Introduction
In our client engagements, some entrust us with a seat on their board of directors.This has yielded valuable insights, reinforced by specialized literature and academic research. Inflex'On's philosophy rests on the understanding that business development is a dynamic process, punctuated by inflection pointssignaling major changes. This framework provides a simple yet effective way to understand these dynamics and optimize the role of the board of directors (BoD) at each stage.
Définitions and ConceptUal Framework
Inflection Points: Business development follows an S-curve, marked by inflection points indicating significant shifts. Inflex'On identifies seven key points: Explore, Emerge, Growth (with three sub-stages: Speed-Up, Accelerate, Take-Off), Mature, Transform, Decline, and Turnaround.
For more details, see: https://meeting.inflex-on.com/hubfs/Dossier%20S-Curve/INFLEXON-File-Creating-Value-For-SMEs-EN.pdf?utm_source=YouTube&utm_medium=video&utm_campaign=Points-inflexion&utm_content=EN
The Context (Cynefin Framework): We use the Cynefin Framework by David J. Snowden and Mary E. Boone to characterize the decision-making context. The four contexts relevant to this article are:
- Clear: Simple, cause-and-effect relationships are clearly defined. Best practices apply.
- Complicated: More complex, requiring in-depth analysis and specialist expertise to identify cause and effect.
- Complex: Dynamic and unpredictable, with multiple interactions and uncertain consequences. Experimentation and adaptation are crucial.
- Chaotic: Unstable and uncontrollable. Immediate action is needed to stabilize the situation before adopting a more structured approach
The original article explaining this classification is available here: https://hbr.org/2007/11/a-leaders-framework-for-decision-making
Board of Director Roles (Didier Cossin & Estelle Metayer): Three main roles are defined for the board of directors, each corresponding to a different level of strategic involvement:
- Co-Creation: The Board of Directors actively participates in developing and defining the strategy, contributing expertise and networks.
- Support: The Board of Directors supports and encourages management, providing credibility and legitimacy while maintaining objectivity.
- Supervision: The Board of Directors monitors performance and managment actions, ensuring alignment with strategic objectives and identifying potential risks.
The original article is available here: https://sloanreview.mit.edu/article/how-strategic-is-your-board/
With these definitions in mind, let's explore how to adapt the role of the Board of Directors to each phase of the business lifecycle.
Building Your Board of Directors According to the Business Life Cycle
This guide proposes an approach to composing and defining the BoD's role based on the seven phases of the business life cycle, combining Inflex'On's practical experience with the frameworks of Snowden/Boone and Cossin/Metayer. We will detail the specific challenges of each phase and how the BoD can actively contribute to the company's success.
a) Explore and Emerge (Chaotic Context): The Creative Chaos
These initial phases are marked by significant uncertainty. The company explores the market, tests hypotheses, and seeks its viable business model. It is a period of great creativity but also high unpredictability. Often observed are:
· Challenges: This phase is characterized by extreme uncertainty. Resources are limited, the target market is not clearly defined, the product/service is in the prototyping stage, and funding is precarious. The team is small, and members wear many hats, making it difficult to manage priorities and develop a clear long-term vision. The search for a viable business model and "product-market fit" is crucial, generating constant pressure on the team. The risk of failure is high.
· Role of the Board of Directors: A very collaborative role close to the management team is essential. The Board of Directors acts as a true partner, bringing its expertise and network.
33% Co-creation: Active participation in defining the vision, strategy, and business model. Open debates, brainstorming, hypothesis validation.
33% Support: Providing credibility and support to management, seeking funding, opening doors.
33% Supervision: Monitoring expenses, key milestones, and regulatory compliance. Here, supervision is more of a support role than strict control.
b) Growth (Evolving Context): From Organic Growth to Strategic Expansion
This phase is characterized by accelerated growth, but it requires constant adaptation. Our experience has led us to distinguish 3 sub-steps that are also explained in an article from the 1980s by Neil C. Churchill and Virginia L. Lewis, which remains relevant today: https://hbr.org/1983/05/the-five-stages-of-small-business-growth.
a. Speed-Up (Complex Context): Finding the Cruise Speed
i. Challenges: Setting up effective operations to manage growth, rigorous cash flow management (balancing necessary growth investments with maintaining positive cash flow, deciding between debt or equity financing), recruiting diverse and specialized profiles to meet growing needs, scaling the offering (adapting processes and tools to meet growing demand without sacrificing quality). There is strong pressure to maintain sustained growth, which can lead to hasty decisions or neglect of long-term strategic aspects.
ii. Role of the BoD: The BoD shifts from a co-creator role to a more supervisory role while maintaining active support.
