This article provides information that will help you assess if your company is on the verge of entering a decline phase.
All companies and organizations have a lifecycle, with some being around for centuries and new companies being developed every day with 50 percent predicted to fail within the first 4 years. A total of 9 out of 10 eventually fail within a ten-year period[i]. Nearly 42 percent of failed businesses reported the failure due to lack of a market need for their product or service. According to Harvard Business School study[ii], 75 percent of venture-backed startups fail with the reasons for failure being reported as:
Lack of motivation, commitment and passion
Too much pride, resulting in an unwillingness to see or listen
Taking advice from the wrong people
Lacking good mentorship
Lack of general and domain-specific business knowledge: finance, operations and marketing
What are the identifiers for those that succeed? According to The Ecommerce Genome by Compass in their Startup Genome report, the following are the indicators of success:
Founders are driven by impact, resulting in passion and commitment
Commitment to stay the course and stick with a chosen path
Willingness to adjust, but not constantly adjusting
Patience and persistence due to the timing mismatch of expectations and reality
Willingness to observe, listen and learn
Develop the right mentoring relationships
Leadership with general and domain specific business knowledge
Implementing “Lean Startup” principles: raising just enough money in a funding round to hit the next set of key milestones
Balance technical and business knowledge, with necessary technical expertise in product development
So, where does your company stand?
As the saying goes, if you’re not growing you’re dying. But that growth can be in various sections of your business; and, often times, growth requires work in the idea stage where you begin to look at better ways of doing business and solving problems.
Lifecycle of a company or organization
From an organizational perspective, "lifecycle" can refer to various factors such as the age of the organization itself, the maturation of a particular product or process, or the maturation of the broader industry. In organizational ecology, the idea of age dependence is used to examine how an organization's risk of mortality relates to the age of that organization. Generally speaking, organizations go through the following stages:
START-UP: How do we get this going?
Your business is born and now exists legally. Products or services are in production and you have your first customers. Start-ups require establishing a customer base and market presence along with tracking and conserving cash flow. At this stage, the entrepreneur should put all his energy in the project.
During the start-up stage, the budget best be revised often. More cash might be needed than expected. Unpredictable circumstances often affect plans and business model. Figures should be adapted quickly. Start-up stages requires: Support & coaching of the CEO and board of directors, Complete Business & Marketing Plan and Assistance in negotiations for capital increase.
GROWTH: Becoming who you are.
In many ways, the growth state is a transitional period between the stages of start-up and maturity. In this stage, the organization begins to define their mission and service niche more carefully.
Growth stagers spend a considerable amount of energy creating, refining and focusing on the best ways to service the organization’s wants and needs.
Board of Directors begin to transition from being a support group for the founder to accepting responsibility for the organization by becoming more formalized, tracking and evaluate performance and recruit professional expertise.
MATURITY: Knowing who you are.
The organization knows its members and its members know them. They engage in public education on topics related to their mission. Organization has a stable and active membership.
The board plays a leadership role capable of understanding pressing issues and provide solutions.
TURN-AROUND: Self Awareness.
The turnaround stage involves restructuring and brings the organization back to the high side of the start-up or early growth stage with fewer programs with stronger budgets and with a relevant mission.
Turnaround boards are fearless, take-charge types, utterly confident of their abilities and not out to win popularity. They are able to mobilize resources, and restore the confidence of the community in the mission and operations of the program. In some cases, board members will choose to retreat from the organization due to differences of opinion or lack of time to play a vital role.
DECLINE: What you used to be.
Declining stages are inward focused and become locked into their own methods and seldom seek evaluative feedback. Organizations begin to justify their thought processes and decisions by their reputation and community position rather than bring new insight or approaches to the table, they continue to recycle traditional programs whether needed or not.
Project outward blame - rather than acknowledge and adapt to the circumstances, the organization ignores or makes excuses for it. Board members have lost interest, lost enthusiasm and may be the last to know it is in a state of decline. There are two ways out of the declining stage. Change nothing and the organization will erode into the terminal stage, or, through some intervention from new board members to move into the turnaround stage.
Depending on where you are in your company’s lifecycle journey, you are either in the midst of change or preparing for change. As we all know, change isn’t easy for people or organizations. There are several reasons for the discomfort of change and they are all individual to each company. However, most organizations overlook the practical parts of what to change and how to change. Change does not occur by simply doing things differently. Change occurs when people and organizations let go of the old habits and behaviors they were using.
Is your company spending too much time solving the wrong problems?
How do you know when to change?
