What Business Stage Are You In? – Part 3

We’ve come to the last installment of our series on the “7 Stages of Every Growing Business”, as defined by Les McKeown, President and CEO of Predictable Success.  Parts 1 and 2 summarized the first four stages, from Early Struggle through Fun, and on to White Water and Predictable Success.  In this last segment, we’ll cover the final three stages of Treadmill, Big Rut, and finally, Death Rattle.

When we left the business last week, it had achieved Predictable Success, that stage where the business is growing, profitable and stable.  Now the question is – How long can the business remain in this stage?   

The answer is – It depends.  As long as the business continues to evolve and adjust to meet the changing market expectations, and maintains its focus on its vision, strategy, and customer base, it can stay in the Predictable Success stage for a long time.

However, there will be those businesses that will be too successful over time, believing that they have all the answers.   These businesses will stop progressing and adjusting, become complacent, bloated and bureaucratic, and lose focus on those key areas that originally made them successful.  As this happens, the business will eventually fall through one, or all, of the last three stages.

Stage 5 – Treadmill
The business has been successful, and performing well for a period of time.  But, complacency is setting in, and it is losing focus on its vision, strategy, direction, and customers.  The bureaucracy is managing the business, and needs to justify its existence by requiring more systems, processes and procedures.  This, in turn, is making the business more complex, rigid, and slower to react to changes.  With the business now more focused on internal activities and tasks, it will eventually stop evolving.

While this stage may be good for fixing specific issues and/or problems, the business must find its way back to Predictable Success to survive long-term.  This will require a critical, objective self evaluation of the entire business, and possibly drastic action, to get back on track.

The strategy here is to Simplify What’s Workingand get back to Predictable Success.

However, if the business stays in Treadmill too long, it will eventually lose its objectivity, and the ability to critically evaluate and fix the business, falling into the Big Rut.

Stage 6 – Big Rut
The business is now complacent and insular, the bureaucracy has taken over, it has lost all objectivity, and its all about maintaining the status quo.  It has lost touch with market requirements and customer expectations, and has stopped evolving.  Without a significant course change, and major restructuring (and maybe not even then), the business will not be able to make it back to Predictable Success.

In this stage, however, the business may still be a going concern, in terms of revenue and profitability, and have enough cash to just drift and decline over time.  A primary example of this is Kodak, which was able to operate very profitably for years, ignoring what was really happening to its core business, until it was too late.

If nothing changes, or if the course changes and restructuring programs are not successful, the business will enter the last and final stage, Death Rattle.

Stage 7 – Death Rattle
After being in Big Rut for some time, revenues are declining, losses are mounting, the cash is gone, and customers are defecting.  At this point, the business is not in a position to make the required changes to survive.  It has now entered Death Rattle, and the business, as it is currently known and operated, disappears through closing, filing bankruptcy and reorganizing, or being acquired.  This is the end of the line.

Now that you know about these 7 Stages, let me ask:

  • What Stage Is Your Business In Now?
  • What is your Strategy for the Future?  

Consider these questions carefully. The future of the business will depend on the answers!


 

“An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.” – Jack Welch

“Whenever an individual or a business decides that success has been attained, progress stops.” – Thomas J. Watson

“Any business today that embraces the status quo as an operating principle is going to be on a death march.” –  Howard Schultz

What Business Stage Are You In? – Part 2

Here’s the second part of our series on the “7 Stages of Every Growing Business”  that Les McKeown, President and CEO of Predictable Success, described in his Inc. Live presentation last October.  Part 1 summarized the first two stages, Early Struggle and Fun.  In this part, we move on to the next two important stages, White Water and Predictable Success.

As we left the business last week, it was in the latter part of the Fun stage.  It’s grown rapidly, become more and more complex, and the team is having difficulty managing it effectively, and losing control.  At this point, the business now has a critical decision to make about its future.

There are only two real choices;  1) Stay small and continue in the Fun stage for as long as it can survive, or  2) Take the actions necessary to move forward, and grow the business for the future.   The business can’t have it both ways, it must choose one of these directions.
If it decides to grow, it will need to enter, and successfully pass through the next stage, White Water, to scale for future growth.  A businesses cannot scale from Fun to Predictable Success without going through this stage.

Stage 3 – White Water

The decision and commitment have been made to scale up for growth, and the business is now in the water.  However, it is now much more complex, with more products and services, customers, people, and management.

The business activity has outstripped its capacity, capabilities and resources, and it’s out of control, losing focus on its direction, and customer requirements and expectations.  As a result, customer problems and complaints are piling up, in terms of service, quality, and delivery, etc., operational issues are increasing costs, and customers are beginning to defect to competition.

The first tendency is to try to sell more to prop up the business, but this strategy will only make matters worse, as the problems and issues continue to increase with the level of activity.

