Traditional organizations often operate with multiple layers of processes, designed to ensure compliance, minimize risks, and maintain operational consistency. These processes are typically introduced for two primary reasons:

• Regulatory Compliance: Highly regulated industries like healthcare, aviation, or food production must adhere to strict legal requirements. For example, pharmaceutical companies are bound by GMP (Good Manufacturing Practices) standards, which demand comprehensive documentation and stringent testing protocols. While essential for safety and quality, these processes create an audit trail that inherently slows down decision-making and execution.

• Countermeasures to Past Mistakes: Processes are frequently added as a response to failures or oversights. For instance, a data breach might lead a financial services firm to introduce additional layers of review for IT changes. Over time, these processes can proliferate, often persisting even after the original issues have been resolved.

While these processes serve important purposes, they can become burdensome. Legacy systems and outdated workflows contribute to what is often referred to as “organizational inertia”—a resistance to change that makes innovation and rapid scaling a significant challenge.

The Problem of Process Redundancy

A key issue in traditional organizations is the inability to regularly evaluate and retire processes. Over time, these processes can become misaligned with current goals. For example, a manufacturing company might retain manual approval systems for purchase orders even after automating 90% of its supply chain. This redundancy drains time and resources, hindering the speed required for modern innovation.

However, it is important to recognize that this inertia, while frustrating, exists for a reason. It provides stability and resilience, especially in industries where safety, compliance, and reputation are critical.

In contrast, newer organizations often begin with a clean slate. Unencumbered by legacy systems and outdated processes, they can design their operations from scratch, leveraging best practices and lessons learned from established players.

Learning from Others' Mistakes

Start-ups and younger companies benefit from observing the missteps of their predecessors. For example:

• Fintech Start-Ups: Many fintech companies have successfully disrupted traditional banking by building platforms that prioritize user experience while meeting regulatory standards. They learned from banks’ struggles with clunky legacy IT systems and designed agile, scalable cloud-based architectures from day one.

• Direct-to-Consumer Brands: Companies like Lenskart (Indian company that sells prescription glasses online) or Glossier (American company that sells makeup and cosmetics) identified inefficiencies in traditional retail and built streamlined, customer-centric supply chains that allowed them to scale quickly without the overhead of physical stores.

Investor-Driven Scaling

New organizations often receive funding from venture capital firms, whose primary objective is rapid growth and a lucrative exit strategy. This focus drives an aggressive approach to scaling, often at the expense of long-term stability. For instance:

• Streaming Services: Companies like Netflix rapidly scaled by investing heavily in global content production to dominate the entertainment market. While this enabled them to gain a massive subscriber base, it also created high operating costs and forced constant innovation to stay competitive.

While these organizations excel at achieving rapid scale, their lack of tested systems and resilience can leave them vulnerable when faced with significant disruptions.

Key Lessons for Organizations of All Sizes

The dichotomy between traditional and newer organizations is not absolute; each has strengths that the other can learn from:

1. For Traditional Organizations:

   • Embrace digital transformation to streamline legacy processes without sacrificing compliance or quality.

   • Focus on agility by fostering cross-functional teams and empowering them to make decisions without excessive oversight.

2. For Newer Organizations:

   • Build resilience into operations early on. Rapid scaling should not come at the expense of long-term sustainability.

   • Recognize the importance of governance and compliance, especially as the organization grows.

Conclusion: Slow and Steady, or Fast and Fragile?

Organizational inertia is often viewed as a hindrance, but it exists for good reasons—stability, compliance, and risk mitigation. While newer organizations have the advantage of speed and agility, their success is often short-lived without the systems to ensure resilience. Conversely, traditional organizations that actively eliminate redundant processes and adopt agile practices can combine their resilience with the ability to innovate and scale.

In a world of constant change, the ultimate winners will be those that strike a balance between these two paradigms. Whether you are leading a start-up or transforming a legacy organization, understanding and respecting the role of processes will be the key to long-term success.