Business Lifecycle Stages
It is a known fact that businesses are dynamic. They change each day and do not stay the same over a period of time. This means that startups grow up, reach maturity & decline. It means that (at least some) small businesses increase in size, reach a critical mass & then start to wane. This article tries to look at these various phases of business lifecycle through the lens of skills. What kind of skills does a business have or rather, what kind of skills is it supposed to have at various stages of its lifecycle? Well, read on.
Let’s look at the various stages one by one.
Stage 1: Learn while you earn
This is the first stage which a business goes through. During this stage, the business is typically a startup. The various units or individuals of the business are trying to gel in together. The knowledge of market conditions is limited & the so are the skills required to succeed in the marketplace. This is the hardest stage since the business has to get customers while it is learning its key skills & competencies. The limited skills & competencies put it at a disadvantage vis-a-vis competition, which is essentially vying for the same set of customers. Our little business has to get customers with whatever limited skills it has in order to get the cash flows going. If no cash flows get going, the enterprise will start to head towards shutdown pretty soon.
Stage 2: Earn while you learn
Over a period of time, the unit matures and the synergies & efficiencies start to kick in. The enterprise now has enough or even cutting edge skills, knowledge & expertise that enable it to attract the best of customers in the market. Due to it’s leading edge over competition, the business may even be able to command a premium on its products and services. In this stage, the focus is on applying the existing knowledge rather than acquiring new one. Sometimes no effort is made to get new knowledge & the focus is solely on the proverbial “making a better cookie cutter” approach. This is a critical phase as during this phase, the business may begin to lose its edge over competition & even fall behind.
Stage 3: Don’t earn while you don’t learn
As stated under stage 2, some businesses become so pre-occupied with making a better cookie cutter that they pay no attention to innovation. As a result, competition starts getting the upper hand. Also, newer startups who are more agile & nimble are able to deliver better solutions in a cost effective way. As a result, customers start slipping out of our now grown up business’s hands. Revenues & profits decline & the focus is maintaining the existing revenues & profits. From here on is the phase for turnarounds (& miracles). Businesses need to re-invent themselves and their products & services to stay alive & stay in the game. But not all of them are able to do that. Not all businesses are able to go to stage 4.
Stage 4: Learn while you earn (Surprise!)
At stage 4 (if someone makes it past stage 3), you are basically a startup all over again. You have to use your now-inferior knowledge & skills to compete for the same set of customers, while also trying to learn new skills at the same time. But as opposed to stage one, you now have the excess baggage of resource costs & overheads. So this stage is trickier to manage & the mortality rate is high. But strict financial discipline and a focus on innovation can help you get there. You have to think back to your startup days & try & emulate the factors that made you successful. It’s difficult, but it can be done.
What stages do you think a business goes through during its lifetime? Share your views with us through your questions & comments.
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