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  • Writer's pictureKarim Harbott

The Importance of Organizational Structure: Adopting Electricity and Modern Business Agility

The Importance of Organizational Structure: Adopting Electricity and Modern Business Agility

In the wake of rapid industrial evolution, the narrative of adopting electricity in factories during the late 19th century provides compelling insights into today's business agility. Just as the introduction of electricity transformed manufacturing, modern companies must embrace structural change to remain competitive and agile in a fast-paced market.

The Spark of Transformation

The journey from water to coal, and then to electricity, marks a pivotal era in industrial history. Initially, factories were powered by waterwheels connected to a series of belts and gears, a central line shaft driving an array of machines. Transitioning to coal-powered steam engines allowed factories to be built away from rivers, but the core design remained unchanged. The inefficiency of this system became apparent as it required full operation for even a single machine's function, leading to wasteful energy consumption and increased operational costs.

The real game-changer arrived with the advent of electricity. Thomas Edison's power stations signaled a new age of powering factories. However, despite the revolutionary potential, electricity's initial adoption saw less than 5 percent uptake in mechanical drive power by factories, 17 years post its introduction. Factory owners, hesitant to overhaul their entire system, merely replaced steam engines with electric motors without reaping the benefits of the new power source.

The Structural Overhaul for Agility

The true potential of electricity wasn't in simply swapping power sources; it demanded a complete structural overhaul. Small electric motors could drive individual machines, enabling operation as needed, rather than the inefficient central line shaft system. This shift to a decentralized power system allowed for a more flexible, efficient factory layout centered around production lines.

The lessons from the industrial transition to electricity are starkly relevant to today's businesses. Modern companies entrenched in traditional hierarchies face the challenge of becoming agile. To compete effectively, they need to deconstruct siloed structures and embrace a network of interconnected teams focused on customer outcomes. This mirrors the shift from centralized power to decentralized, nimble, and responsive electric-powered machinery.

The Current of Change in Business

Today, an organization's agility is often stifled by outdated structures that impede rapid response to market changes and customer needs. The story of electricity teaches us that adopting new technology or methodologies isn't enough; businesses must be willing to restructure fundamentally. Agility necessitates an environment where innovation is not just possible but fostered across a network of teams that collaborate, adapt, and deliver quickly.

Leaders in the digital age must learn from the past and have the courage to initiate deep structural changes that support exploration and exploitation. This means building an organizational structure that is flexible, customer-centric, and enables quick pivots and adaptations - much like the factories that moved from centralized to decentralized electricity sources.

Harnessing Business Agility

As businesses continue to grapple with volatile markets and shifting customer demands, agility becomes an imperative rather than an option. The transition to agile is not just a surface-level change but a reengineering of the very foundations of an organization's structure. It's about creating a dynamic system that can channel the current of innovation and operational efficiency effectively.

Just as the decentralization of electric power led to an industrial boom, businesses that embrace a decentralized, agile structure are poised to experience growth, innovation, and sustained success. It's a transformation that demands vision, commitment, and a willingness to change from the core.

Conclusion: Lighting the Way Forward

The historical switch to electricity in manufacturing is a powerful allegory for modern business transformation. It serves as a reminder that true progress often requires a fundamental change in structure and approach. For today's businesses, this means adopting an agile framework that is as transformative as the shift from steam to electric power in the factories of yesteryear. It's not just about being responsive to the current of change but being structured in a way that allows you to harness it, leading to a brighter, more innovative future.


If you would like to dive more deeply into Agile Leadership and Business Agility, we have three great options to help you grow in that space:

1) Check out Karim’s best-selling book, The 6 Enablers of Business Agility.

2) Check out Karim’s self-paced, on-demand Agile Leadership & Business Agility course.

3) Attend Karim’s live Certified Agile Leader (CAL) class.

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