Scott Keller, Mary Meaney

To most leaders, the speed and flexibility that drive innovation lie at the opposite end of the spectrum from standardization and centralization, which promote efficiency and control risk. Not so. Rita Gunther McGrath’s research sheds light on agile organizations. Large companies that raise their income disproportionately, she found, have two main characteristics: they are innovative and experimental and can move quickly but also have consistent strategies and structures, and their “culture is strong and unchanging.” Our research confirms that fast yet stable companies are upward of three times more likely to perform well than fast ones that lack stable operating disciplines

Leaders who want to make their companies agile must therefore determine which parts of the organization should be stable and which should adapt to challenges and opportunities in a faster, looser, more dynamic way. They might choose a primary organizational axis like regions or functions (stability) but deploy temporary cells to address specific issues (speed); standardize work through signature processes (stability) but conduct fast, iterative experiments to develop new products or services (speed); or emphasize shared cultural values (stability) but radically empower the front line to make decisions that embody them (speed).

In short, by constantly reorganizing around a stable core, agile companies break the cycle of recurring—and mostly futile—large-scale organization redesigns.