- 60% Supervision: Rigorous control of profitability, financial forecasts, and process quality.
- 20% Co-creation: Providing sector expertise, identifying potential partners or targeted acquisitions.
- 20% Support: Mentorship, access to their network for recruitment or business development.
b. Accelerate (Complicated Context): Controlled Acceleration
i. Challenges: Optimizing processes to improve operational efficiency (establishing KPIs, task automation, improving the supply chain), managing teams (developing skills, managing larger and more diverse teams, effective delegation), increasing competition (competitive analysis, differentiating offerings, adapting to market changes). The strategy is defined, but its execution requires precise management and anticipation of potential difficulties.
ii. Role of the BoD: The BoD oversees the execution of the strategy, ensures compliance with key indicators, and intervenes in case of significant deviations.
- 80% Supervision: Rigorous performance monitoring, risk identification, and resource optimization.
- 10% Co-creation: Validation of major strategic decisions, such as entering new markets or launching products.
- 10% Support: Occasional advice and support for managing critical situations.
c. Take-Off (Clear Context): The Take-Off
i. Challenges: Managing rapid and exponential growth, managing innovation (maintaining a spirit of innovation while ensuring operational stability), international development (adapting to foreign markets, managing cultural and regulatory differences), potential acquisitions (evaluating targets, integrating acquisitions, managing synergies). The company must maintain rapid growth while managing complex issues and preserving its corporate culture.
ii. Role of the BoD: The BoD focuses on strategic supervision, ensuring governance efficiency and the sustainability of the model.
- 90% Supervision: Monitoring performance, managing risks, and adapting to the market.
- 5% Co-creation: Exploring limited opportunities, mainly focused on long-term strategy.
- 5% Support: Limited intervention in exceptional situations requiring specific expertise.
c) Mature (Clear Context): The Stable Growth Phase
- Challenges: Maintaining long-term performance (cost optimization, productivity improvement, customer loyalty), incremental innovation (continuous improvement of products/services, adapting to market developments), managing competition (anticipating competitors' actions, adapting strategy), anticipating market changes (trend analysis, identifying new opportunities). The company must maintain its dominant position while preparing for future challenges.
- Role of the BoD: Rigorous supervision, anticipating market changes, and identifying new growth opportunities. (Same distribution as Take-Off)
d) Transform (Complex Context): Strategic Transformation
- Challenges: Adapting to a rapidly changing market (new technologies, changing consumer behaviors, new regulations), developing new products/services (disruptive innovation, significant R&D investments), diversification (exploring new markets, developing new offerings), reinventing the business model (adapting to the competitive landscape, creating new revenue sources). The company must fundamentally rethink its operations to maintain competitiveness.
- Role of the BoD: Returning to closer collaboration with management to co-create the new strategy and manage uncertainties. (Same distribution as Speed-Up)
e) Decline and Turnaround (Chaotic Context): The Recovery
- Challenges: Significant loss of market share (analyzing causes, implementing corrective measures), substantial decline in profitability (cost optimization, restructuring operations), the necessity for deep restructuring (staff reductions, site closures, asset disposals), difficult return to growth (rebuilding trust, revitalizing innovation, repositioning in the market). The company must face a critical situation and take drastic measures to ensure its survival.
- Role of the BoD: Intensive intervention to revive activity, restructure the company, and define a new strategy. (Same distribution as Explore and Emerge, with stronger supervision if necessary.)
Conclusion
We are particularly pleased to share this practical guide based on numerous missions supporting companies at various stages of their development. We aimed to highlight the crucial importance of clearly identifying the growth phase in which the company finds itself. The consequent adaptation of the composition and role of the board of directors, according to the identified strategic contexts, appears as a key success factor. Indeed, a flexible and reactive approach, taking into account both strategic contexts (Clear, Complicated, Complex, Chaotic) and the roles of the BoD (Co-creation, Support, Supervision), optimizes the board's contribution and maximizes the chances of success for the company at each stage of its evolution.
