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A Rainbow of Growth and Despair

For every business there exists a wonderful rainbow of growth and opportunity. At the end of this rainbow, however, lies not a pot of gold, but decline, despair and demise — in the form of the Inevitable Kraken of Doom. *cue thunder and lightning*

In his 2015 outgoing speech as the CEO of Cisco (a multinational technology company), John Chambers delivered a dire warning to the 25 000 attendees — ‘40 per cent of businesses in this room, unfortunately, will not exist in a meaningful way in 10 years.' He went further, adding that 70 per cent of companies will attempt to go digital, but only 30 per cent will be successful.

Now, a heap of ‘doom and gloom' warnings go out to businesses — and particularly to leaders within large organisations. But this one is worth paying attention to. Before retiring, Chambers had to lead one of the most painful transitions in the company's history (including moving from 62 business units to 18 focused divisions that worked together). Chambers stressed, ‘We had to tie together our silos, we had to change our culture … we had to change, or we would have been left behind.'

And you can find plenty of examples of companies that have been left behind. In 2011, IBM turned 100 — a remarkable achievement. To celebrate their relative resilience and highlight just how much had changed in that period of time, IBM ran ads in The New York Times, Washington Post and The Wall Street Journal. ‘Of the top 25 companies on the Fortune 500 in 1961, only six remain today,' the ads explained.

How do organisations find themselves in this predicament? Why is it that a few organisations are able to maintain resilience and relevance over time, while many others sink into inevitable decline?

How is it that large organisations die?

Leaders do not set about to make their companies irrelevant and extinct. Rather, they find themselves meeting the Inevitable Kraken of Doom as a result of a series of reasonable decisions — the type of decisions that are so reasonable, and backed so convincingly by precedent and convention, that you just can't argue with them.

Let's explore what these reasonable decisions look like through the various phases of company growth.

THE DEFAULT GROWTH ARC

All successful enterprises have an arc of life — from startup, to growth, maturity and decline.

I rather like to think of this lifespan as an arcing rainbow of growth and despair. It's all somewhat wonderful to begin with — but follow this one path too long, and you'll find yourself sliding into not a pot of gold but the gaping maw of the Inevitable Kraken of Doom (as per figure 3.1).

I'm not sure where you are currently placed in this growth arc. Perhaps you have the benefit of being a leader within an enterprise undergoing rapid growth, or maybe you've taken the reins of a senior leadership role for a company that's already feeling the tendrils of the Inevitable Kraken of Doom. Or maybe you're an intrapreneur within an enterprise that's currently experiencing the stagnation that comes with maturity — and you're looking for creative new pathways to reactivate growth.

If your enterprise is in the stages of maturity and decline, looking backwards, you might see a series of reasonable decisions that have led you to this point. Part II explores how to move on from the point you're at, but for now let's have a look at some of the typical challenges any organisation faces at each stage in this path.

The magical startup phase

In the magical startup phase, the focus is on new thinking.

Or, at least, it ought to be.

If everything is going well, you'll be very connected with your teammates and your customers, and minimal to no hierarchy or friction is standing in the way of meaningful progress. Feedback loops are tight, and learning is fast. You adapt to change quickly, and thrive on new insights. You pursue hunches via experimentation, sharing learning and insights, and asking progressively better questions. Diversity is leveraged, and feedback is sought constantly. The work is inherently motivating. Discretionary effort is the norm — people do what's needed, when it's needed. No-one is counting the hours of work they're doing — you're looking for a more meaningful sense of progress. During this phase, you have a sense of purpose, you're developing mastery, you have autonomy in the way you pursue progress, and you have the community of your team (and the rituals that keep your team together — like daily stand-up meetings, and beers and pizza on Fridays).

But the situation is not always magical. Startups can be structureless and unfocused, blindly subscribing to default ‘proven' methodologies without critical thinking, stumbling from one minimum viable product to the next and hurling prototypes at users until something sticks. Everything is lean, everyone's agile, we're all pivoting and using all the right buzzwords — but we're not learning, or making any meaningful progress. In this scenario, experiments are not informed by any vision or reasoned thought. The ‘new thinking' that is the most valuable element of this phase is instead replaced by a desperate need to build something viable to sell to customers. As a result, the focus shifts to improving existing products for existing customers. Such thinking might bring about incremental improvements, but it certainly won't lead to any breakthrough development.

I'm a bit sceptical of the zeal many folk have toward lean startup methodologies. The importance of experimentation and agility is paramount — and this is something a startup can do well. But this should not eclipse the need for good, thorough thinking.^[1] And that's the risk any good system or template provides — it's too easy to simply follow the formula, rather than thinking for yourself.

But, let's assume all has gone swimmingly, and you've found and made something brilliant — something worthy enough to draw notice in the market. If you're attracting customers and sales are happening, your focus shifts to the crazy growth phase.