The only constant in business is change, because our consumers are changing, and we must adapt to their needs. Businesses grow by finding better ways to serve. If you are a company in the growth stage, you’re in the sweet spot of the lifecycle and your energy will be mostly spent creating, reefing and focusing on the best ways to service the organization’s wants and needs. This requires having the means to be proactive and inclusive.
While Maturity might be a “feel-good” lifecycle stage, it is also the most dangerous position for a company that has: 1) grown to fast; or, 2) not created a strategy to move back into growth. This is a stage that sets the company up for future success or failure. This is also the stage where most of the bad habits are created, hijackers are born, problems that don’t need solved are given too much attention and the company becomes narcissistic.
Signs of a narcissistic company:
A narcissistic company has lived out its vision and mission and that characteristic is now embedded in the company’s culture. The leadership’s attitudes and values have now been transferred to the broader teams, groups, committees that are on the frontline to support the company’s livelihood. There is a sense of pride and accomplishment that has been shared within the community and the air of being vulnerable is no longer an issue. And…this is where the company starts to slip into decline, like a frog in boiling water, it is often too late to TURN-AROUND.
It is beneficial for organizations to practice responsible vulnerability in their culture. The practice of being vulnerable is often identified as being weak; however, in many cases, it is a positive indicator of finding strengths.
Benefits of practicing responsible vulnerability:
Being vulnerable helps you identify both your qualities and flaws.
It increases self-worth and provides leaders the opportunity to assume their new roles as the business models change while being open to insecurities that can provide the proper supporting network to normalize your experiences.
Vulnerability provides leaders with confidence and trust in the process while being open to the needs of others and opening asking for what they want.
It supports innovation and motivation by allowing others to engage and inspire that is established through trust.[iv]
It provokes compassion. It is crucial to an organization to engage in the personality of the company by acknowledging someone else’s expression and demonstrating the willingness to simply listen. Vulnerability is a call for accountability. By embracing a sense of vulnerability, leaders are demonstrating they are willing to take responsibility for their actions.
Because a company that practices being vulnerable can best avoid the narcissistic trap. Narcissistic organizations are often coming out of Growth or currently in the Maturity or early stages of Decline. They have achieved identified goals with some level of success and use that success to promote their “story” that identifies the brand.
Here are a few signs of a narcissistic company that can substantially hinder their growth and trap them in decline:
They educate the people that helped them get to where they are. The company has now adapted the practices of all those that have helped them build their vision and mission and they are no longer listening, but telling people what they want and how they want it. This process closes the door to innovation and locks an organization into a system that is closed off to innovative solutions.
They no longer have a need for outside advice. They now believe they are exceptional and no longer need input from other groups or individuals and often find fault or reasons why “that won’t work.” This process normally develops out of a need to fast track project, products and services. Ultimately, quality suffers.
Their company has defined its brand and will protect the image at a cost to its growth. This is not a bad position for an organization; however, the downfall is often with the leaders that devalue the passion brought to the table by outside groups or individuals within the organization. The company is in a mature position and has defined itself without the need for change, criticism or evaluation of its brand.
They are the company that everyone wants to work for and everyone wants to leave. If it looks good from the outside, but the inside is showing signs of misery, this is a sign of a narcissistic company. The first impression quickly wears out the welcome.
If you’ve identified your company is near a decline stage; or, if you are wanting to strategically plan your organization’s lifecycle growth, look for an outside agency that specializes in organizational development for companies to create a plan that will ensure continued growth.
Companies can strategically move throughout a lifecycle stage from idea to growth into maturity and avoid decline by efficiently managing change. For over 15 years, Q7 Associates has worked with various sized businesses and organizations to assist them in successfully managing various lifecycle changes. We work with companies to identify not only what needs changed, but how to manage change through a transition.
[i] Patel, Neil (2015, January 16). 90% of Startups Fail: Here’s What You Need to Know About the 10%. Retrieved from forbes.com.
[ii] Henry, Patrick (2017, February 18). Why Some Startups Succeed (and Why Most Fail). Retrieved from entrepreneur.com.
[iii] Sicard, Sarah (2017, August 30). A Brief History of the Military’s Unsightly ‘Birth Control Glasses.’ Retrieved from taskandpurpose.com.
[iv] Roche, Sonja. 6 Powerful Benefits of Vulnerability and Shame – Yes, you read that right. Retrieved November 16, 2018, from intentioninspired.com.
[v] Abby. (2018, May 29). Vulnerable Narcissism: The Less Obvious Narcissist [web log post.] Retrieved from thrivetalk.com.