Unless you remain agile, your business will decline at the very time that it should be maturing.

Once a business reaches its maturity stage, the strategic mindset changes to something like: “This is perfect, we have found the ideal formula, let’s not mess with it”. The business becomes operational, less strategic, assuming (or hoping) the environment will not change. Our enterprise starts to lose its edge and risks drifting into decline; it is at the mercy of the market.

Once it hits the decline, it’s all downhill. But you can avoid decline by extending the maturity phase. Products and whole business lines will eventually decline due to new technology, changes in the environment and other factors.

This is where the distinction between ‘enterprise’ and ‘product or business line’ becomes useful. If we identify the enterprise with the product or the business line, the enterprise will decline along with that product or business line.

The idea is to allow the natural decline of products and business-lines in order to extend the maturity phase of the enterprise.

For an enterprise to survive in the long run it needs to constantly cultivate the start-up of new business lines and new products while culling off the older products, declining business lines and failed start-ups.

So, what does a strategically agile enterprise look like?

An agile enterprise tends to move out of an established advantage early, with the goal of moving on to something new. By all means, milk an established advantage, but avoid going down with it. Established business lines utilise resources and in doing so may restrict the enterprise from considering alternatives. An agile enterprise constantly thinks about alternatives to established products by watching future trends. They develop new competencies and capabilities early, while the established advantage is at its peak and use the established advantage to fund their next start-up.

An agile enterprise also establishes a systematic way of exiting business lines. If you do not have a system to exit business lines, you just keep on with them. Agile enterprises monitor the relative value using traditional measures such as a profit and loss or simply a cost-income ratio for each product or business line. Is the product pulling your enterprise’s cost-income ratio up or dragging it down?

They monitor the leading indicators of each business line and compare the future prospects: future costs and revenues. They kill off business lines which lower the value of the enterprise and have low prospects in the long run by redirect budgets and other resources towards alternative ventures.

Having a documented process for disengagement is just the starting point. Disengagement from a business line must also be accepted culturally as a normal way of doing business and not a sign of failure which will mark an individual or team for the rest of their career. These organisations plan and manage change carefully and in detail, taking into consideration the career paths of all those who may be impacted. They involve them in the design of the change-over and communicate a strong case for the need for change.

An agile enterprise recognises that failures are unavoidable and tries to learn from them. They reward managed risk taking, especially when coupled with organisational learning. They remind themselves that today’s mature usiness would not exist without that initial risk taking. Similarly that that same mature business cannot be sustained without renewed risk taking.

Many organisations inadvertently discourage risk taking when they discourage individual failure. An agile enterprise makes managed risk taking an accepted part of doing business and introduces formal risk management for new initiatives, new products and new business lines. This would include formal risk identification, objective risk assessments, monitoring for risk indicators and also contingency planning.

To be agile, an enterprise budgets in quick cycles, either quarterly or on a rolling basis. Frequent budgeting allows an enterprise to introduce new items into the budget and avoids postponement.

Many will have heard: “… yes, it is an excellent idea … but the budget is fully allocated; let’s budget for it next year.” By that time, your competitor might have already taken first mover advantage.

An agile enterprise must be comfortable with changing plans as new information comes in. Some managers pride themselves in bringing plans to fruition against the odds. They should be proud, as bringing about change is never easy. Nevertheless, this tenacity needs to be balanced with the need for flexibility or even abandoning plans, if necessary. A sunk cost is sunk, and investing further simply increases total costs. An agile enterprise re-evaluates current business lines on their potential future revenues against the potential revenues from newer alternatives.

For an agile enterprise, it feels quite normal to pull resources from a successful (mature) business line to fund more uncertain (start-up) opportunities. Taking managed risks becomes acceptable, if we know that a mature product or business will eventually decline and when we know that we must innovate or decline as an enterprise.

A start-up requires an entrepreneurial mind, a risk taker. Sustained innovation cannot be performed on a part-time basis, or with the ‘extra’ resources. An enterprise’s creative and dynamic resources should focus on nurturing its start-ups.

On the other hand managing a mature repetitive business should be relatively easy. If this is not the case, ask yourself why. Perhaps that mature business line should be re-evaluated or even discontinued.

Agile enterprises introduce flexibility into their organisational structure; they review it regularly by considering the cost-benefit of each function.

It is important to emphasise experimentation over analysis. Due to unknown or intangible factors, for a start-up the numbers often do not add up. Success may be contingent on some innovation or the interplay of a new supply chain. Entrepreneurs know the value of a hunch. Famously Google had no business model and no idea how it would make money during its first years.

One cannot eliminate all uncertainty through analysis. Similarly, one cannot eliminate all uncertainty through detailed budgeting. Where the analysis is inconclusive and the potential benefits warrant it, an agile enterprise would simply try it out. Their aim is to learn quicker that the competition.

We all grow up learning from our failures. When taking risks, things will sometimes go wrong. If your corporate culture frowns upon failure and tries to avoid failure at all costs, employees will either hide failure or worse spin failures into success and the firm may end up paying for a loss-making scheme.

Agile enterprises formally evaluate all new investments and establish a culture which does not simply understand but one which values managed risks takes collective accountability and collective responsibility for organisational learning.

This article is based on a presentation delivered at the PWC-BOV Family Business Forum 2014.

Joseph Camilleri is the Bank of Valletta chief officer for strategy & process management.