Company life cycle. Determine exactly where you are.
26 August, 2020
Business Analysis Expert 4E Consulting.
Every company, regardless of its size, goes through stages of formation. According to the methodology of the world-famous business expert Yitzhak Adizes, the company's development cycle is in tune with the human way of life. That is, the company also consistently goes through all stages of its existence: birth, adulthood, prosperity, maturity and decline.
All stages of development have certain features. Understanding what period of your life your company is in, you will see the problems and risks inherent in this stage. Based on this, you will be able to build a further development strategy of the company, implementing measures to help it return or remain at a favourable stage of the life cycle.
Consider these stages, the main characteristics and risks inherent in each of them.
At this stage, there is only an idea. For it to be able to develop and materialize, the bearer (founder) needs to form a commitment to it, both internal (own) and external (people who will be associated with your future business). At this stage, the following are important:
deep motivation of the founder;
his belief in success;
clear answers to the fundamental questions: "Why are we doing this?", "What exactly are we going to do?", "Who exactly is going to do this?", "For whom?", "How are we going to do it?", "When are we going to do it?" shall we do?”
The birth of a company is possible only if both the founder and the environment (future partners, investors, colleagues) have a strong commitment and take possible risks.
The excessive commitment of the bearer of the idea, which prevents to consider it objectively, within the existing reality.
The company is at the initial stage of formation, which requires product development and the beginning of its implementation — sales.
This stage is characterized by a focus on improving the product and production process, finding ways to sell, centralized management and close interpersonal relationships.
The period requires constant cash infusions and excessive efforts from the company's management. Hard work for the future result is a sign of this stage.
Loss of enthusiasm, endless bringing the product to perfection, financial problems, premature delegation of authority.
Childhood "Come on"
Your baby has grown and started to form as a person. The idea begins to work: production processes and sales channels are adjusted, profits become stable, the company grows and develops.
This period has "pitfalls". Often the first successes are followed by a deceptive sense of invulnerability. As a result, there is a lack of focus and prioritization. The owner may make too risky, ill-considered decisions.
At this stage, it is important to continue to strengthen the position of your business, move consistently and moderately.
The "second birth" of the company. During this period, the energy of movement is set not only by the founder but also by the people who work with him side by side. The company is growing, maturing and needs to systematize and formalize business processes, mission formation, reasonable distribution of management power.
The most common problem is internal conflicts. The founder must redistribute management functions, delegate a large part of his powers. Not everyone is given this easily. Besides, veterans do not perceive changes in organizational processes, resist them. The loss of employees at the source, the excessive ambition of the management, the lack of a common vision and purpose — these and similar problems can lead to the collapse of the company.
If the company has honourably passed all previous tests, then in its history comes the "golden age" — a stage that is characterized by an almost complete absence of problems.
Signs of early flowering:
clear company structure;
profit and sales growth;
common vision of goals, effective teamwork;
functionality of internal structures;
reasonably set priorities.
The main task at this stage is to stay in this state for as long as possible, supporting the growth and development of the company.
Recession or late flowering
The stability of the company reaches its apogee. At the same time, at this stage, the first signs of the company's ageing may appear, manifested in a systematic decline in profits. The good state of affairs and the absence of urgent problems can lull the vigilance of the management as well as at the stage of "Come on".
If the company becomes too conservative, will not notice signs of decline, sooner or later it will approach the following stages.
Aristocracy and bureaucratization
Why seek change in the case of stability? This issue is a major problem in companies that have gone through a certain path of development.
Here, the personal interests of employees who are accustomed to a "warm place" and do not want to make extra efforts come first. The company loses its common passion, desire to achieve and take new heights.
Adherence to tradition, focus on former greatness, lowering the bar of growth, formalization and ultra-conservatism — all these shortcomings will eventually lead the company to decline.
Trying to deal with problems, internal conflicts often begin — "witch hunting". Instead of looking for common ways out of the crisis, employees are looking for the "extreme" and blaming each other. The team of the company is covered by a common paranoia.
The owners of the company understand that all efforts are in vain. There are no resources — neither financial nor energy. Commitment to the company for all employees, regardless of their status, is zero.
By looking at your company more meticulously, you will be able to understand at what stage of the life cycle it is. Understanding the problems inherent in each stage will give you an advantage in overcoming them. The main thing is to understand what development mechanisms you can use to allow your company to stay in the boom stage for as long as possible.
Be brave and aware. Take care of the internal processes in the company, even if you think that there are no problems. Look for new ways to develop and improve. We wish you prosperity!