An obvious truth (that people love to forget) is:
First you grow, then you die.
Every entity that is born or created is destined to die eventually. Nothing grows or lives forever unless some type of intervention breathes new life into the old shell.
Scientists haven’t figured out how to master immortality for the human body yet, but it’s actually possible for a business because its “lifeblood” is sales and its organs are people, processes and technology. All of these things can be swapped or changed.
The wildcard for business immortality is management. People running companies are not always willing or able to make the changes that will breathe new life into their businesses.
The Number One Cause of Corporate Death is Inability to Navigate Breakpoints.
Lifecycles come in all shapes and sizes. Many variables affect the speed and speed and extent of growth that is possible for any entity, so the width, height and length of lifecycle curves can be vastly different. Yet every lifecycle shares common milestones or “breakpoints”.
A breakpoint is when a hidden threshold is crossed and a sudden shift shocks the system triggering a transition or “phase change”. Basically, things jump to a whole new level where things operate in a significantly different manner.
Think about H2O. It’s liquid and fluid until suddenly it’s not. It becomes something with completely different properties, like steam or ice.
It’s the same in business. For periods of time, change can just look like slow, steady growth — add some customers, add some employees, expand into the market… deal with staffing and cash flow issues as you scale… But other times, businesses face l DISRUPTIVE change. Like a bug hitting a windshield. WHAM! It can be over in an instant.
An advisor or practitioner has a wildly successful practice and then WHAM!, a new government regulation makes a huge part of their service illegal.
A doctor fills up the schedule with great patients, and then WHAM!, changes in the insurance industry wipe out half the business and 75% of their profits.
A taxi company dominates its market using reputation and network ties to get coveted licenses and dedication to quality in fleet and staff to please customers. But then, WHAM! Uber creates an easy way for people with cars to connect with people who want rides, and the taxi business starts fading into oblivion.
We can go on and on with examples of how the Amazons and Apples and Facebooks and Googles of the world have disrupted “business as usual” but you get the point.
Business Breakpoints
In the figure above, the black breakpoints are when rules change. The red breakpoints are when the whole game changes.
The first stage is what I call STORMING. It’s when things are in chaos. Everything is swirling around, looking for connections, cohesion, and collaboration. Trying this, experimenting with that. The goal in this phase is to get to the first game-changing breakpoint and go from being nothing to being something. The secret to success here is CREATIVE INNOVATION.
After something has crossed the first zero-sum, “to be or not to be” breakpoint, the next phase is what I call FORMING. This is when things need to move from being a rough lump of clay to being a viable, functioning entity. Things need to be set up and put into place. The goal here is to find what really works and eliminate what doesn’t work, Find the patterns, start repeating the patterns. The secret to success here is IDENTITY & EXPRESSION- Figuring out your niche, your brand, your exact deliverables, and your message about it to the world.
The next breakpoint is just a rule change and starts what I call NORMING. Efficiency and optimization help you get better at what you’re good at. By paying attention to feedback, you can improve, refine, and hone. The key to success here is ESSENTIALISM & IMPROVEMENT – saying no to the trivial many in order to say yes to the vital few and .putting processes in place that limit creative impulses and perfect what in known to work.
After you’ve really honed what works and can use reliable metrics to create repeatable results (and recurring revenue), you pass through another rule-changing breakpoint and begin to amplify in the PERFORMING phase. this is when you can drive growth by finding new connections, entering new markets, expanding product lines, etc. The secret to success here is SCALING – making strategic deliberate changes that fuel massive and possibly even exponential growth.
Just when you thought things were going well…
The next breakpoint is the hardest one of all because it’s not just a rule change, it’s another zero-sum, life or death game change. It’s a bifurcation point where things usually shift from growing to dying.
Nothing Fails Like Success
Companies used to have a good 20-50 years to grow, but now the average business survives less than 10 years. Everything cycles faster in a rapidly changing, highly connected world.
Death comes to businesses in many forms. You can lose critical connections or customers, run out of resources, suffocate or starve from market saturation, get wiped out by better faster, cheaper, or easier technology or processes, etc. Shifts in customer values can cause a mass exodus. The list is endless.
Once you hit that bifurcation breakpoint at the top of the curve, you might plateau for a while, but it’s like life support –it just prolongs the inevitable. The next phases are slumping, declining, crumbling, and ultimately flatlining.
It’s tragic, but it’s not your fault. It’s just an inevitability unless you can “leap the curve” and create new life.
If you can figure out when your performing streak is about to end and can jump to a new storming phase, you will have a shot at continued growth. If you can do that over and over, you might actually become “immortal”. According to the Guinness World Book of Records, a hot-spring hotel called Nisiyama Onsen Keiunkan, has been successfully operating since the year 705!
The problem is very few people are able to jump curves. The reason is best illustrated with chickens.
If you take a room full of free-ranging chickens and randomly drop food from the ceiling, it only takes a few hours for them to pick up weird habits. One will be continuously flapping a single wing. another will be turning circles in a corner, while another does a crazy neck bob thing.
These habits are formed because the chickens superstitiously believe that whatever they were doing when the food fell must have caused it. So they repeat the behavior to test the theory. When another supply of food (randomly) falls, it further reinforces the belief that flapping or bobbing causes meals to come.
If you know anything about intermittent reward patterns, you know that they cause the strongest habits.
When something only happens “sometimes” the habits that are formed around it become very solidified. And it’s not just with chickens.
If every time you put a quarter into a slot machine, you are rewarded with a river of coins, you would likely develop a habit of putting in coins. But if the machine suddenly stopped paying, the habit would die off pretty quickly. If, on the other hand, the slot machine only paid out sometimes, your habit of putting coins into it would be much harder to break. You would always wonder if maybe this time, it will work again. Intermittent reward causes stubborn hope.
What does this have to do with business life cycles? Owners and managers routinely assume that whatever they are doing is causing revenue to flow. The assumption may or may not be true. Business success might be thanks to skill, but it could also be due to luck. Most likely, it’s a combination. Regardless of what actually causes success, HABITS are formed and intermittently rewarded with revenue.
When a phase changes or the market is disrupted and the old habits are no longer working, most people don’t switch to new ones. They double down and do “more of the same” because they have evidence from the past that ties those behaviors to success. They know in their bones how to grow their business. Unfortunately, what they know, is no longer so –once a breakpoint has occurred.
What I’ve come to call “chicken brain” afflicts us all. We superstitiously stick to our ways and we miss crucial breakpoints.
Much of my consulting career has been focused on helping people and companies to understand where they are in their life cycles, which focus and skills are necessary for the current phase, and how to recognize the signs and seize the opportunities that come with change and disruption.
If you’d like more information on how I might help you navigate waves and jump curves so you can enjoy profitable longevity, please don’t hesitate to give me a call.