The 10 Stages of Corporate Life Cycles

So you've got business problems. Well, thank God! Problems come with change,change comes with growth, and no company ever achieved peak performance without growing. The struggle for success is a struggle with problems. Rejoice. Without problems you'd be dead.

But there are problems, and then there are problems. Some problems threaten while others beckon. Like good parents, good CEOs know that some problems are just not worth getting all bent out of shape over. They're the normal--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 they treat--promptly and skillfully--lest the problems fester or fulminate.

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

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

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

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

For each defining stage there is a set of actions: the steps required for a young company to reach Prime or for older companies to regain Prime. Again and again, 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 the  dynamic of Prime organizations.

Corporate life cycles are defined by the interrelationship of flexibility and control. They are not defined by a company's chronological age, sales or assets, 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 begins when the founders assume risk.

Infancy. The founders' attention shifts from ideas and possibilities to results. The need to make sales drives this action-oriented, opportunity-driven stage. Nobody pays much attention to paperwork, controls, systems, or procedures. Founders work 16-hour days, six to seven days a week, trying to do everything by themselves.

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

Adolescence. During this stage, companies take a new form. The founder shire chief operating officers but find it difficult to hand over the reins. An attitude of us (the old-timers) versus them (the COO and his or her supporters)hampers operations. There are so many internal conflicts, people have little time 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. New businesses sprout up within the organization, and they are decentralized to provide new life-cycle opportunities.

Stability. Companies are still strong, but without the eagerness of their earlier stages. They welcome new ideas but with less excitement than they did during the growing stages. The financial people begin to impose controls for short-term results in ways that curtail long-term innovation. The emphasis on marketing and research and development wanes.

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

Bureaucracy. If companies do not die in the previous stage--maybe they are in a regulated environment where the critical factor for success is not how they satisfy customers but whether they are politically an asset or a liability--they become bureaucratic. Procedure manuals thicken, paper work abounds, and rules and policies choke innovation and creativity. Even customers--forsaken and forgotten--find they need to devise elaborate strategies to get anybody's attention.

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

Death. This final stage may creep up over several years, or it may arrive suddenly, with one massive blow. Companies crumble when they cannot generate the cash they need; the outflow finally exhausts any inflow.