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How to Survive Transition to a Growth-Stage Company

October 24, 2018

 

“Why change my leadership style? It got us to this point, where we’ve established a real beachhead in our market.”

 

These are the famous last words of many an entrepreneur.  It's much easier to stick with what's been working and as a result, fail to realize that critical transition points in the growth stages of a company require leaders to change tactics and focus. The company stalls. Confusion grows among key team members, investors, customers and suppliers. And, ultimately, the failure to understand the demands of the transition lead to the failure of the company itself.

 

The mission of a startup is to search for a business model, while the goal of a growth-stage company is to execute that business model.  Understanding this difference -- search vs. execution -- is critical to the success of every company.

 
Project to Process

One such abrupt transition — from project to process mode — occurs soon after a company launches its initial sales efforts and begins to service its first customers. A project is a one-at-a-time exercise performed by a team assembled specifically for that task. It is the ad hoc nature of the project that enables the flexibility and agility required to capture the first real customer. If the entrepreneur has recruited the type of people usually attracted to startups — people who like fast-paced projects — then they will likely find working as a team in the project mode extremely satisfying.

 

Most entrepreneurs understand that they need to be flexible and agile in order to figure out how and what potential customers will buy from them. Most new founders start by sprinting at whatever idea or problem seems the most pressing and became firefighters, rather than commanders, within their business.

 

At a startup, culture -- not policies -- drives the development and release process.  But flexibility and agility must begin to make way for reliability and efficiency if the company is to deliver the kind of consistent product or service required to maintain happy customers and win new ones.  Reliability and efficiency require that work be performed in a process mode, where tasks are accomplished repetitively in a prescribed fashion, resulting in minimal variation and cost.

 

Resistance

But most entrepreneurs instinctively resist switching from the project to the process mode. I hear entrepreneurs use excuses like, “there are a few more things we can do to make our product even better,” or the classic, “we are working well as a team, why change how we work?”

 

The teams that have been recruited to successfully create a new company, product or service also resist this change. They ask why they need to change from the ‘fun’ mode into a mode most project-loving people despairingly and naively call ‘bureaucratic.’

 
Dangers of Not Changing

The dangers of staying in a pure project mode too long are many. Projects, no matter how well led, produce inconsistent results. Entrepreneurs cannot afford disappointed customers, and most won’t forgive poor products or services just because they were experiments.

 

Staying in project mode too long also opens up opportunities for competitors. How many entrepreneurs have seen their great ideas copied by a more cost-effective competitor destroying all the value they had created to that point — irrespective of patents?

 
Your Strength can become Your Weakness

Staying in the project mode too long also makes the company too reliant on the founder.  In the start-up phase, when adding new employees, the founder delegates activities where she is weak.  But as the company grows and enters the growth stage, the founder must delegate activities where she is strong!

 

In many cases, the strength of the top leader becomes the weakness of the organization.  For example, if the founder is the CEO and is also the main sales driver, either everyone ignores the big picture or revenue stalls.  The leader needs to delegate one of these two functions if the company is to continue to scale up.

 

No company can become self-sustaining if the skills of its founder have not been replicated in an effective process.

 

And staying in project mode too long frustrates the employees the entrepreneur will rely upon to manage effective processes. People who enjoy making something better and better make good process managers, and these people typically like organization and feel uncomfortable with the change and disorganization that often accompany project mode.

 
Leadership

A strong and savvy leader with a sense of the needs of the company will understand that this transition needs to take place to create a more competitive and self-sustaining company.

 

Savvy leadership is also required to know how to lead both the experimental, creative, project-loving people recruited to help capture the first customer and the organized process-loving people required to implement efficient and reliable processes. Also, a strong and savvy leader will want to develop processes that do not require her unique talents.

 

The first step toward successfully making the transition is to explain why the shift from projects to processes is critical to the well-being of the company. A compelling explanation gets the team comfortable with the need to design and develop reliable and efficient processes — and it preempts cries of ‘bureaucracy.’

 

Although work in a growth-stage company is progressively dominated by processes, projects never go away entirely. After all, you need a project to create or even improve a process.

 

Leaders who understand the differences between projects and processes, and search vs. execution, will keep the good project-loving people, who found and captured the first customers, assigned to project work while process-loving people focus on helping the enterprise become increasingly efficient and reliable.

 

The transitions required in a rapidly growing and maturing startup are unforgiving, and for many entrepreneurs the project-to-process change amid the startup-to-growth-stage transition, is particularly tricky. It’s one of the reasons entrepreneurs have such a high rate of failure and why those who understand it greatly increase their odds of survival.

 

For help with transitioning from Startup to Growth Stage, contact me at mike@therevenuegroup.net.  Feel free to also visit our website to learn more about the services we offer to help you Position Your Potential: https://www.therevenuegroup.net/.

 

p.s.

I also invite you to download the white paper and learn the 5 step process on How to Quickly Increase Your Valuation: a Proven 5 Step Process

 

p.s.s.

If you're looking to grow your startup I invite you to check out my virtual incubator program, More Than a Pitch Deck.  It is a virtual incubation program that brings Silicon Valley to you while helping you hone your value proposition, enhance your business model, and gain attention from qualified VCs.

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