven organization. This is entirely reasonable as a company grows from small to large; having a robust set of processes is essential for sustainability.However, it’s important to be cautious not to swing to the other extreme, turning every individual into a mere tool in the process, mechanically following procedures. While this approach may yield short-term efficiency and scale, it can result in the loss of the vitality and creativity needed for the company’s long-term development.

Stage10-100

In this stage, many companies have become industry leaders, possessing top-notch strategic and organizational execution capabilities, surpassing the “person-to-person” mode of management and reaching the level of “system-to-person, person-to-system.” At this stage, the company’s task coordination systems, talent and knowledge systems, and culture management systems may already be quite mature. However, organizational evolution and renewal systems often face challenges, especially concerning the executive team and organizational assessment subsystems. In this stage, the executive team must remain vigilant about changes in the external environment. Once vigilance is relaxed, a highly successful company may be at risk of internal strife, complacency, and inertia as executives vie for resources.

For companies at this stage, “agility” primarily manifests in the ability to “self-destruct and be reborn.” Many companies, even when they have grown significantly with thousands of employees, hope to maintain the entrepreneurial spirit of their early days – the ability to respond rapidly to changes, pivot quickly, and continuously experiment with innovation while retaining the agility and flexibility of a small organization. In my personal opinion, if a company has not established agility-related capabilities and culture effectively during its early stages, it is almost impossible to do so after it has become very large. It’s akin to a child who hasn’t developed good study habits during their early education; expecting them to develop these habits during high school or college is very challenging.

However, it is not impossible. Firstly, it depends on whether the executive team, especially the founders, can let go of their desire for control. The essence of agility is transparency, empowerment, and providing space for innovation. If the executive team continues to tightly hold onto power, it can stifle the growth of innovative culture. This process requires the founders and executives to go through a transformation, observing, and analyzing the organization from an external perspective. It involves listening to external customer feedback, internal organizational needs, and continuously crystallizing and prototyping plans. Only by truly achieving this can a company rejuvenate and regain its vitality.

Microsoft also went through this stage in its corporate journey. Before Satya Nadella took the helm in 2014, Microsoft had entered a phase of stagnation with a declining market value. However, under Nadella’s leadership, Microsoft made a dramatic turnaround. He shifted Microsoft’s culture from closed to open, from being adversarial with the world to being cooperative, ultimately bringing Microsoft back into the ranks of trillion-dollar growth companies by 2018. This transformation was a painful process. Therefore, any organization that fails to consciously maintain external adaptability and continuously reinvent itself, especially its executive team, is at risk of regression, particularly during the middle and later stages of development.

Conclusion

Agility is a “organizational capability and culture” (it’s both a capability and a culture), not a specific organizational form. Building the capability and culture of agility requires a comprehensive consideration of all components of an organization (task coordination system, talent and knowledge system, culture management system, organization evolution, and leadership system). Just like the agility of a cheetah, it means that it has to evolve all its body systems (skeletal and muscular systems, circulatory system, respiratory system, etc.) to be agile. If a cheetah grows the long tusks of an elephant, it won’t be agile.

At the same time, I must emphasize once again that “agility” is not the only choice. “Elephants” are not agile, but they also have their own space for survival. Some industries require stability and robustness like elephants to thrive. So, it’s essential not to blindly pursue “agility.” Moreover, different industries have varying needs for the capability and culture of “agility.” In other words, the importance of “agility” as an organizational capability and culture varies across different industries. For example, an aircraft manufacturing company or a pharmaceutical company may not need to be as agile as a game company.

Additionally, it’s important to note that agility alone cannot solve the issue of technological competitiveness. For some industries, without technological competitiveness, being agile won’t be sufficient.

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