The Nishiyama Onsen Keiunkan Hotel has existed in Japan since 705, and Olga Buzova’s chain of restaurants closed a year and a half later.
What is the secret of the first and the reason for the failure of the second? Why do some companies exist for centuries, while others are hastily closed without waiting for a profit? The whole secret is incompetent management and the ability to live a business in the truest sense of the word. The editors of the blog talked about this in an interview with a person whose profession is at the origin of any business project – Elena Melnik, Head of Marketing Web promo.
Organizational management – where does it start? As soon as we hire the first employee or much earlier? What functions should management perform in business?
Let’s first understand what management is. In simple terms, this is management, where the organization needs the following functions:
- Meet the needs of the market and customers (P – providing needs);
- Ensure compliance with established procedures (A – administration);
- Encourage entrepreneurship (E – entrepreneurship);
- Create an atmosphere of cooperation (I – integration) in the company.
Meanwhile, a manager is a manager, and he should be responsible for: organization planning, motivation, control, and of course, the process of making managerial decisions. The manager as a person is needed by the company far from the first day. At first, it is quite successfully replaced by a business plan. After all, any large company is born with a small idea, behind which stands a man-entrepreneur with burning eyes.
At the same time, the function of entrepreneurship for a nascent company is one of the four important, but far from the only one. As a marketer, I generally believe that everything starts much earlier. At the origin of the company is always the consumer and his specific pain or dream. If the business started from something else, then I have bad news for him …
What is the life cycle of an organization? What stages does it consist of? Also, why does it look so much like a human? For ease of perception of the theory, or does it have a deeper meaning?
Everything is born and dies at some point. Companies are no exception. Only one thing does not die – the need of the client. We are all consumers, so I can say with confidence that the feeling of hunger, thirst, or communication will not die for me (at least I really hope so!).
Only throughout my life, I can count dozens of ways and products that helped in my needs. For example, such a need as communication is now closed by Facebook, mobile operators, and popular instant messengers. But 20 years ago, I would have named slightly different companies. In particular, operators of home telephony and mail. They were in their prime and had practically no alternative, but stability became disastrous for them.
Returning to the stages of the life cycle of an organization, there are more than ten of them:
And the names of the stages really have a lot to do with a person’s life. I am sure that when developing his concept, Adizes (Yitzhak Adizes – one of the world’s most famous business management consultants, approx. ed.) took pity on all of us, giving the stages of the organization’s life cycle “human” names. But I also see a deeper meaning in it. After all, each company is a whole organism that once began with one cell.
If you study the scheme presented by you, then almost at every stage of the life cycle of an organization there is a risk of manifestation of ” pathologies”, which will lead to the destruction of established business processes. What management errors usually lead to this?
Absolutely at any stage of the life cycle of a company, something can go wrong. And, unfortunately, most businesses die before they were born. What is their mistake? The most common scenario is when an entrepreneur does not move beyond the idea and their own enthusiasm. Such businesses exist only as long as this very enthusiasm of the owner is enough. The mistake in them is just the lack of transition from dreams to actions.
Another thing is when an idea turns into a business plan, and an entrepreneur develops healthy pragmatism. Such a company creates its product or service “here and now” and moves to a new stage – infancy. This is the correct sequence that starts the life cycle of an organization.
Of course, in the “nineties,” there were examples of creating companies from the opposite. But where are they now? They are simply not on the market.
At what stage does an organization move from short-term to long-term management functions? How does this manifest itself for the manager and leader?
That’s the “trick” that functions, both short-term and long-term, are needed by the organization at each stage. Problems occur in those organizations that forget about this and at a certain stage focus on one thing. Yes, at first we are more ideological, and in the middle of the life cycle, we are pragmatic. However, with proper management, the prevailing functions should not exclude less relevant ones.
Heyday – the peak period of the life cycle of the organization, after which stagnation and decline occur. How long and at what expense can a company stay at a point of growth?
Heyday is a very dangerous period for a company. At this stage, it is much easier to slip into stability than to enter a new round of development. Because the business is doing well, and when everything is fine, you don’t want to change anything.
In my opinion, the period “Come on” and “Youth” seems to be more attractive as a point of development for the organization – it was there that the mix of youthful maximalism, the desire to take risks, and the ability to do business were concentrated.
In fact, the task of a business is not to be in its heyday as long as possible, but to kill one product in time for another.
The Gillett brand is a very good classic example of how to enter a new round of development in competition with yourself. Anyone who has read The Marketing Wars knows what I mean.
Why is stability bad?
Why does the swamp smell bad? That stability is a swamp. Warm, soft, with a distinctly perceptible smell of unhealthy processes. If you remember Lewis Carroll’s famous quote: “In order to stay in place in our time, you need to run very fast.” So stability is a situation when you stand still, and life rushes past you at breakneck speed.
But business also forecasts, isn’t it? Doesn’t constant “running” complicate forecasting?
Forecasts are great, but it’s even better to have a vision, a mission, and a strategy. Of course, sometimes you want to stop and think about the eternal, or at least pause and plan everything properly. But the practice of the last decade shows that the hypothesis, which was tested here and now, and immediately changed, works better than the ideal plan that was written for a year. It’s like quickly creating a prototype of a future site, making changes, and launching it, instead of hatching the perfect portal in your thoughts and never publishing it.
What are the signs that a company is dying? Where is this “point of no return”? And how does the decline of an organization affect its employees?
The point of no return is hard to see, almost impossible. Therefore, I will give simple and effective advice to prevent disastrous consequences: regularly take “tests”, that is, check the company for all the features listed above.
Can the death of an organization be considered inevitable? Or is there always a chance to go back and start over?
Time only goes in one direction and you can’t go back. This story is more suitable for the plot of a science fiction film. Moreover, death in business is a very relative concept. Sometimes you have to kill something old for something new to be born. I like organizations that have a portfolio of multiple products at different stages of the life cycle, and they themselves are teetering between the stages of “Come on” and “Flourish”. This is the golden period when there are enough resources for development, but there is still “gunpowder” to take risks and generate new ideas.
On the examples of what successful global and Ukrainian companies can best trace the life cycle of an organization from inception to death? What was their main mistake?
Very few organizations go straight through all stages of the life cycle. Most often, companies die at the first or second stage, and those who have gone further become brands and we read successful cases about them.
In the example of Apple, one can speculate at what stage of the life cycle it was indifferent years of existence. Given that this company has been on the market since 1976, it has repeatedly started a new round. One of the most powerful was the release of the iPod and then the iPhone. After all, the brand managed to make such a technological breakthrough, among other things, due to the fact that its position was deplorable. The changes were the saving grace for the company from the collapse. Right now, Apple seems to be in its heyday. This is a very risky position from which the real changes that are so necessary for the business rarely appear. Therefore, now with double interest, I will observe their decisions.
By the way, about Apple and similar fast-growing brands. They bring new products to market so quickly that it sometimes seems difficult even for their consumer to keep up with the proposed technologies. Can it be that the pace of development of the organization outstrips the rate of getting used to new consumer products? Is this also a sign of imminent death, or here, as with jokes, do you need to leave the “brew” and in the meantime take on another project? Are there similar cases in business practice when the consumer was simply not ready for the product/service?
Of course, there were cases when the consumer was not ready for the product. The same tablet that Apple released in 2010 has already been released to the market by other companies and consumers have not appreciated the “innovation”. In general, the assumption that Apple offers new technologies is very doubtful. Innovation ended back in 2010. Now it’s pure marketing, good marketing, but technology has nothing to do with it.