Clarity of purpose and strategy are essential at the early stage of the organizational cycle. As the firm grows, market opportunities expand and competitive pressures intensify, management must remain focused on the desired purpose of the organization. Suh & Shannon initially were clear about their purpose and capability. This clarity drove decisions about when to say yes and no to potential clients. While this is always an important question for companies to consider- and re-consider- it takes on special significance when both the firm and the industry are new.

It is important to balance internal capabilities with promises for external service. Decisions concerning market strategy, clients, and competition must be closely linked with internal decisions on governance, structure, systems and processes of the organization. The growth-by-acquisition strategy upon which Agency embarked greatly increased and enlarged their technological capabilities and, as a consequence, the range of services which it could offer to existing and potential clients. These additional capabilities came at a high cost, however. Despite its clear acquisition criteria and integration philosophy- the challenges of "digesting" its acquisitions - integrating systems, processes, cultures; managing turnover; and assimilating the senior managers - presented many challenges for the firm.

Partnerships are especially effective in the creation and early growth firms. Despite their dislike for organization charts, the founders clearly had a tacit agreement about the division of labor between them. Both were creative free spirits but Suh clearly took on more of the managerial and administrative functions of the two while Shannon seemed to have played a larger role in the creative end of the business. The mutual trust and support of a well-designed leadership dyad forms the foundation on which enduring firms are often established and thus, enhances the possibility of success.

Lessons from Agency.com (B)

“Managing Rapid Growth” has two components: the scale challenge and the scope challenge. As firms grow the face certain pressures, particularly in the way they configure their processes, knowledge, resources and align them to the core strategy. In the cases we see Agency grow through 2 or more orders of magnitude. The stress this places on an organization are enormous. When industry structure and consumer demands change rapidly, firms face important “product/market scope” decisions. There are few situations in which it is tougher to manage and lead a firm than when it faces both rapid growth and the need to keep pace with a rapidly changing marketplace. If ever there is a time to have seasoned professional managers, it is then.

Core values of the organization must remain constant regardless of capital and labor flows. Management must be clear about what those values are and communicate them throughout the organization. When the company was small, it seems the founders were very good at working their formula to maximum advantage. It is hard to imagine that the company as it is configured today - with its emphasis on "interactive relationship management"- is what the founders had in mind. Or was it? Compare the acquisition history (Exhibit 6) and the organization chart in (Exhibit 7) and ask yourself if the structure of Agency, now a company with 1100 employees, is the one the founders envisioned.

Complementarities count. The successful implementation of strategy requires the adoption of a set of interrelated policies and practices across the entire organization- laterally and vertically. Organizational culture, which can be thought of as the set of beliefs and perspectives that define the organization and govern its choices and actions, is a part of that formula. A sound strategy complemented by a vibrant organizational culture can be a source of sustainable competitive advantage for the firm, primarily because such combinations are hard to achieve and almost impossible to imitate. To its credit, Agency seems to have been able to maintain this for at least first few years of its existence. The percentage of CEOs and creative people from the acquired firms who stayed on is very impressive and speaks well of Agency's acquisition and integration philosophy. Or maybe they were just staying around for the IPO?

Timing matters. Agency.com entered the industry early but was way late to the IPO party. Agency went public well after many of its Silicon Alley competitors and compatriots. The share price has dropped through the floor since its opening day highs. Some of this could be attributed to the bursting of the Internet bubble, but some of it may due to a lack of confidence in the viability of Agency.com itself. No longer just designing web-pages, they are now in a space where the value-added comes from much more than just the technology. Given their competencies at founding, do you have confidence that they can now compete head-to-head with management consultants, systems integrators, advertising agencies, and other integrated relationship management firms?

Linked by: BusinessPundit