THE GROWTH CURVE

THE GROWTH CURVE APPLIED TO BUSINESS

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The curve describes the stages of growth of a business based on the performance of the business against a key measure such as profit or revenue. Profit is generally a better indicator. The various points on the curve are explained below: 1. The Infancy Stage In Infancy, the owner decides that they can start a business, usually doing what they have been doing as an employee and charging directly to the market for the services, rather than directly to an employer. This often involves the transfer of risk from the employer to the new business owner, but there is also a transfer of potential opportunity. In this stage, the focus is on creating the business and surviving. Often the initial stages of infancy have some pain involved but the sheer passion and focus of the owner often results in progress and the curve turns upwards with a small number of clients valuing the personalized service. The owner has their hands on all parts of the business and they have the ability to keep it all in control. 2. The Perils Of Success, Volume At this point, the small number of clients are talking about the new business and the business owner gets confidence in their model. Other clients decide to try the new player in the market and the new owner may even market a bit harder. Soon, volume makes it hard for the owner to keep control of all parts of the business, and without some action taken, the downturn at point three often occurs. 3. Reputation Destroys Potential The market starts to try the new business in volume but failure to deal with the volume results in delivery of poor quality and a lack of responsiveness. The market reacts swiftly and ruthlessly and the tarnished reputation of the new business causes the results to fall away. An alternative approach was needed to create the upward curve shown at point four. 4. The Adolescent Stage In Adolescence, the major goal is for the business to push the boundaries, test current wisdom and learn to live on its own as an adult, without the heavy hand of the owner in the business. It needs to do this in a way that allows it to

become scalable. A strong business should be structured to grow at least several hundred times its current size. The key in this stage in systemization and leverage. The two components of people and process are the core focus of this stage. However, the very nature of systemization and leverage creates the problem that can cause the curve to turn down at point five. 5. Competitors Pay The Compliment Of Mimicry Any business running smart systems, operated by good people, immediately becomes visible in the market place. The results become obvious. Against this type of competition, bigger, more capitalised companies can simply try to copy what has been working in the adolescent business. If the adolescent business does not react, it will end up in a price driven market with bigger more robust players. 6. The Maturity Stage In this stage, the business finds itself in a mature market without a key point of differentiation. It looks like everyone else, especially the bigger players that can also offer size, capability and stability. The adolescent business has to redefine and reinvent at point five to prevent the shift into a price driven, lower profit market. 7. Sustained Future Growth If the business can successfully reinvent, hopefully whilst the rest of the market is still busy trying to copy what it has been doing up to this point, then it has the potential to continue to grow based on a depth of knowledge, expertise and responsiveness, within its niche, that the market cant match or doesnt realize it is offering. 8. The Big Decision Divest Or Reinvest At this point, a big decision must be made. Do we sell out or reinvent? The business is at its maximum value at this point. It is a high-performing, highly systemized business that has all the appearances of being a money machine that is not dependent on the personality and passion of a specific individual. At this point, potential buyers will be scouting around and the owner needs to decide if they will sell the business or go through the process of reinventing to avoid the mature, price-driven market the business is about to enter into. This growth curve applies to small to medium sized enterprises and it applies to big business, just on a different scale.

CAN THE CURVE APPLY TO AN INDIVIDUAL?

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The curve can be used to explain the pathway of an executive manager in an organisation. Lets track the curve as it might apply to a CEO. Whilst we are talking about the CEO, the same could also be read as true for any executive level role. 1. The Impact Perception Period This is sometimes called the first 100 Days. However it is framed, and over whatever time period, when a new CEO comes to a company, the Board or key stakeholders will have things they are happy with about the business but they will also have aspects of the business they want improved - even if the previous CEO was successful. The changeover of executive leadership invariably brings promise of a new level of success. During this period, the new CEO is probably at the highest level of energy they will bring to the job, they have outsiders eyes and are not blinded by any sacred cows, and they can make decisions without the need to consider alliances and previous history. As with a business, the goal here is to survive and often, due to the tenacity and skill of the new CEO, the company does get some immediate gain following some potential loss of momentum that often occurs during such a leadership change over. 2. The Perils Of Success, Increased Expectation At this point, the Board may have experienced some short-term gain from the new CEO. The new CEO has been able to be pretty hands on and, in reality, everyone has been trying to impress. The net result is often a jump forward in the business. As familiarity sets in, the Board starts to increase their expectations due to both results and familiarity. Simultaneously, the wider organisation begins to settle back into familiar patterns. The new CEO is no longer new and the heightened desire to impress wanes. Without some attention on the way forward, this can result in a drop away of organisational performance. 3. Reputation Decay Sets In The results start to fall away and doubts set in. The Board begins to question the appointment and the organisation has lost the sense of distance and reserve that has served the new CEO well up to this point. At the same time, the

