Most of us can recall a bold transformation that fizzled out after a promising start. It’s staggeringly common that a company launches a new strategy or governance model with fanfare, only to see its impact decay over time. In fact, McKinsey research finds that fewer than one-third of organisations sustain the performance improvements from their transformation. The rest fall victim to what John Kotter famously dubbed the “appalling” 70% failure rate for change programs. Why is this?
A common culprit is treating governance as a one-off design, freezing the operating model in place after an initial installation. Without ongoing adaptation, even well-designed systems stagnate. Initial clarity can calcify over time, stifling innovation and inviting dysfunction. In short, static operating models die. To avoid the static trap, companies must continuously iterate on their governance and processes, keeping the ecosystem alive and responsive to a changing world.
The Nature of Living Systems
In biology and ecology, any system that stops adapting is on the path to extinction. The same is true for organisations. A business is a living system of people, processes, and decisions. It’s an ecosystem that must constantly sense and respond to its environment. Management thinker Peter Senge famously described the “learning organisation” as one that is continually expanding its capacity to create its own future. This principle is grounded in systems theory. A “learning” company treats feedback as the ongoing circulatory flow of the enterprise. Modern research reinforces this view. A 2025 MIT Sloan study found that organisational learning and adaptation are vital to business survival and success.
Similarly, the World Economic Forum highlights adaptability and resilience as keys for navigating today’s disruptions. In a living system, stability is dynamic, and the result of continuous adjustments that keep the organisation in tune with shifting conditions. When governance is approached as a living system, it behaves less like a rigid blueprint and more like an evolving organism, always processing feedback, healing weaknesses, and growing stronger through change.
Iteration as Governance
How do we translate this living systems philosophy into the practice of management? The answer is iteration. Treat governance itself as a continuous process. Instead of a static model, governance becomes an active cycle of decision, feedback, and adjustment. Jim Collins’ Flywheel concept is a useful analogy. In his study of great companies, Collins observed that enduring success was never about one big push, but rather a cumulative process. Step by step, action by action, decision by decision, turn-by-turn, that led to spectacular results. Each small win reinforced the next, creating unstoppable momentum.
In the context of operating models, iteration is the flywheel’s turn-by-turn motion and the regular rhythm of improvements that compound over time. Strategist Alex M. H. Smith likewise argues that strategy should be viewed as “ongoing decision making” rather than a fixed plan, emphasising constant course correction as conditions evolve. In practice, this means leadership doesn’t just set the governance structure and walk away; they treat every week, month, and quarter as an opportunity to learn and refine. Governance meetings shift from merely reporting results to actively adjusting tactics. Policies are not eternal edicts but provisional hypotheses to be tested and tuned. Iteration, in effect, becomes a core governance mechanism and a disciplined loop that keeps the operating model relevant and resilient.
The Cost of Stasis
The data on what happens when companies don’t embrace this iterative mindset is sobering. Even high-performing businesses leave value on the table when their operating models become fixed. McKinsey notes that even market leaders have a 30% gap between their strategy’s potential and what’s actually delivered, largely due to shortcomings in their operating models. In other words, a static or misaligned governance system quietly saps one-third of the company’s optimum possible performance.
Over time, static governance also generates what might be called “governance entropy”, a gradual loss of clarity and effectiveness. Industry experts have warned that governance frameworks, which once looked robust, are no longer enough.
Techniques that worked just five years ago can be obsolete today, meaning every organisation must regularly review whether its governance still fits the business. If they don’t, inertia sets in. In the worst cases, a company keeps operating on autopilot while the market moves on, which is a recipe for drift or crisis. In short, lost agility, eroding performance, and sometimes full-blown transformation failure can be the costs of stasis.
Little wonder, then, that adaptive firms are pulling ahead. In a recent survey, 71% of executives said that leading through constant change has become a critical leadership capability. The cost of stasis is so evident that most leaders now realise only the adaptive will thrive.
Embedding Iteration in Practice
Acknowledging the importance of iteration is one thing. Embedding it into the fabric of an organisation is another. This is where Arx Nova’s Fortify for Growth methodology puts theory into action. Its principle of ongoing iteration calls for building feedback loops, governance cadence, and a culture that treats change as continuous. Concretely, this means instituting a governance rhythm: monthly and quarterly reviews where strategies and operating metrics are actively questioned and adjusted. Leading organisations formalise such loops.
A McKinsey study found that companies with successful transformations were far more likely to embed new disciplines into regular business routines, for example, integrating transformation initiatives into weekly executive briefings and quarterly performance dialogues. One McKinsey recommendation is that a transformation should instil repeatable processes that deliver value again and again by baking them into monthly, quarterly, and annual cycles of management. In essence, the operating model itself must have a heartbeat. This could take the form of systematic after-action reviews, iterative planning sprints, or KPI dashboards that trigger course corrections in real time. Moreover, successful iteration requires cultural permission and a leadership tone that encourages experimentation and candid feedback. Research on change-ready cultures shows that change-seeking companies intentionally integrate feedback loops that accelerate learning, treating their learning systems as the neural network of transformation.
In practice, that might mean regular pulse surveys, open forums for frontline suggestions, and leaders who model openness by responding to feedback visibly. By operationalising feedback loops and a cadence of iterative planning, Arx Nova’s approach ensures that governance is a living process, continually aligning the business with its strategic direction and the realities on the ground.
Adaptability and Performance
In the end, iteration is a philosophy of high performance through adaptability. Organisations that survive and prosper over decades tend to be those configured as learning, living systems. They accept that “done” is an illusion. There is only doing and improving, again and again.
This mindset turns change into a continuous opportunity. It’s what Jim Collins’ research illustrated. When momentum builds through many iterative turns of the flywheel, small wins compound into almost unstoppable results. The company becomes, in effect, greater than the sum of its parts over time. Instead of guarding a static legacy, the organisation’s leadership and culture focus on renewal, regularly shedding what no longer works and doubling down on what does. As Peter Senge and other thought leaders have long argued, a great organisation is one that keeps learning.
It’s fitting, then, to conclude that an operating model kept alive by iteration is a mark of resilience. The goal of iteration is not endless change for its own sake, but continuity, and the ability to endure and excel in a world that never stops changing. In that sense, ongoing iteration is the very mechanism that gives a company its lasting heartbeat.
Who’s behind this post?
Joseph Mawdsley
Director & Co-Founder
Joseph Mawdsley is a senior project leader and governance specialist, and Co-Founder of Arx Nova. With extensive experience guiding complex organisations through change, Joseph focuses on operational control, strategic planning, and delivery under pressure. He helps businesses stabilise fast and move forward with structure and clarity.
