A Question of Survival

Why are the keys to business success seemingly elusive? Are there principles one can learn that govern the probability of success—or is starting and running a business simply a game of chance (Russian Roulette anyone)?

In my work with companies at different stages of growth, I have developed a scale to help predict a company's probability for ongoing success in today's uncertain economy. It comprises five stages, which examine the internal operations of a company. What stage are you in?

Stage 1: The Entrepreneurial Enterprise.

A company at this level reflects the entrepreneurial spirit in its purest form. All the company truly has going for it is an idea. The founder sees a gap in the market and believes he or she can fill this gap better than anybody else. Internally, the company is driven by trial and error as the founder tries to figure out what the market will value and pay for. In this state, the company is intimately aware of customer needs and will do almost anything to fill them.

How to move on to the next stage: With rising expenditures and uncertain revenue, the Entrepreneurial Enterprise must quickly figure out its winning formula in order to successfully ?remain viable and move on stage two.

Stage 2: The Performing Enterprise.

A company enters this stage when it has figured out the compelling value it can deliver, and does so with positive cash flow. The market has now validated the founder's vision and the company is able to attract talented individuals to share its vision and passion. However, this company's Achilles heel can also be the same talented people it attracts because its success depends entirely upon the ‘Herculean' efforts of these individuals. Unfortunately, this is not a scalable model. The founder and the key employees become a bottleneck but are unable to give up control. The growth, which was so exciting when emerging from the entrepreneurial phase, becomes a source of unyielding pressure and foreboding risk. Where the company was once at risk due to ‘starvation', it is now at risk from ‘indigestion'—with its talented people burned out. And no one has the time or energy to recruit and train the workforce required to keep the company going.

How to move on to the next stage: Companies in this phase must prevent upsetting customers if their resources are being stretched too thin. If their service levels are compromised and they just cannot keep up with the dramatic growth, this company must take the steps necessary in order to adapt to the growing demands—which could include hiring a more professional management team and giving up some control.

Stage 3: The Systematic Enterprise.

At this stage, in order to survive, the founder hires professional managers—all bringing proven experience in systems and processes to address the disorder of the Performing Enterprise. These proven systems enable the company to scale. Consistent results are achieved through a systematic approach. Typically, at this stage of growth, the company's culture becomes inhospitable to the founder and original employees. Where creativity and confidence were once prized, consistency, caution and repeatability are now prioritized. Often, at this stage, the original employees leave and seek employment with smaller firms where their entrepreneurial spirit is valued. The remaining employees and the new hires focus on building an enterprise based around a winning formula.

How to move on to the next stage: With new management, new systems and a winning formula in place, sometimes it's easy for management to become wedded to those new systems (strategy fixation) and inadvertently neglect the ongoing needs of customers. Learning to successfully adapt those systems in order to accommodate ever-changing customer needs is crucial.

Stage 4: The Adaptive Enterprise.

Realizing the company was in danger of becoming wedded to its systems, the Adaptive Enterprise stage kicks in. The company realizes it now must take input from its strategic customers on an ongoing basis. It also realizes that its value is not in the products or services that it creates, but in its relationships with its strategic customers. The strength of the Adaptive Enterprise is that its processes and systems take input from the market on an ongoing basis and it has change and adaptation formally built into these systems to enable its ongoing evolution.

How to move on to the next stage: The weakness of the Adaptive Enterprise is that it is reactive rather than proactive—it risks failing to evolve quickly enough. That means further evolving the company to the point where it can anticipate risk, and know how to immediately work through those potential challenges.

Stage 5: The Preemptive Enterprise.

The Preemptive Enterprise takes nothing for granted. It knows that its deepest and strongest customer relationships are constantly at risk. It also knows that both existing and emerging competitors are able to create new value, and that its customers will always be attracted to that new value. So rather than wait for these emerging demands and threats to come to fruition, the Preemptive Enterprise is predictive. Through close collaboration with its most strategic customers, it is able to anticipate any new challenges customers will be facing and position itself as a strategic ally in overcoming these challenges. Through the use of competitive intelligence and scenario analysis, it is able to understand the goals, strategies and capabilities of its competitors and consistently dilute and diffuse any new value that its competitors plan to bring to the market. In so doing, it sustains the momentum of a continually unique and compelling value proposition.

So there you go. Understanding where your company is in its maturity and knowing what steps to take to get to the next level is critical to your success. This is not just a question of increasing sales or market share; it is a question of survival.

WOODRIDGE

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A Question of Survival