CEO may have some personal doubts setting in and, unchecked, these only serve to fuel the decline. An alternative approach was needed to create the upward curve shown at point four and if self-awareness is lacking this need to shift gear is often missed. 4. The Consolidation And Validation Stage In this stage, the major goal is for the new CEO to get the business to push the boundaries, test current wisdom and grow to an entirely new level of performance. They need to do this in a way that allows recognition of past success and also recalibrates the bar to a whole new level and scale. The key in this stage is duplication and leverage. The two components of people and process are the core focus of this stage. The new CEO has to create their own set of systems that identify and translate strategy into action and, at the same time, engage the entire team as volunteers in the business. The organisation is no longer performing at a heightened level because the CEO is an unknown quantity, but rather because the CEO has engaged them in a compelling and challenging way. 5. Hubris Borne Of Success Creates Decline At this point, overconfidence or the failure to continue to adapt to changes in the market, can cause the organisation to begin to head into decline. Up to this point, the CEO has had a strong run. They have implemented strategies and delivered results. The tendency to hold onto what has been working, even in the face of new change and challenge, may cause them to remain doggedly fixed to what once worked but is now no longer effective. It is time to reinvent, but failure to be self-aware, and organisationally aware, can cause decline. 6. The Loss Of Gloss And Shine The CEO has failed to recognise the changes in the market and the circumstances of the organisation and has consequently failed to adapt as required. The performance of the organisation has fallen away and the once shining success has lost its gloss. Just as in old age, the CEO has become tired and is no longer as sure about the strategy. It is possible that the gap between the CEOs skill set and the skills required of the new organisation, is now too great for the individual to bridge. Separation between the CEO and the organisation is likely to be unpleasant. 7. Stellar Success Good To Great Transition If the business can successfully reinvent, hopefully whilst the rest of the rest of the market is still playing the old game, the CEO has the opportunity to jump from good CEO to great! To achieve this, the CEO will have to reinvent personally and also challenge the rest of their senior leaders to reinvent. Some will make the jump and some wont, but the great CEOs are driven by company value and they know that the principle-determining factor is to have the right people. The CEO is prepared to make the difficult decisions, both personally and with others, and is also prepared to take on the difficult challenges. There is a welcoming of the development opportunities this represents. Goals are reset and the journey recommences with a renewed level of strategic foresight, supported by here and now insight and the lessons learned from hindsight. 8. The Big Decision Reinvent Or Relocate At this point, a big decision must be made. Should the CEO relocate or reinvent? The business is at its maximum value at this point.

It is a high-performing, highly-systemized business that has all the appearances of being a money machine for its investors. The CEO is already in the book as one of the good CEOs. They know how to create this level of success and they are confident that they can do it at any company that has needs that are compatible with their skill set. If the CEO were to relocate to another company and do it all over again, they will build a solid reputation of consistent performance over time. This is an entirely legitimate decision and is also a fair decision that will likely benefit the company. For some CEOs, the opportunity to take the company to unexpected new heights may prove attractive, but to do this, the CEO themselves will have to reinvent and push to new levels. This extends their range of skills across the curve and so carries some risk, but it also carries high levels of rewards. The CEO becomes a brand name that is associated with high performance. This is also a legitimate decision and just needs to be made from a level of self-awareness. It must be a conscious decision, based on a belief that there is still a compatibility of capability and a continued level of desire to continue to develop and do the work required.