Birth. Infancy. Adolescence. Adulthood. Death. These phases of life don't only pertain to living creatures. They are also the lifecycle phases of companies. And much like our mortal existence, the living experience of a company in each phase is characterized by different demands, needs, opportunities, skills, mindsets, etc.
Understanding the evolving lifecycle dynamics of companies has been a body of research for decades. Titans of industry such as Jim Collins have devoted their careers to such research to answer big, important questions like, “Why Some Companies Make the Leap and Others Don't”—which happens to be the subtitle of Collins' famous work, Good to Great.
This notion of lifecycle phases and the management consulting principles that underpin it may make you nauseous. I get that the average entrepreneur doesn't want to be burdened with these thoughts. Instead, the prevailing priority during the early days is to focus on building the product—whether that's a service-based or tangible product—as well as the launch and marketing of that product. During the birth and infancy phases of a company—a la the entrepreneurial days—that's very appropriate. Your company will die a premature death if it doesn't find genuine product-market fit quickly that can generate revenue.
But you don't want to be just another average entrepreneur, right?
Whether you're off to build the next great software product for your industry or establish the go-to agency for your space or achieve some other meaningful marketplace position, your company will find itself influenced by these inescapable lifecycle forces. As the research shows, those companies that perform best and last the longest are those that are led by individuals very aware and masters of these dynamics.
If you care to rise above average and angle your business toward living a better life, then let's explore the phases of life that your new business is about to encounter.
The Lifecycle Phases
Famed British economist Alfred Marshall is often credited as the first person to develop a lifecycle model for businesses based on a living thing. In the late 19th century, Marshall compared companies with trees in a forest to describe their development patterns. His 5-part model is as follows:
- Top position
- Decline and (eventually) death
Marshall's model was the unrivaled standard for the better part of 60 years. Then, in 1950, another influential economist, Kenneth Boulding, declared that organizations grow through the “same” lifecycle as living organisms, which he described simply as: (1) birth, (2) growth, (3) decline, (4) death.
Nearly two decades later—starting in the late '60s and surging through the '70s into the '80s—the management consulting boom ushered in the golden era of organizational design principles and practices. That boom bore a range of revised lifecycle frameworks—all very similar to one another and more or less derivative of Marshall's and Boulding's original works.
I'm particularly fond of two models: one from Virginia Lewis and Neil Churchill, and one from Larry Greiner. Both provide context needed to apply the practical methods that we'll get to later in this chapter. Let's briefly touch on each of these models:
Lewis and Churchill's 5-stage model is arguably the modern gold standard. If you only examine one model, choose this one. It's rooted in an entrepreneurial mindset, which is helpful for those in the infancy phase of their companies. It provides for alternative growth pathways at each stage, a level of nuance other models lack. And it incorporates Greiner's model regarding each lifecycle phase's unique growth and crisis characteristics, the latter being critical to understanding how to successfully evolve from one stage to the next.
Greiner's 5-stage model concentrates on what he calls the “evolutionary” and “revolutionary” moments of a company's lifecycle. Evolutionary moments are periods of prolonged growth using established methods that work. Revolutionary moments are the turbulent times (e.g. crisis points) when growth is stalling because the established methods no longer work. The beauty of Greiner's model is that the thrust of an evolutionary growth stage is the cure to the preceding revolutionary crisis.
Must you adopt these two models? Absolutely not. Feel free to apply any lifecycle framework that most speaks to you. Just make sure to choose a model that helps you very clearly understand what it's going to take to get from your current stage to the next. The door to each subsequence stage is always represented by a crisis. As Gandalf might say, you shall not pass to the next stage of growth unless you take these organizational inflection points seriously. Let's explore just how to do that below.
Growth Phases & Crisis Points
Puberty. Heading off to college. Getting married. Having a child. These events mark some of life's most important, challenging, and memorable moments. Businesses experience similar lifecycle moments that hallmark entrance into a new phase of existence. And like big life moments, big business moments are always rooted in a fundamental change of being that is new and, therefore, uncomfortable and daunting.
