If It’s Not Changing It Must Be Broken

Having run and worked with many companies that are experiencing growing pains, one thing that is very clear to me is that the CEO must be constantly changing the focus of the company as the organization goes through the various stages of maturity.

Just as in child rearing, different approaches are needed for a company in the infancy, adolescent, teen and adult stages of maturity.  A parent would not use newborn tactics with a teen and a CEO must be sure to adjust the operating practices as a company matures.

I recall one particular off-site meeting with the executive team of Cardiff Software in which there was some discontent with the ongoing changes being driven across the company.  I countered the resistance with the title of this post – “if its not changing it must be broken”.  Change is an essential element of a healthy growing company and it is the CEO’s responsibility to drive change in order to build a successful organization.

The CEO needs to be reinforcing the (1) the overriding mindset, (2) attributes of the core staff, (3) the financial thrust, (4) and the core concentration of marketing, sales and R&D as the company grows from infancy to adulthood.

Infancy Stage (under $5M in sales) – During this period the overriding mindset is to prove the business viability.  The core executive team needs to be able to articulate the vision of the company and be ready, willing and able to do any task at hand to establish the business.  From a financial perspective, it is all about cash flow and ensuring the company has ample runway to get to break even.  In most cases, marketing resources are educational in nature by effectively reaching the influential leaders to legitimize the segment and offering.  It is also imperative that R&D be nimble and iterative – with quick adjustments to the offering based on the priorities of the early customers.  Finally, sales staff needs to be creative and nimble with greater concentration on business development to get to the right decision makers and get deals done.

Adolescent Stage ($5 – 10M in sales) -  In the Adolescent stage, the overriding mindset changes from viability to scalability.  It is essential to prioritize resources on tasks that will grow the business in a repeatable way.  The core executive team can no longer be the “free wheeling” creative types predominant in the infancy stage, but must be “change agents”.  At this stage you should expect to experience limited turn-over from staff who are resistant to process and prefer to operate in the past.  The financial focus is on EBITDA.  For every percentage point of revenue growth, the operating expenses must grow at a slower rate.  Meanwhile, product development must be formalized and a clearly documented product roadmap must be committed to across the company.   Normally, marketing concentration (separated from sales) is focused on lead generation to feed the growing sales team.  The core product and business model is working and sales leverage is top of mind.  As such, alliances, OEM’s and expanding channel partners are top priority.

Teen Stage ($10 – 25M in sales) – At the teen stage its about expansion into new markets.  This requires a greater understanding of the ecosystem and a look beyond the point solution that may have started the company.  In the Teen stage, turn over among the leadership team is expected.  The “generalist or visionary” skill set is no longer viable, now it’s about specialization and having experienced and tightly focused resources working on many facets of the expanding business.  In the teen stage, the CEO’s role of keeping the team integrated and aligned on the top imperatives is critical.  Experienced financial leadership and consideration of  inorganic growth as well as preparation for an exit is important.   Within marketing, raising the visibility of the company with industry analysts and partners is paramount.  Meanwhile, the R&D team should be pro-actively managing product extensions and product lines and direct account presence to drive greater adoption in new markets.

Clearly, each company has its own unique position and these guidelines may not be universal, however its the CEO’s responsibility to initiate the changes to mature the business as quickly as possible.  I hope this framework allows you to better identify your companies position, identify the necessary changes and drive your organization to adulthood!

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