Businesses go through several stages of evolutionary development and in each one they demand different things in order to survive and to prosper. In an organization’s early entrepreneurial beginnings, the focus lies in getting customers and generating enough revenue to stay alive. Centralized systems for managing workflow, delegated leadership, and formal business planning lay far off in the future.
But as the business grows, these needs begin to become pressing — often challenging the leadership of the organization to recognize that there are new requirements for both their leadership and the business’s functions. From an IT perspective, this entrance into the maturing phases of business growth can be an excellent opportunity to support and accelerate company performance. Moreover, if IT truly embraces its potential, this can be a transitional moment that allows it to develop a vital strategic role in the organization.
There are many models which analyze the phases of business growth. Although there are many other outstanding sources on this topic, many of my observations reference the work of Neil Churchill and Virginia Lewis, who recordedThe Five Stages of Small Business Growth in a 1983 edition of the Harvard Business Review. Whichever business expansion model is examined, however, you will undoubtedly recognize the period of growth in which a business struggles to progress from its initial success as a small business to a more mature organization which maintains sustainable growth.
If we compare this phase of the company’s growth to our own human development, it parallels adolescence. New opportunities are accompanied by awkward growth and frequent confusion. More significantly, though, the specific skills needed to deal with these opportunities (and hurdles) change, as well.
Adolescence and the executive function
In middle schools, many students are challenged because the focus of learning shifts from primarily technical functions (such as reading or mathematics) to a new requirement for assuming more executive functions. These executive functions are skills like prioritization, delegation, organization, collaboration, and work planning. We may all recall that age when long term assignments and projects suddenly became a lot more complex.
Businesses at this adolescent stage feel pressure from the same challenges. The strengths of the organization need to transform. The executive functions in any well-organized business become more essential every day. The company cannot rely solely on the success of its traditional product to solve all its problems. This is not to say that the company loses its identity, but it does go through an awkward period of change and adjustment to the new priorities at hand.
For example, the owner of a design firm may be a creative genius, but may also need help managing cash flow or setting up a quality assurance process. A brilliant engineering entrepreneur may have difficulty delegating work and is most likely unfamiliar with HR best practices. Some executives cannot navigate this change. Some may be emotionally tied to the earlier corporate culture or to their role as the singular heroic leader. As a result, their companies may either fail or eventually migrate to new ownership. Other leaders may fair better, but never be able to push the company into the growth mode which is necessary to attain business maturity in later years.
Recognizing the onset of corporate adolescence
So how does IT rise to the call and assist in helping the company through these changing times? By recognizing the signs of these phases, understanding the larger business changes at work, and engaging strategically with executive leadership to augment the skills they need most. By truly understanding the business requirements of their company during their adolescence and recognizing the unique factors at work, IT can take advantage of this period to demonstrate powerful strategic value, and ultimately drive the performance of the organization to new heights.
To begin, it is important to understand the hallmarks of a business entering adolescence. Here are some characteristics to help define this stage:
- An organization at this stage has already passed through the times when the owner did everything and constantly worried about adding clients, delivering product, and generating enough cash to break even. The owner is now withdrawing from day to day responsibilities.
- The organization has lived to see the addition of functional managers, and responsibility for budgets and major decisions are beginning to be pushed out to them.
- Financially, there is a growing sense of stability, both in terms of client base and cash flow. The company is recognizing regular profits and reinvesting them into growth.
- Systems are often unevenly deployed and departmentally isolated with little or no cross functional capabilities.
This is the point when the leaders of the organization typically need to make a decision regarding future growth. To plunge into expansion mode, they must actively reinvest their profits into funding growth to drive the company into this new age. In doing so, they also introduce functional managers, who are more forward-looking, and work towards a vision of the future rather than managing the status quo. These managers may be given responsibilities such as developing their own respective budgets and collaborating to develop strategic plans to march forward as a united group.