The traditional view of companies is that they have a lifecycle through which they evolve from cradle to grave.
Companies who are radical in their innovation not only create a new category or niche which define their brand (al Ries) but also often have different business models that displace convention industry wisdom, (Skype, Netflix, Ikea, Amazon, Google).
Unless the Leadership team make changes to keep the entrepreneurial drive, and keep on innovating, most companies eventual either die or are taken over.
I have outlined a few different perspectives, in helping you determine your business maturity/phase.
The simple view of a company’s lifecycle (unless an effort is made to extend it by making the necessary changes)
Beginning to walk (the “toddler”).
The new company is launched as a small business, like the thousands that are created each and every year. Most quickly fail because they don’t understand the needs of the market and they lack a vision of how their company can uniquely meet those needs.
While they may well have the technical skills needed for success, they lack the necessary entrepreneurial drive and vision.
Uniquely meeting the needs of the market coupled with entrepreneurial drive and vision are the necessary ingredients to proceed to the next stage of the company life cycle.
Running up the hill (the “adolescent”).
At this point in the company life cycle, the company continues to meet the market’s needs, and may experience rapid growth.
The rapid growth results from their having met the market’s needs better than their competitors, and letting the visionary zeal of the founders continue to drive their efforts.
In theory, this visionary zeal could persist long after the founder’s demise.
And, in some cases it does.. It is at this stage, though, that most successful companies eventually falter, and thus, enter the next stage of the company life cycle.
They do so by forfeiting the direction provided by the entrepreneurial visionary to that provided by what we might nicely term “professional managers.” Or more aptly, bureaucrats.
Running in place (“aging athlete”).
At this point, the successful company has come to the conclusion that they no longer have the wherewithal to manage the company.
They need help. Enter the professional managers. What’s kind of amusing here is that the origin of the professional manager concept goes back about a century, when the prevailing thought that a “trained manager” could manage anything. Dumb thought then; dumb thought now.
Falling down (the “old geezer”).
It is at this stage of the company’s life cycle in which share declines, and declines, and declines. Abruptly or gradually, ultimately, the company simply ceases to exist. It may go out of business in its entirety, or may be acquired by another more visionary company.
A more detailed 10 stage model is more useful in understanding where a company is.
Having worked with a large number of organisations, I find understanding it’s position in the lifecycle, the role of founders and the maturity of its systems and processes helps in developing an appropriate strategy be it in developing its maturity or in helping it re-invent itself.
Because the business environment is constantly changing, Customer Priorities change (Price, Status, Novelty, Convenience etc) so what may have been relevant when the company started may not make the mark as competitors challenge the status quo.
Examples of changes might be:
A more detailed model of a company is outlined below.
The Developing Stages
This is the stage of dreaming and making a commitment to a dream. The would-be founder focuses on ideas and future possibilities, making and talking about ambitious plans either to change the market or create a market niche. Courtship ends and Infancy begins when the founder assumes risk.
During this stage, the founder’s attention shifts from ideas and possibilities to results. In the business world those results take the form of sales. Sales drive this action-oriented, opportunity driven stage.
During Infancy, nobody pays much attention to paperwork, controls, systems, or procedures. The founder works 16-hour days, six to seven days every week, trying to do everything. Because a small problem can escalate and turn into a major crisis overnight, the founder makes all decisions — big or small..
This is a rapid-growth stage. Sales are still king or queen. The founders, seeing their companies flourish, believe they can do no wrong, the arrogance leaves their businesses vulnerable to flagrant mistakes. They see everything as an opportunity, and too many opportunities can present big problems. The leaders organize their companies around people rather than functions; capable employees can — and do — wear many hats, but, to the consternation of key employees, the founders nevertheless make every decision. What was normal in Infancy is becoming abnormal in Go-Go.
During this stage, experiencing the problems of uncontrolled growth, the company takes new form. The founder hires a chief operating officer but finds it difficult to hand over the reins. An attitude of us (the old-timers) vs. them (the COO and his supporters) hampers operations. Company goals languish while the battle rages. There are so many internal conflicts that people have little time left to serve the clients. The company suffers a temporary loss of vision.
This is the stage of life when everything comes together. Introducing and enforcing discipline without losing vision, the company in Prime establishes an even balance between control and flexibility. The organization, disciplined yet innovative, consistently meets its customers’ changing needs. New infant organizations sprout up, and they are decentralized to provide new lifecycle opportunities: The organization is vital and vibrant
The Aging Stages
The organization is still strong, but without the eagerness of its earlier stages; it’s starting to show the first signs of Aging. Instead of getting what it wants, it wants what it gets. Members of the organization welcome new ideas but lack the degree of excitement that characterized new ideas during the growing stages. The financial people begin to impose controls for short-term results. The emphasis on marketing and research and development wanes. Employees admire past achievements but find it difficult to muster energy for the future.
Not making waves becomes a way of life. Outward signs of respectability — dress, office decoration, and titles — take on enormous importance. The organization acquires companies rather than incubating startup businesses. Its culture emphasizes how things are done over what’s being done and why people are doing it. The company appears to be stalling, and the organization’s leaders rely on the past to carry them into the future.
In this stage of decay, the company conducts witch hunts to find out who did wrong rather than trying to discover what went wrong and how to fix it. Cost reductions take precedence over efforts to increase revenues. The reason for this behaviour seems to be that it’s easier to see how cutting costs improves the bottom line. It is far from certain, however, whether stronger efforts – even with an unchanged cost structure — will increase revenues and affect the bottom line. The company, therefore, does what is certain and expedient for the short run, rather than what is uncertain — in spite of being significant -for the long run. Some companies cut costs to the point that they suffer from corporate anorexia, they have no strength to do anything: They die. Back-stabbing and corporate infighting rule at this stage. Executives fight to protect their turf, isolating themselves from their fellow executives and demonizing their customers. Petty jealousies reign supreme..
If the organization did not die during the previous stage, it becomes bureaucratized either because it is politically protected or because it survives in a regulated environment. The critical factor for its survival is not how it satisfies its customers, but how it satisfies those that grant its resources and control the predictability of its behaviour. The organization’s procedure manuals thicken, paperwork abounds, and rules and policies choke innovation and creativity. When employees question procedures or processes, management’s answer is, “It’s the policy.” Clients –forsaken and forgotten — find they need to devise elaborate strategies to get anybody’s attention. There are systems for everything. Employees play by the book.
This final stage may linger for years while the company slowly dies, or it may arrive suddenly with one massive blow. The organization crumbles when it cannot generate the cash it needs to cover its bills.
I really love Les McKeown’s take on the lifecycle of a business especially the different types of co-founders required. (Gates/Ballmer, Jobs/Cook, etc).
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