Understanding your business’s lifecycle will illuminate these right-of-passage moments in a way that will help inform how you navigate them, from the exciting times of growth that require little operating change, to the challenging times of turbulence when the status quo no longer works and the resulting crisis becomes a transform-or-risk-dying decision point. It’s in these latter periods when companies that do not transform and evolve to accommodate new demands of the business will not survive.
Specifically, mastering the dynamic relationship between growth and turbulence is critical to successfully exercising your executive duties for your business. As the saying goes, what got you here won't get you there. Or, as Greiner puts it, “Smooth evolution is not inevitable or indefinitely sustainable; it cannot be assumed that organizational growth is linear.”
The non-linear nature of growth is a concept that should be self-evident to anyone based on their own natural life experience. However, unlike the natural world where non-linear growth is common sense, the business world is full of entrepreneurs and founders who struggle to understand, accept, and master the non-linear nature of their companies. That inability to mature as a businessperson leads many promising companies to crash and burn at its first real challenge—a crisis of leadership.
The crisis of leadership moment is, I believe, the riskiest post-launch moment for any startup. This is when you, as founder and entrepreneur, need to examine yourself—your headspace, your ego, your skills, your needs, your behaviors, your strengths and weaknesses—to answer a serious question: Are you equipped to handle, by yourself, the organizational challenges that are characteristic of and unavoidable during this revolutionary moment?
That question isn't likely to have a binary yes or no answer. More often, you are well equipped in some areas but not in others. The imperative at this moment, therefore, is to assess yourself and your organization's needs and use those insights to find new levels of harmony among three key variables—personality, skills, and role—that align with the leadership demands. Such self-examination can be daunting to be sure, though when it's taken seriously and performed honestly it can yield wonders that promote the caliber of maturity needed to successfully grow as a person and professional as well as navigate your business into the next major lifecycle phase. To prepare for this major right-of-passage moment, consider these practical actions. Moreover, if you happen to have a leadership team already, involve them in these actions too.
1. Read Rocket Fuel by Gino Wickman and take action on its recommendations.
It's rare that a single entrepreneur possesses all the characteristics necessary to make a business successful. Wickman's book delves into this subject by examining the relationship dynamics between a company's two key roles: a visionary and an integrator. According to Wickman, “Visionaries have groundbreaking ideas. Integrators make those ideas a reality. This explosive combination is the key to getting everything you want out of your business.”
The concept itself may not be all that revolutionary to you. A healthy yin-and-yang partnership where two entrepreneurs join forces to complement each other is old wisdom. What I enjoy most about this book is not the illustration of the core concept itself but rather it's deep, specific teachings about how to make such a dynamic relationship work. From personal experience, it's the behaviors, not merely the labels, between these two individuals that make-or-break a business.
If you have a founding partner now who already complements you, great! Still, read this book, discuss its teachings, and implement those that you aren't already doing. And if you don't have a partner and feel that someday finding one will help you eclipse the crisis of leadership, then absolutely dig into this material and use it as a guiding framework in your quest for a complementary partner with equal capabilities as your own.
2. Execute personality assessments for yourself, any partners, and team.
Personality assessments are tricky. On the one hand, they can provide tremendously valuable insights into behavior defaults, communication preferences, and stress responses. On the other hand, they can be used as combative weapons to excuse bad behaviors, justify poor performance, deflect feedback, and admonish others. Personally, I find the value to outweigh the risks because you, as the person in charge, get to decide how personality assessment data is used within your culture. Use it wisely.
Wise use of personality assessment data helps calibrate fit between an individual and their role. If you and your team are new to such assessments, you may uncover some real misalignments within your organization. Perhaps you've staffed Sally into a management role when her innate personality is more prone for leadership work. Maybe David is in a creative role when his hardwiring prefers organizational structures and methods.
First and foremost, subject yourself to an assessment. Be open-minded to the results and use them as part of your broader self-examination to gauge your fit for the leadership challenges ahead at the end of the infancy phase of your business. That data may reveal some gaps that you can work toward filling with a combination of leadership training for yourself, recruitment of a partner (if you don't have one), hiring of new staff, and more.
