As each company grows, it faces different challenges. Some of these hurdles follow known patterns related to where the company is in its evolution. For example, early-stage companies founded by a strong entrepreneur often get to a point where the founder becomes overwhelmed with too many competing demands. Companies that have experienced rapid growth can suddenly stall out. Very mature companies face a different challenge where it never feels like anything gets accomplished. And companies like Radio Shack eventually slide into obsolescence when they can’t re-evolve into something new.
At some point, your company is going to have real business struggles related to its growth. Understanding where you are in your company’s journey can help you identify the problem you’re facing and find a way to overcome it before you or your company burns out.
Six Stages of the Predictable Success Life Cycle
One framework that describes the life of a business is Les McKeown’s Predictable Success Life Cycle. I was introduced to this concept three years ago by a friend. This picture is an elegant way to see how a business and its challenges change over time.
There are a number of videos (one of my favorites), books, and even a consulting business that go into great details about the image above. I’ll provide a brief summary of the stages.
1. The early struggle
When the startup business begins, it’s driven by a Visionary with passion, charisma, and resilience. This stage is exciting and filled with anxiety and stress. However, 80% of the companies in this stage fail. They don’t have enough runway in cash to get them into a profitable market.
The 20% of businesses that do get out of this stage usually have an Operator—someone who’s ruthlessly focused on profitability and getting things done. The heroic leadership of the Visionary and an Operator with tight controls drives the company’s success.
A company that reaches this stage is doing things right. They have found a profitable market. Cash is coming in, and there is excitement in the future. Here, all the myths and legends are created. The company begins to grow really fast as it mines its market.
With growth comes the challenge of accreting complexity as new people, new products, and new processes are added. And at some point the company enters…
Here, people are living with complexity. There is frustration because the work is no longer easy. Issues and errors with orders appear. There are people involved in the business who were not there when the myths and legends were created. And the leadership team is struggling to figure out how to scale the business.
To move beyond this stage, the company needs to shift to improving processes and systems to manage complexity. This often means hiring a Processor with expertise in this area.
This stage is also when leadership conflicts tend to arise. Visionaries want autonomy, but they know they must surrender some to the processes in the business. Often, the Processor is either fired or gives up unless the Visionary chooses to give up some autonomy to find Predictable Success.
4. Predictable success
At this stage of the business, the company has the ability to scale and gain long-term success in their market. This is the goal of the leadership team. The company that achieves this is very different from what it was at the start of its journey. The goal is to avoid the slide into the right side of the image…a slide that ends with the death of the company.
When a business becomes inwardly focused on process and efficiency gains, it can become trapped in an endless cycle of process improvement. Innovation can become difficult when the processes inside the business reject anything new. Risk is no longer acceptable.
However, without innovation, the marketplace moves on and starts to leave the business behind. It can easily slide into a rut, rolling toward an eventual death.
Companies can live in this state for a long time. Often their only hope to escape an eventual death is for a strong CEO to come in and reinvent the company. Think Apple when Steve Jobs focused them on building the first iPhone.
6. Death rattle
This is the end game for a company. At this point, it’s fighting to stay alive, but losing customers and relevance. Many retailers and grocery stores are arriving here today as Amazon slowly takes away their business. Very large retailers are fighting for life. But their heavy internal processes and lack of coherence on how to reinvent themselves is driving them to an eventual death. More will be moving here as the economy becomes driven by more digital commerce.
Where Is Your Company?
This framework is an excellent way to understand your business and its struggles as it tries to grow. I’ve worked with companies across all of these different states.
If you’re just starting your business, you’re in the Early Struggle. You need to figure out if your product or services has a marketplace. Time and cash are scarce resources. Before spending lots of money and taking big risks, you need to test your product vision.
Luckily, there is help. My partner, Mike Marsiglia, has written a great Startup Product Roadmap just for you. Make sure you read this thoroughly before you make the money commitment.
Trying to scale
You have customers and are making a profit. There are lots of great shared success stories with your partners and your team. But for some reason, the company is trapped at a certain size. Every time you try to add more customers or employees, something happens to shrink your business.
You’re in the Whitewater. To continue to grow the business, changes are needed. Usually, this needs to be done at the leadership level so you can distribute decision authority to others and align them to a purpose. At this point, entrepreneurial CEOs can no longer do it all–nor should they.
I’ve seen many software consulting agencies arrive at this point. They are capped by how they run. A CEO Visionary who plays the Operator is in the position to make all the key decisions, but at some point, this person becomes a bottleneck. They can’t keep up with all the demands and wear out. If they are unable to set aside their ego and extend trust, the business will stall out or collapse.
The smart CEO recognizes the need for a leadership team driven by a shared purpose. This team is high-functioning, transparent, and focused on delivery. They feel safe enough with to be vulnerable with each other, provide candid feedback, and accept feedback to become better team members. A strong team gives the company a chance to evolve and reach the desired goal of Predictable Success.
Running in place
In some of the large companies where I’ve worked, I’ve experienced the frustration of moving nowhere. Changing priorities, inconsistent customer definitions, unclear authority structures, and decision processes that require the approval of many contributors all make it difficult to add new value for the company’s customers.
The change that’s needed here is an acceptance of some risk as a way of learning. Failure is an acceptable option. Feel free to run experiments to test hypotheses, share the results with the rest of the organization, allow everyone to innovate in the organization.
Change is Hard
The Predictable Success Life Cycle map is a simple approach to understand the growth challenges that companies face at different stages. However, companies are made up of people. And people are very complex and messy.
This model may not help you understand every dynamic, but it does allow you to better grasp the challenges your company is facing.
Recognize that making the needed changes will be very hard. Change brings FUDA and may make people uncomfortable. Good!
Reframe this discomfort as the opportunity for everyone, including yourself, to grow. Find a way to make this change with others. Create bonds of safety and trust through this growth. And you’ll find your company in a better position to realize long-term success.