To survive and make it through this stage, formal Systems, Processes, Structure, must be developed and implemented, the Culture may need to change, and an expanded Management Team put in place to effectively manage, stabilize, and get the business back under control.   In most instances, however, the initial team and programs won’t work out, and the business will remain unstable for a period of time.  In fact, it may take several years and attempts, and different team members, to finally get through this stage.

Also, during this stage, the business may go back and forth between Fun and White Water several times, and it will be a very painful process, fraught with challenges and opportunities.  But, successfully navigating through this stage is absolutely necessary for future scale and growth.

The strategy is to develop and implement formal Processes, Systems, and Structure, Change the Culture (as needed), and to recruit the proper Management Team to effectively manage and control the business to provide long-term growth.

Once the business has successfully passed through this stage, it is now positioned for ….


Stage 4 – Predictable Success

The business has finally made it through the White Water stage, after several attempts.  The Systems, Processes, Structure, Culture, and Team, are all in place and working well, and it is stable, growing, and profitable.  Life is good for now.

Growing and maintaining the business in this stage, will require an ongoing, dynamic process of evolution and adjustment to consistently meet the changing expectations of the market, customers, and other stakeholders over time.  As long as the business continues to do this, and maintain its focus on its vision, strategy, and customer base, it can remain in this stage for a long time.

The strategy is Keep Doing It, Evolve as Needed, and Grow the Business.  

With long-term success, however, there is a danger is that, over time, the business may become too successful and stop evolving, resulting in complacency, a bloated and bureaucratic organization, and a loss of focus on vision, direction, and most importantly, its customers.  Once this happens, the business may eventually fall forward through one, or all, of the last three stages, including Treadmill, Big Rut, and finally, Death Rattle.

What will happen next?  Will the business survive?

We’ll find out in Part 3, next week!

“The great thing in this world is not so much where we are, but in what direction we are moving.” – Oliver Wendell Holmes

 “Making an enduring company was both harder and more important than making a great product.” –  Steve Jobs

What Business Stage Are You In? – Part 1

In an Inc. Live presentation last October, Les McKeown, President and CEO of Predictable Success, described his “7 Stages of Every Growing Business”.  These stages can help to define why some businesses grow and succeed, while others stall and/or fail.

In keeping with our recent posts on Business Growth and Strategy, we thought it would be helpful to provide an overview of each stage, and the related strategy and actions necessary to move a business forward.  Obviously, there are a great many factors, management skills, and organizational requirements that are required at each stage to make it through to the next one.  The complete series is at www.inc.com/les-mckeown/7-growth-stages-of-every-business.

As McKeown noted, all businesses will eventually pass through some, or all of these stages in their lifetime.  Each stage brings with it a different strategy, organizational culture and requirements, and a set of challenges that must be met to grow the business.  It is critical that a business understands these stages, what stage they are in at the moment, and hopefully avoid some of the hard lessons that other businesses have experienced.

The 7 stages include the following, in order:

   1. Early Struggle
   2. Fun
   3. White Water
   4. Predictable Success
   5. Treadmill
   6. Big Rut
   7. Death Rattle

As noted, a particular business may not pass through all of these stages, but as it grows, it will move through the stages in this order.  While there is no set duration for each stage, it is critical that the business make decisions about where it wants to go, to survive, and move on to the next one.

In this post, we’ll discuss the first two stages, and the strategy required to move to the next level.  The balance will be covered in our next posts.

Stage 1 – Early Struggle

This is the beginning stage for every business, the struggle to get, and keep it, going, and finding the Profitable, Sustainable Market (or PSM) for the long-term success.  It’s a race against time, and the most dangerous stage, with 80% of businesses failing in the first 3 – 5 years.

This requires an intense focus on identifying that PSM.  However, keep in mind that one large customer is not the PSM.  While that one customer may be profitable, at least in the short term, the customer base must be diversified, over time, to be truly sustainable.

Finally, this stage is also all about cash flow, and the ability of the business to fund itself, in any way possible, to survive and move to the next stage.

The strategy is to Find the PSM, Stop Being a Start Up, and get out of this stage as soon as possible!

 

Stage 2 – Fun 

The business has managed to survive, found its PSM, and can now mine it for growth, which can be dramatic.  In this stage, it can now have some Fun, grow, and build the myths and legends of the business.  The mantra is “do whatever it takes to grow the business and please customers.”

Sales and Profits are increasing, and there is usually a simple organizational structure, infrastructure, and processes in place to run the business.  The team is pulling together, improvising, and tap dancing every day, to make things happen and take care of their customers.

The strategy is “Sell More, and Grow!”.

As the growth continues over time, the complexity of the business will increase to the point that the management team cannot effectively manage, or control it.  The business is falling forward into Stage 3 – White Water.

It has a decision to make for the future – what will it be?

Stay tuned!

 “Think big, start small, then scale or fail fast.” – Mats Lederhausen

Are We Having Fun Yet?

Since our last few posts have covered a number of serious and heavy subjects, we thought this one should be a bit lighter, while still providing some useful information.