Which personality assessment is best? None, in my experience. Each one has pros and cons. Those that rise to the top include Myers-Briggs Type Indicator (the classic), StrengthsFinder 2.0, and the Enneagram. Lesser known ones include DISC, Personalysis, and the Birkman Method. The website 16personalities.com is a decent starting point if you're new to this material. It's based on the Myers-Briggs Type Indicator, presents the data in an engaging manner, and is free.
3. Develop a detailed RACI matrix for you and your business partner(s).
Who is responsible for what, both now and when the turbulent demands of a leadership crisis strike? Answering that question today may be difficult even if you do have a co-founder or partner with complementary abilities. And while investing time and energy into personality assessments can get you closer to an answer, they alone are unlikely to be enough.
This is where a RACI matrix can really help. The acronym—R=Responsible, A=Accountable, C=Consulted, I=Informed—is used to clarify important nuances of various work functions. For instance, you as the entrepreneur and founder, are Accountable for top-line revenue. That said, you may already have someone on staff in a sales or marketing role to whom you've delegated some revenue-generating responsibilities. That person is Responsible for that subset of work instead of you even though you remain Accountable for the results of that work. Additionally, if you have a business partner who leads operations, that person may still need to be involved in marketing strategies. In that scenario, the partner is Consulted on marketing, not Responsible for marketing.
I recommend that the practice of crafting and maintaining a RACI matrix becomes an organization-wide discipline. Jumping to that extent right off the bat, however, is probably over-engineering your business right now. So, to start, focus a RACI matrix specific to you and any partners you may have in aid of structuring your respective leadership duties. Getting those down on paper in detail now—and making sure that everyone is aligned to and accepting of them—is a mature move that will yield positive dividends down the road.
4. Evaluate leadership training options and experiences.
Getting outside your own bubble of thought is a good move, especially as the dynamics and demands of your business evolve. You may already have a counsel of friends whom you turn to with pressing questions. You may also already have a mastermind of contemporary entrepreneurs moving in a similar direction with their businesses. Both such group types can provide BS-busting feedback and wisdom to help you avoid missteps and overcome challenges.
For the big stuff, like the various lifecycle crisis moments, involving professional help may be the extra boost you need to succeed. Such help can come in various shapes. A business consultant. A leadership coach. An industry mentor. A professional association. An executive training program. One, many, or all of these learning environments may be desirable. Each one will look and feel differently, so choose with care. For instance, committing to a months- or years-long executive program will only be valuable if you truly have the time and focus to commit to it. Similarly, a leadership coach will only help you develop as a leader if that coach's character, experience, and methods resonate with you.
Mind you, all consultants and coaches aren't created equal. Neither are executive programs or professional associations. I've had mixed experiences and results with a few of these options. I've loved some and hated others. Before you head into any such relationship, with an individual or a program, really zero in on your personal needs as well as those of your business. The best advisors will never give you answers or force outcomes; they'll develop your mindsets, principles, and skills to guide you to making the best decisions yourself. If you're looking for a starting point, consider Seth Godin's altMBA program. I haven't experienced it myself but I know others who have and they've really enjoyed the curriculum, format, and community.
Becoming more self-aware, being receptive to challenging feedback, and working on your leadership and management abilities, you'll become better equipped to rise above the ranks of average entrepreneurs. Better still, you'll put your business in the best position possible to survive future trials of growth and flourish through more expansive phases of prosperity.
Once traction is found and growth begins, you may find yourself struggling to manage your operational growing pains. An expanding payroll. Heftier independent contractor payments. Tricker tax matters involving multiple states. Heightened seriousness with respect to all things human resources (HR). Extension of new benefits to entice new talent onto your team while retaining the talent you have. I'm familiar with the pressures of these growing pains. They can quickly sap your entrepreneurial energies. They can also, if mismanaged, put your business in real legal and compliance binds. Thankfully, there's a single solution that we recommend for many of these growth woes, which we'll geek out about in the next chapter.