The lifecycle of businesses

[pbrower2a]

http://www.adizes.com/lifecycle/




So that I can provoke some thoughts about business in general. 

Courtship is the first stage of an organization's development. At this stage, the company is not yet born. It exists as a gleam in the Founder(s) eye. The focus of Courtship is necessarily on dreams and possibilities.

The primary goal of this stage is to build the Founder's enthusiasm and commitment to his dream. The higher the risk, the deeper the commitment needed. As Conrad Hilton said, "If you wish to launch big ships, you have to go where the water is deep."

In Courtship, it is normal to experience fear, uncertainty and doubts. What exactly are we going to do? How is it going to be done? When should it be done? Who is going to buy this and why? Now is the time to wind-tunnel test the brilliance of the Founder's vision.

The goal of the fledgling business should be to add value and satisfy market needs. Founders that are in it solely for the money, often don't have the fortitude to sustain their companies over the rocky road they will encounter in Infancy and Go-Go. A useful definition of a Founder is someone with; "unreasonable conviction in the face of insufficient evidence." By definition, most will think that the idea for the new business is risky, and probably won't work. It is not important that everyone else believes it will work. It is crucial that the Founder(s) believe it will, and are committed to doing whatever it takes to make the new company succeed.

Infancy begins the moment financial risk has been undertaken and the Founder quits her paying job, signs the loan documents or promises 40% of the company to outside investors.

Infant organizations are necessarily action-oriented and opportunity-driven. The focus instantly changes from ideas to action. The time for talking is over. It is time to get to work and produce results (sales and cash). Like a real baby, Infant organizations need two things to survive: 1) periodic infusion of milk (operating capital), and 2) the unconditional love of their parents (Founder(s).

Like a newborn baby learning to walk, performance in Infant organizations is inconsistent. Unexpected crises appear with little notice. Because Infant organizations lack systems, it's easy for them to get into trouble. Moving from one crisis to the next is normal. The Founder and all employees constantly test the limits of their endurance for work, stress and confusion. Employees are often attracted to Infant companies for reasons that go far beyond money; and their loyalty to the team often extends beyond the struggling Infant's ability to pay them. They end up working seven days a week and sleeping under their desks but still there is not enough time and talent to do everything that must be done.

A Go-Go organization is a company that has a successful product or service, rapidly growing sales and strong cash flow. The company is not only surviving, it's flourishing. Key customers are raving about the products and ordering more. Even the investors are starting to get excited. With this success, everyone quickly forgets about the trials and tribulations of Infancy. Continued success quickly transforms this confidence into arrogance, with a capital A.

Go-Go companies are like babies that have just learned to walk. They can move quickly and everything looks interesting. Fueled by their initial success, Go-Go's feel that they can succeed at almost anything that comes their way. Accordingly, they try to eat everything they touch. On Friday night the Founder of a Go-Go retail shoe business goes away for the weekend. On Monday morning, he walks into the office and announces, "I just bought a shopping center". This does not surprise the employees. It has happened before. The success of the Go-Go is the realization of the Founder's dreams, and if one dream can be realized, why not other dreams too? "What we did for shoes we can do for a whole mall". This arrogance is a major asset of the Go-Go, but when taken to an extreme, it is also how they get into trouble.

During the Adolescent stage of the organizational lifecycle, the company is reborn. This second birth is an emotional time where the company must find a life apart from that provided by its Founder. This critical transition is much like the rebirth a teenager goes through to establish independence from their parents.

The Adolescent company teeters on the brink of both success and disaster. So long as the Adolescent company does well, investors and the Board regard the Founder as a genius with a golden touch. However, when the infrastructure collapses, sales slow down, costs mushroom or profits decline, the finger pointing begins in earnest. The Founder, accustomed to the magic of adoration, is instantly transformed into a goat who is no longer up to the task of leadership.

Adolescence is an especially stormy time characterized by internal conflicts and turf wars. Everyone seems at odds with everything. Sales fall short or exceed production's estimates, quality is not up to customer expectations, and old timers plot against the new hires. Emotions are volatile and organizational morale traces a jagged line: ecstasy in one quarter, depression and dejection in another. Throughout the organization, people are busy tracking the real and imagined injustices they have suffered, which they nurse with great care. The Founder's safe conduct through this tempest is by no means guaranteed. If these conflicts are not resolved, Adolescent companies can find themselves in Premature Aging that can lead to the early departure of entrepreneurial leadership, or the professional managers leading to pathologies called Divorce or Premature Aging.


Prime is the optimal position on the lifecycle, where the organization finally achieves a balance between control and flexibility. Prime is actually not a single point on the lifecycle curve. Instead, it is best represented by a segment of the curve that includes both growing and aging conditions. This is because flexibility and self-control are incompatible and there is no stable equilibrium. Sometimes the Prime organization is more flexible than controllable, and sometimes it's not flexible enough.
These are the characteristics of an organization in Prime:

• The organization is guided by the vision of its reason for being. There is a clear purpose and people know what they will do, and will not do, "they walk their talk".
  
• The company operates in a focused, energized and predictable manner.
  
• Stretch goals are set, aligned and consistently achieved.
  
• There is an enterprise-wide focus on customers and earning their long-term satisfaction. There is a high degree of customer loyalty. At the same time, the organization knows when and how to say "no" to the market. It is disciplined enough to protect itself.
  
• Priorities are clear. The organization knows what to do, and what not to do. It enjoys a certain composure and peace of mind when making tough decisions.
  
• The entrepreneurial spirit is fully institutionalized. Evidence of organizational fertility abound. This creativity repeatedly produces controlled, profitable innovation.
  
• Organizational structures work well. Opposing forces are balanced. There is alignment between vision, strategy, structure, information, resource allocation and rewards. A company in Prime is continuously realigning these subsystems.
  
• The infrastructure provides reliable support.
  
• The governance process is institutionalized. People know and understand where and how decisions are made.
  
• Decision-making is done is an environment of healthy, constructive conflict. Points of view are considered, but there are no hard feelings if one's recommendations are not heeded. Differences of opinion rarely deteriorate into personality clashes or turf wars.
  
• There is intra- and inter-organizational integration and cohesion with clients, suppliers, investors, and the community. This internal cohesion enables the Prime organization to devote much of its energy externally.
  
• People enjoy working at the company. Few willingly leave and there is a backlog of people applying for positions at all levels.
  
• They embrace change. Prime companies work hard to adapt to changes in markets and technology so that they can gain share from weaker competitors.
  
• They enjoy consistent, above average growth in both sales and profits.
  

So far, so good. But this halcyon era comes to an end.