STRATEGY

The 10 Stages of Corporate Life Cycles

An excerpt from Adizes' book The Pursuit of Prime.
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So you've got business problems. Well, thank God! Problems come with change,change comes with growth, and no company ever achieved peak performance withoutgrowing. The struggle for success is a struggle with problems. Rejoice. Withoutproblems you'd be dead.

But there are problems, and then there are problems. Some problemsthreaten while others beckon. Like good parents, good CEOs know that someproblems are just not worth getting all bent out of shape over. They're thenormal--that is, perfectly appropriate and even predictable--maladies,stresses, strains, and pitfalls of successful corporate growth and development.Some threats CEOs avoid by taking the available preventive vaccines. Most theytreat--promptly and skillfully--lest the problems fester or fulminate.

Abnormal problems are abnormal only in their timing. They're normal problemsthat break out when they're not supposed to--like mumps, say, in middle age, orprostate trouble in adolescence. If CEOs do not or cannot deal effectively withthe problems that confront a normally growing business, those problems willbecome chronic.

If leaders cannot handle a problem with the same energy they apply to othersituations, that problem is abnormal. If the same type of problem repeatsitself despite the founder's having tried to solve it, that problem isabnormal. If the founder needs outside professional help to solve it, thatproblem is abnormal.

By contrast, normal problems are those that founders can resolve routinely orwith the application of their energy. If a CEO can increase sales; create newmarkets; control cash, accounts receivable, and inventory; and design newproducts so that the company is able to make a smooth ascent to Prime--theideal stage of balanced creativity and discipline--then those problems arenormal.

Before you can judge whether a problem is occurring at a normal time, you mustunderstand the corporate life cycle. Once companies know where they are inrelation to Prime, they can learn what they need to do to get there--either forthe first time or on a return trip.

For each defining stage there is a set of actions: the steps required for ayoung company to reach Prime or for older companies to regain Prime. Again andagain, real companies have lived through the process and validated the theory.In essence, successful organizations passionately nurture both their expansive,creative energy and their need for structure and discipline. That is thedynamic of Prime organizations.

Corporate life cycles are defined by the interrelationship of flexibility andcontrol. They are not defined by a company's chronological age, sales orassets, or number of employees. The goal is to reach--and stay at--Prime.

The 10 Stages of Corporate Life Cycles

Courtship. Would-be founders focus on ideas and future possibilities,making and talking about ambitious plans. Courtship ends and infancy beginswhen the founders assume risk.

Infancy. The founders' attention shifts from ideas and possibilities toresults. The need to make sales drives this action-oriented, opportunity-drivenstage. Nobody pays much attention to paperwork, controls, systems, orprocedures. Founders work 16-hour days, six to seven days a week, trying to doeverything by themselves.

Go-Go. This is a rapid-growth stage. Sales are still king. The foundersbelieve they can do no wrong. Because they see everything as an opportunity,their arrogance leaves their businesses vulnerable to flagrant mistakes. Theyorganize their companies around people rather than functions; capable employeescan--and do--wear many hats, but to their staff's consternation, the founderscontinue to make every decision.

Adolescence. During this stage, companies take a new form. The foundershire chief operating officers but find it difficult to hand over the reins. Anattitude of us (the old-timers) versus them (the COO and his or her supporters)hampers operations. There are so many internal conflicts, people have littletime left to serve customers. Companies suffer a temporary loss of vision.

Prime. With a renewed clarity of vision, companies establish an evenbalance between control and flexibility. Everything comes together. Disciplinedyet innovative, companies consistently meet their customers' needs. Newbusinesses sprout up within the organization, and they are decentralized toprovide new life-cycle opportunities.

Stability. Companies are still strong, but without the eagerness oftheir earlier stages. They welcome new ideas but with less excitement than theydid during the growing stages. The financial people begin to impose controlsfor short-term results in ways that curtail long-term innovation. The emphasison marketing and research and development wanes.

Aristocracy. Not making waves becomes a way of life. Outward signs ofrespectability--dress, office decor, and titles--take on enormous importance.Companies acquire businesses rather than incubate start-ups. Their cultureemphasizes how things are done over what's being done and why people are doingit. Company leaders rely on the past to carry them into the future.

Recrimination. In this stage of decay, companies conduct witch-hunts tofind out who did wrong rather than try to discover what went wrong and how tofix it. Cost reductions take precedence over efforts that could increaserevenues. Backstabbing and corporate infighting rule. Executives fight toprotect their turf, isolating themselves from their fellow executives. Pettyjealousies reign supreme.

Bureaucracy. If companies do not die in the previous stage--maybe theyare in a regulated environment where the critical factor for success is not howthey satisfy customers but whether they are politically an asset or aliability--they become bureaucratic. Procedure manuals thicken, paperworkabounds, and rules and policies choke innovation and creativity. Evencustomers--forsaken and forgotten--find they need to devise elaboratestrategies to get anybody's attention.

Death. This final stage may creep up over several years, or it mayarrive suddenly, with one massive blow. Companies crumble when they cannotgenerate the cash they need; the outflow finally exhausts any inflow.

Adapted from The Pursuit of Prime, by Ichak Adizes. Copyright ©1996 by Ichak Adizes. Published by arrangement with Knowledge Exchange LLC ,U.S.A. All rights reserved.

Last updated: Oct 1, 1996




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