10/ 21/ 2003
by Lisa Waddle
"Your company is your idea, your risk and your life. You are the leader. But as it grows, it needs to change-and your role must evolve to match those changes. Your challenge is to become the dynamic leader your company needs through every stage of its growth."
-- Leading at the Speed of Growth, by Jana Matthews and Katherine Catlin
The secret to growth lies with you
It's an irony that the very behaviors that brought your business success at one stage of growth can contribute to failure in the next stage.
Yet that's what consultants Jana Matthews and Katherine Catlin discovered after interviewing hundreds of entrepreneurs.
Their central question, "Why don't more entrepreneurs become successful CEOs?" became a just-published book, Leading at the Speed of Growth: Journey from Entrepreneur to CEO (Hungry Minds, $24). It explores the failure of many entrepreneurs to manage their companies through change and offers a step-by-step guide to taking your company through each stage of growth.
"It became clear to us that there were different roles an entrepreneur had to play at each stage and the extent to which you understood you needed to stop doing what you were and start doing a whole other set of skills determined how successful you were," says Matthews, who is senior program director at the Kauffman Center for Entrepreneurial Leadership. "This is giving the entrepreneur the road map on how to move up, how to prepare themselves and their companies to be better."
Overcoming stalled growth
Many small businesses plateau once achieving an initial degree of success, and can stall at one level of revenue and sales for years. If the business owner is comfortable at that level and is fulfilling all of his or her goals, that's great, Matthews says. But for the entrepreneur who wants more, figuring out how to climb off the plateau and bring a company to greatness is the most difficult transition they face.
The way to start is by "understanding and learning the different kinds of knowledge and skills that are needed in each stage of your company's growth," Matthews says. "For instance, getting a product to market is very different from building a company that will be sustaining over time."
Be aware that there is no set time line for when a company goes through each stage. Every company moves through the continuum at different speeds.
"If you're a high growth technology company, you can go through start-up and initial growth in two weeks, and blow right through that to rapid growth," Matthews says.
Stages might also seem to overlap, or different units of a company might be in different stages at the same time.
Defining precisely where you are on the growth continuum at any given moment is less important than knowing the types of changes to expect as your company grows so you can become the leader it needs," Matthews says.
"By failing to understand your new role in the next stage, or not taking on the necessary skills, you'll negatively affect the company's ability to grow," Matthews said.
In Leading at the Speed of Growth, Matthews and Catlin detail the personal changes you need to make in your leadership role in each stage of growth, the dangers if you don't change, and what your critical responsibilities are at each stage.
Overwhelmed? Don't be. Matthews and Catlin found that most small business owners already have what it takes to transform themselves into highly successful entrepreneurial CEOs. This is because the classic entrepreneurial strengths provide a strong foundation for every stage of company growth.
You already have what it takes
Key to transforming yourself into an entrepreneurial leader to move up through the stages of growth is building on your classic entrepreneurial strengths and adding new roles and responsibilities. Sometimes you'll simply apply what you already know to new situations, but other times you will have to learn new things and add new skills to your repertoire, Matthews says.
Necessary new skills include:
- balancing short-term and long-term goals in planning;
- building your entrepreneurial team;
- communicating to produce alignment;
- resolving conflicts;
- understanding that people and culture are your key assets; and
- learning from every success and failure, from mentors and from other successful entrepreneurs.
"The creativity, drive and will to succeed that made you an entrepreneur in the first place will enable you to take on the new leadership roles and responsibilities that are necessary to propel the growth of your company," Matthews says.
And it gives you an edge over CEOs-for-hire. "These skills create a powerful and even unbeatable competitive advantage," Matthews said. " You have experience, insights and attitudes that are generally lacking in CEOs who have never started a company from scratch."
The 3 questions
Questions critical to ask early on, and continually update:
- Why am I doing this business? Is it to earn enough money to be comfortable? To create a company to pass on to my children? To build a company to sell as soon as possible?
- How much control am I willing to share? If you're not willing to share any control, you're not likely to be a growth company, Matthews says. If you want to control everything, it's hard to have people who are smarter than you join and stay with the company. "You'll surround yourself with yes-men and it won't be a terribly strong company," she says.
- What's your exit strategy? You need to think of this right from the start, and reassess it often, Matthews says.
Your answers to these three questions will help you figure out your strengths and weaknesses, Matthews says. Depending on the stage of growth your company is in, your own characteristics can be both strengths and weaknesses. But no matter what stage you're at, the classic entrepreneurial strengths you can count on are the ability to see new possibilities, take on new challenges and find creative solutions.
The 4 stages of growth
Start-up. When you're trying to figure out what product or service to offer and what your company's real value will provide for customers.
Initial growth. At this stage, your company is very sales driven, trying to launch a new or different product, trying to capture market share and growing revenues. Company operations are fast-paced, highly flexible—even chaotic.
Rapid growth. Here, your company is trying to achieve widespread use of its product or services, gain a significant share of its chosen markets, ward off advances from competitors and move into a market leadership position. Lots of new people need to be hired.
Continuous growth. This is comprised of successive rounds of turbulence and periodic "re-inventions" of the company. Rapid growth led to many more customers and market opportunities, a much larger employee base, a more complex organization and the potential to dominate the industry. But more of everything also includes more potential to go out of control.
Watch for Red Flags!
Here are some of the signs of a turbulent transition from one stage of growth to the next:
From start-up to initial growth
- Your days are too short
- It's physically impossible to do everything you need to
- Everyone is constantly fighting fires
- You don't know which of multiple growth opportunities to pursue
From initial to rapid growth
- You want to become more proactive, but it's hard to find time
- It's hard to keep the original culture as new people are added
- The best way to fund growth is unclear
- You realize how easy it would be to lose control
From rapid to continuous growth
- You worry about your management team's ability to run the business without you
- You need to solve more complex problems, and the old ways of handling them don't work
- Your company's organization seems unwieldy and turbulent
- You believe in the need for change but also worry about throwing the company into chaos
- You feel you're constantly communicating, but managers complain that they don't understand decisions or how they were made
