Rising Competitive Pressure and the Need for Agility in the Digital Age
Globalization is increasing competitive pressure, product life cycles are becoming ever shorter, and innovation pressure is growing. Everything is changing – sometimes faster than ever before: demographics and social behavior, markets and technologies, and even business models are in constant flux. No company can afford to rest on its previously successful strategies – because its product might be disrupted and rendered obsolete in no time.
The world’s largest companies today are no longer oil giants or banks, but rather Apple, Alphabet (Google), Microsoft, Amazon, and Facebook. Apple could, with its current cash reserves, easily acquire Daimler, Volkswagen, and BMW – not just one of them, but all three combined. But what are these new giants – and many startups – doing differently from their competitors? Why are they so successful?
Agile Team Communities vs. Rigid Departmental Silos
Today, most companies are still organized hierarchically, with traditional departments and leaders carrying prestigious titles such as Chief Executive Officer, Chief Financial Officer, or Chief Technology Officer – titles that originate from the military, specifically the navy, and were adopted by early trading companies in the 17th century.
Companies still rely on hierarchical org charts that document departments, roles, and reporting lines – clearly showing who reports to whom and how important a person is. While this structure may still make sense in the military, aerospace, or hospitals, it is unsuitable for organizations developing products and services for customers – especially in the digital age, where markets, technologies, and customer needs evolve at breakneck speed.
Departments may operate efficiently within their own silos, but suffer massive friction losses when collaborating across departments due to the increased complexity of tasks. Decisions are often made not by teams, but by a few managers at the top.
Customer Proximity as a Critical Success Factor
Which departments and employees in your organization have direct contact with customers, and thus receive immediate feedback on your products and services? Can these departments actually initiate improvements?
Customer proximity, empathy, and customer-centric product development, along with agility, are decisive. The traditional top-down hierarchy and departmental thinking slow down decision-making and have a significant impact on business success.
Isn’t it astonishing that, in many companies, the people making the key decisions are those furthest away from the customer – the executives and managers?
Cross-Functional Teams as Drivers of Innovation
To develop innovative ideas and implement new features quickly and flexibly, teams must work across departments and disciplines – from concept to deployment. This requires valuing the knowledge and ideas of each employee, recognizing that individual skills and competencies matter.
Decisions should be made within teams – because they are the ones closest to the customer.
This is the core strength of the Big Five – Apple, Alphabet (Google), Microsoft, Amazon, and Facebook – as well as countless startups that can respond to change swiftly and are therefore extraordinarily successful. It’s no longer the biggest, but the most adaptable companies that survive – pure Darwinism in action:
“It is not the strongest nor the most intelligent companies that survive. It is the one that is most adaptable to change.”
The Traditional Hierarchy Is Obsolete
The rise of the digital era has made it abundantly clear: Hierarchical organizations are outdated. According to a Deloitte survey from 2017, only 14% of global executives still believe that the traditional hierarchical model with functional silos is effective for their organization. Even more striking: only 6% consider their organization to be “highly agile.”
Conclusion: From Management Hierarchies to Agile Team Communities
Companies need modern, team-centric structures, management systems, and processes that decentralize decision-making from the executive level down to self-organized teams – fostering autonomy and responsibility among employees.
Classic management systems, where decisions are made exclusively at the top, can no longer keep up. Employees often give up, conform to the rigid structure, and become “underperformers”, doing only the bare minimum from 9 to 5, which further entrenches departmental silos.
Let’s embrace the opportunities of digital transformation, take responsibility, and work together to make the world a better place.
