The Four Stages of High Growth

Our practice has largely focused on high growth companies who have raised capital from private equity investors. High growth businesses, particularly those that are private equity backed, have an added dimension of complexity - limited time and resources. The PE investment brings the resources (the carrot), but also brings with it time bound goals for achieving return (the stick). The investment acts as the catalyst for the business to move to the next level of growth. As we worked with these companies fighting to grow and build a sustainable organization quickly, we realized that the stage of growth a company is in is very important context for understanding organizational maturity. In other words, the Six Imperatives for High Growth look very different at each stage of growth.

We’ve had the privilege of working with and for companies that are very large and very small. Operating a successful business that employs a few people is like riding a bike compared to operating a multinational corporation with thousands of people which is more like captaining the space shuttle. There’s a whole lot more complexity to that latter mission. Complexity is really what sets each stage of growth apart from the next.

Like people, organizations also develop competencies. In describing the Four Stages we highlight some of the organizational competencies, or muscle, needed to progress at that stage.

Emerge

Informal. Ad Hoc. Undefined, Reactive.

You say that like its a bad thing!? Getting started is messy. The truth is businesses generally start when one or two people have an idea. The early founders and their first employees form a team. The team is really the simplest unit of an organization. At this stage one team forms around an idea or opportunity. They are proving out a concept and business model. The company is at its most creative with nothing to encumber innovation other than lack of resources: people, money, time.

Companies in the emergent stage are extremely agile frequently pivoting in reaction to client demands and customer feedback. Until they have landed on their formula for success, there really is no point in codifying much. That’s why the focus of this stage is proving out their business model, product, or market opportunity quickly.

Organizational competencies at this stage are creativity and agility. During this messy creative time many companies have a nascent identity that draws largely from the founder and his/her values and vision which are organic and unscripted.

Operationalize Stage

Defined, Data-informed, Focused, Proactive

Ah ha! Now we’re getting somewhere. Once the business has proof of concept - someone is buying what you are selling - it’s time to build the mousetrap - or the infrastructure needed to support the operation. In many ways, the Operationalize Stage is the most important. It’s the stage where the company moves from purely entrepreneurial and creative to building its foundation for growth - the processes and capacity to serve more customers and serve them in a consistent way.

One company we worked with described the shift rightly in terms of “productizing” their software offering. They had developed technology that could do a lot of things. When they threw it at the market, different customers liked different iterations. In the Emerge Stage, they were reactive and built whatever the paying client wanted which resulted in many one-off products. The shift to the Operationalize Stage occurred when they had enough data and experience to be able to take the proactive step to stop customizing for each client and develop one product to take to market.

The Operationalize Stage of growth is internally focused and the organizational competencies that develop at this stage center around process development. Developing processes to support innovation is a very different skillset from innovation itself and often companies look outside to hire people with this skillset to complement the entrepreneur founder(s) who likely lead with creativity over process. Also at this stage, the company has likely grown beyond the one founding team to multiple teams. This added complexity is what drives the need for more process and intentional communication.

Grow Stage

Accountable, Data-driven, Predictable

Bring it on! The company shifts from the internal focus of the Operationalize Stage to the external sales focus of the Grow Stage. With the mousetrap built, the company can confidently turn on the sales spigot and grow!

When the growth accelerates, it quickly overwhelms the organization - even if the foundational mousetrap is in place. One of the biggest limiting factors in scaling is people. Organizations must develop the competency to bring in talent and get them up to speed quickly.

Becoming what Google calls a “self-replicating talent machine” is one core organizational competency to develop in this stage. In addition, with processes firmly in place, the company can begin to learn from the mousetrap and mine it for efficiencies.

Explore & Expand

Strategic, Agile, Innovative, Opportunistic

Let’s take this show on the road! Companies that make it to this stage of growth have a firm foundation and proven successes from which to dream big. It’s time to parlay the mousetrap into new products, verticals, geographies, etc. By now the organization has strong core competencies and a core identity to leverage into new business opportunities. Inorganic growth opportunities come into play here. Scale comes not from doing more of what we do but taking what we do and applying it to something new - a new product, market or geography for example.

One of the challenges at this stage of growth is keeping it fresh. What started out as pure innovation in the Emerge Stage is now a fully mature company. And often, what gets lost in the process - literally and figuratively - is the innovation that got you here in the first place. We all know the adage, “innovate or die.” At this stage it’s important to build in innovation and Innovation. Lower case “i” innovation refers to the incremental innovations that come from the mature part of the business through upgrading technologies, mining customer data and finding efficiencies. Capital “I” Innovation is blue ocean thinking. It’s the big hairy audacious goal. Companies in Explore & Expand must have both.

What stage is your company in? For more information on how we can help guide you through the Four Stages of High Growth, check out our website at www.PeopleCap.com.