Understanding The Business Life Cycle

“One of the paradoxes of success is that the things…which got you there are seldom the things that keep you there” – Charles Handy, The Age of Paradox.

Transitioning a business through its life cycle requires a constant focus and an ability to adapt to changing market conditions.

Charles Handy in The Age of Paradox uses the mathematical sigmoid curve to demonstrate the life cycle through which all organisations move fairly predictably.

It shows how organisations undergo a period of growth before inevitably reaching a peak and beginning to decline.

There is no easy way to gauge how long it will take until the peak is reached. However, in order to sustain growth, it is critical to begin a second curve of organisational development before the peak is reached.

To succeed into the longer term, leaders need to anticipate and start working toward a new future, even before that future actually begins to take shape.

The sigmoid curve provides a way of thinking about the future that cautions us not to take success for granted.

It suggests the need to begin planning for change during the good times, when there are resources available to support business reinvention.

Point A: Generally, this is the optimum time to consider business reinvention.

Point B: At this late stage of inaction, the business is in serious trouble. Changes should have been made two, three or even five years ago.

Point C: The current business model could continue to create value in future years. The focus is on making continual improvements to the model that it has now.

Point D: It’s possible, even probable, that in the next three to five years significant changes will need to be made to the business model to sustain its success. The business operators may not be sure what the signals for change will be. They find it difficult to imagine what G looks like, but they need to scan their environment more actively and be more alert to the signals for change.

Point E: There could be increasing anxiety among some people who may have thought about, but did not action change a year or so ago. They may be nervous about approaching a serious decline, however few people seem to notice, care or act.

Point F: The business operators are trying to reinvent their business model. Not everything seems to be working, some people are confused and anxious, and others want to go back to the old model that has served them so well. Others say we must persist with our new initiatives until we learn which ones are viable and how we can make them perform.

Point G: The business operators have bedded down the new business model – it is working better each week. They are back to a position like C or D.

Point H: The business is experiencing some serious performance issues. If it continues like this, its future will be at major risk. The owners must act to make the changes that will turn the business around. This is difficult because some of its best people have left, its reputation has been damaged by poor performance and it has few resources to direct at the renewal.

Point I: After much effort, the business operators have made major changes to its business model that appear to have turned the business around. People are exhausted and regret that they didn’t act earlier.

Are you monitoring your business performance and scanning your environment for signals to change?

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Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.