As the title suggests, let me ask you two questions.

1. Is your organization having fun and enjoying participating as part of the team?
  2. If not, what can you do to make the culture and the environment more enjoyable for everyone?

If you’re not having fun and enjoying what you’re doing, chances are that your organization isn’t either, and will be less effective, productive, and successful over the long run.  Since you and the team spend most of your waking hours at work, you should enjoy the time that you’re there, otherwise, why bother?

Many articles have been written about this subject, and some have a “formula” to follow in order to improve the organizational culture.  But, when you come right down to it, there are a few things that you can do that will make all the difference.  Oh, and by the way, I’ll be the first to admit that it took me a long time to learn them, and learn them I did, mostly the hard way.

  • Loosen Up

Operations are serious, no doubt, especially when things aren’t going particularly well.  However, rarely, if at all, are the issues or decisions that you are facing, life or death (although at times they may feel that way!).  Yes, there are times to be serious, and there are times when you can lighten up and keep your team loose.  In the long run, this will improve decision making, and the organization as a whole.

  • Have Patience

 Stuff happens in every organization, maybe in some, more than others.  The question is how you deal with it. If you approach the issue/mistake calmly, with a  desire to learn for the future, there is a very good chance that it won’t happen again.  However, if you’re yelling, and/or looking for someone to blame, you’ll create an atmosphere of fear, and the organization will run scared, trying anything to avoid making a mistake, and/or being taken to task or blamed for that mistake.  At the same time, two other things will happen: 1) mistakes will increase because everyone is trying too hard not to make a mistake, and 2) the organization will stop taking “prudent” risks to improve the business because it is afraid of being blamed if something goes wrong.

Note that I’m not suggesting that the organization lower its standards.  Quite the contrary, set high standards, be very clear about them, and make sure the organization lives up to them, which leads to my next point.

Talk with your team about the organization, direction, performance standards and improvement, and what is required to succeed in your market.  People want to know where they stand, and why, and you should be communicating that to them, clearly.  At the same time, ask for their help in resolving issues and improving performance.  Nothing works better than an organization that has active participation and engagement, at all levels, and is moving in the same direction.

By communicating both ways, you’ll find out all sorts of interesting things, including ideas to improve the organization from the people who are actually doing the work.  This will make for a much happier and productive organization over time.

  • Have Fun

Have fun while you’re there.  Organize some fun, inexpensive events that get people involved, and lighten things up.  Doing this consistently will improve participation and engagement, and the overall environment of the organization, and becomes infectious over time.

While these things may not seem difficult, they are a challenge to do, and do consistently.  However, by doing these things, you’ll have a much happier, effective, committed, and participative organization ready to take on anything.  And that’s exactly what you want!

“A business has to be involving, it has to be fun, and it has to exercise your creative instincts.” – Richard Branson

“Find a job you like and you add five days to every week.” –  H. Jackson Brown

“If you don’t do it excellently, don’t do it at all. Because if it’s not excellent, it won’t be profitable or fun, and if you’re not in business for fun or profit, what the hell are you doing there?” – Robert Townsend

Change Is Constant – Get Used To It!

Most of us don’t like change.  In fact, my guess is that the word itself makes you uncomfortable.  So maybe we should call it something else – how about Shift? or Transition? or Adjustment?

Why do we “fear” change?  Generally because we’re comfortable in our present situation and maintaining the status quo, and things seem to be working just fine.  Some of the comments I hear most often include:

  • “If it ain’t broke, don’t fix it”.
  • “This is how we’ve always done it”
  • “It’s working fine, why change it?”

In these uncertain times, however, these approaches, and doing nothing, may actually risk the future survival of your business.

When you really think about it, most of the issues and challenges that you face, or objectives that you want to achieve in your business, require a change.  Call it whatever you like, “Strategy Development”, “Revenue Growth”, “Performance Improvement”, “Cost Reduction”,etc. etc., it is still a change from what you are doing now.

The fact is that the pace of business today, and the uncertainty of the current environment requires continuous adjustment for a business to grow, remain competitive and relevant to their markets and customers, and ultimately, achieve sustainable success.

Why do we need to constantly make these adjustments?

  • Market and customer requirements are continuously moving
  • Customer expectations keep increasing
  • Costs are rising
  • Prices are under constant pressure
  • Technology continues to change the way we do business

Sailors know the need for continuous adjustment better than anyone else.  On a sailing vessel, the wind is constantly changing velocity and direction, and the sails must be adjusted consistently to maintain course and reach the destination.

Change is inevitable and required to keep pace with the changing conditions.  Organizations must constantly review, evaluate, and adjust their business and operations to new conditions in order to grow and be successful.  They need to be prepared to learn new skills, take advantage of new trends, and adapt to unforeseen circumstances.

While it may be uncomfortable, those organizations that choose to make these adjustments will be successful.  Those who choose not to will be left behind.

“We cannot direct the wind, but we can adjust the sails.”  –Bertha Calloway