Not sure about the future of your business? Perfect! Because running a company is no walk in the park. Healthy businesses evolve constantly – sometimes for the better, sometimes for the worse. And today the pace of change is faster than ever before.
Feeling uneasy is a good sign
Although most of your business indicators are well in the black, are you still wondering about your company’s long-term viability? That means you’re on the right track. CEOs and business owners must always be on the lookout for signs of change. Some of the signs could be crying out to you, hard to miss; others could be very subtle, like an intuition. But all of them are important to consider. They could be harbingers of new opportunities or of roadblocks ahead – things that can be hard to see clearly from the inside.
At the dawn of a new cycle
While this uneasiness may not feel comfortable, it could save your enterprise. It may simply mean that your company might have reached the end of one growth cycle and is ready to embark on the next one.
Developing a business is always intense, but there are five key phases of a company’s growth cycle, which we have plotted on an S-curve:
- Phase 1 – Market discovery, when you acquire your first customers
- Phase 2 – Hatching your business model, when you lay the foundation for long-term profitability
- Phase 3 – Profitable growth, when you gain market share
- Phase 4 – Sustained momentum, when you become an established player in your market
- Phase 5 – Maturity, when you’re ready for a new period of growth and renewal, or are about to go into decline
So what can you do to ensure your company’s survival over the long haul? The crucial point in our S-curve is Phase 5, when you’ll start getting that feeling of discomfort. There are two possible outcomes: either your company transforms, reinventing itself and beginning a new cycle – a single business can go through several cycles – or it goes into decline.
You need to know where along the curve your company is. One way to find out is described in our article “Value Creation for SMEs: the secret of inflection points.” We discuss the key characteristics of each phase, along with the attendant challenges and the levers for overcoming them and moving on to the next phase.
What’s interesting here is that when a company’s growth plateaus, it could be due to external factors like a general market trend, or to strategic decisions made by the company itself. For example, we once worked with a company’s CEO (and founder) who was also head of sales and marketing. The company found itself at a bottleneck that was hindering its further expansion and even beginning to harm the firm. At that point, the CEO – with our advisory support – appointed someone else to manage sales and marketing and successfully reinvented his firm. The company went on to expand internationally, something it was incapable of doing previously, and to lower its production costs by relocating some of its manufacturing to new markets.
As the pace accelerates, the gap widens
While the S-curve of business development has always existed, it used to take place over long periods of time. But that pace has accelerated over the past 15 years. More and more young firms are growing fast – and more and more are going bankrupt. According to the Swiss Federal Statistical Office:
- The number of Swiss companies that shut down grew 13% between 2013 and 2016;
- The percentage of “high-growth” Swiss companies has risen significantly, reaching 7.3% in 2018.
This fast pace makes navigating the business landscape even harder. More than ever before, CEOs and business owners need to have their eyes peeled and ear to the ground, to prepare their companies for the next growth cycle.
So if you’re feeling uneasy, it’s a good sign!
