The Seven Stages of Business — The Challenge of Growth, the Challenge of Change. Entrepreneurs Guide to Business Success.
Growing businesses have different characteristics, challenges and opportunities, as they evolve from start-ups into much larger organizations. Most companies don’t recognize the growth phases that they move through; they suffer from the growing pains without recognizing what to do, and they miss the best opportunities which each phase uniquely offers.
What is required to sustain a growing business?
What are the biggest challenges and opportunities at each phase?
What are the most appropriate styles of leadership and management as it grows?
There are typically seven stages in the life of a business. Of course, every organization and market is different, and some companies will choose to stay small, whilst others will grow huge, and may well be split up to become small businesses that can grow again.
While each life-stage is partly a result of the business’s age, size and performance, it is also distinguished by its structure and sophistication. Some companies will evolve rapidly and others slowly, some will leap through life. Some evolved companies will still be small, maybe virtual, whilst some large companies might still be quite primitive. You can probably think of a few.
Their challenges are different. Small businesses want to get noticed, capture a new market, gain customers, and ensure that they drive enough cash flow to survive, and hopefully thrive. Large companies have an equally tough challenge in seeking to remain innovative, find new markets and to take their organizations with them.
The objectives of each life-stage are different and, therefore, the approach is too. Unlike the natural world, this is rarely a natural evolution. It requires deliberate thought and desire, hard choices and decisive management. Moving from one phase to the next will require change – in strategy, people, activities, leadership and even ownership.
Entrepreneurs love their small, chaotic, personal worlds. Small teams don’t like being torn apart or having more structures and processes imposed on them. Large companies don’t like having to make choices, to delete certain product lines, pull out of certain markets, make people redundant.
Yet we choose to evolve because each life-stage brings new opportunities for growth.
Additional investment allows the company to extend its offerings, recruit more people, launch new ventures. Clearer structures and processes improve focus and efficiency, giving people their own teams to run and markets to manage. New leaders bring valuable experience and fresh ideas, and often allow the founding entrepreneurs to focus their creativity, without the admin.
Growth brings its rewards too, and part of the skill is linking the right rewards to the growth model so that it encourages the positive, evolutionary behaviours that the organization needs. Ensuring that all employees, and even wider business partners, have a stake in the business is one effective way of ensuring that everybody focuses on the same goal, supports growth, and shares in the rewards.
The life-stages flex between periods of rapid growth, where innovation and extension are important, followed by periods of consolidation where the organization has to regroup in order to build a new platform for another stage of growth. The focus and culture of the business will therefore differ by stage, and the challenges in moving to the next stage will be different each time.
Stage 1: ‘Create’ reflects the birth of a new business, driven with entrepreneurial ambition. The founders shape their ideas and establish the business. The focus will be on creativity, whilst big obstacles to growing to the next stage will include funding.
Stage 2: ‘Enter’ is about getting the business going, launching itself into markets, building awareness, delivering its services, and generating some income. The focus will be on building, whilst obstacles to evolving the business will often include the founders’ own relentless passion.
Stage 3 : ‘Stabilize’ seeks to bring some order to a small, probably fairly chaotic business. The founders might not notice, but others are struggling. The focus will be on consolidation, whilst the obstacles to growing will include learning to empower people.
Stage 4 : ‘Expand’ marks a second phase of rapid growth, extending the business in new ways, reaching out to new products and extending the range. The focus is on innovation, whilst the obstacles to moving on will now include the resistance to more formal control.
Stage 5 : ‘Optimize’ takes stock of all of this expansion to focus resources on the markets, products and customers that matter most. It may also involve stopping doing other things. The focus is on prioritization, whilst obstacles now include the bureaucracy that inevitably creeps in.
Stage 6 : ‘Extend’ is back on the innovation track, looking for more strategic ways to innovate the business, shaping markets and business models. The focus is on strategic innovation, and the obstacle now is size, lacking the agility and single-mindedness of small business.
Stage 7 : ‘Evolve’ is the alternative to death. There is no limit to how far a business can evolve, how high it can fly, the focus is on deciding where to go next – to sell, merge, break up, or keep extending into new domains, limited only by the imagination of its people.