The crazy growth phase

Once an enterprise gets over the initial challenges of building a viable new product or service (something that delivers value where none existed before) and attracting paying customers, they are then ready to enter the crazy growth phase.

Now, the reasonable default and reasonable thing to do here is to scale fast — to capitalise on the opportunity before competitors can catch up. When this works, organisations can see rapid increases in their revenue and market share. This is where they begin to reap the rewards of all the hard, angsty work in the magical startup period.

It's a glorious phase, this. You have a growing customer base, surplus revenue, validation and a level of future stability — the opportunities are abundant. It is here that leaders have the greatest opportunity to use the momentum, interest, optimism and confidence generated to venture further into uncharted territory — to keep pioneering, and stay fresh and relevant.

But alas — this is not the default thing to do. In an article published in First Round Capital, Mark Leslie (the former CEO of VERITAS Software) points out, ‘When things are going well, most leaders are reluctant to take significant, unnecessary risks in favour of market dominance.' Instead, they do the reasonable thing. They focus on what works — building incremental improvements to the product or service, adding new features, and refining things further.

Even if you're coasting along with default thinking, it's not all beer and skittles in this phase. New challenges emerge.

In the magical startup phase, small teams managed a diverse range of responsibilities. But now, in the crazy growth period, it's no longer viable for people to be spread so thin across so many things. And so people begin to work to their strengths. In an attempt to manage increased demand and workflow, the more formulaic tasks are automated or outsourced. Roles are created and a company structure begins to form. More people are hired — a process that needs to develop as the company grows. With more people and more roles comes more complexity, and more risk of duplicated and wasted effort. And so, new systems, templates, policies and structures are created and evolved to curtail the entropy inherent within rising complexity.^[2]

It's possible to go from a small team to hundreds of staff within the space of a year. This can all feel fast and frantic, and work culture, vision, meaning and purpose can take a hit if leaders are not mindful through the growth period.

I've worked with a few founders who have navigated the crazy growth period of their company. The common challenge they express is that the culture is just not what it used to be — it used to be dynamic, creative and collaborative, and the team felt a real connection with each other. But now the members of that startup team feel as though they are surrounded by acquaintances they barely know. Things used to be spirited — now they are polite and correct. The initiative and discretionary effort that once fuelled things has now been replaced by slavish adherence to role descriptions. Where once people were motivated by a sense of purpose, now they're motivated by pay and promotion.

The plateau of maturity

Throughout the crazy growth period, the organisation has scaled to the point where revenue starts to flatten, and margins begin to stabilise (to a lower but still decent level) as competitors enter the space.

At this point, you likely have a well-established organisation, with robust systems, policies and procedures. The company also probably has a good base of customers, distribution channels and some brand equity.

In the best-case scenario, you have a level of operational excellence that allows for epic efficiency and impact. With your national or global positioning, you can truly change the shape and nature of industries. You can leverage massive investments in research and development to create groundbreaking products and services in your field. You attract brilliant talent. You can invest in quests and the development of further options, which in turn further enhances business strategy and growth. And, your organisation can be driven by something higher than profit — purpose (and the opportunity to do great good).

But, at their worst, mature organisations have a bank of well-established policies and procedures that significantly hobble their ability to innovate or prosper. By following the default path, making reasonable decisions and doing the default thing, you can end up with an organisation full of bureaucracy, friction and politics. You likely find an embedded fixation upon near-term KPIs and shareholder returns. There is no sense of greater purpose — people fixate upon ever-shrinking margins, and seek greater efficiencies.

Here are some of the common challenges I see within large organisations cursed with efficiency and default thinking:

• A distinct lack of ownership exists. Because people have clearly defined roles and hierarchies, it's easy to simply keep doing the default things in their role description. As a result, peripheral things like quests and discretionary effort just don't happen.
• Vision is blinkered and myopic. If leadership is operationally driven, established metrics and conventional measures of success will be a strong focus. This serves to narrow people's focus to a small range of tasks, hobbling curiosity and exploration. Further, some senior leaders may only have a few years remaining until their retirement. If this is the case, they may be more inclined to maintain the status quo, rather than take bold risks that might rock the boat.
• Failure carries a stigma. In mature cultures gripped by the Curse of Efficiency, failure is bad. Very bad. The learning derived from experimentation and exploration does not outweigh the perception of wasted effort — a thing to be frowned upon. This is a results-focused organisation! To demonstrate this, those who successfully adhere to established metrics are rewarded and celebrated. The message is clear: we want you to innovate (of course!) — but don't you dare innovate.^[3]
• Friction seems to exist for every action. The company has a system, policy or procedure to follow for everything. You can't even send a tweet without multiple layers of approval. Everyone is civil and politically correct — but no authentic communication is happening. People aren't being human and real — instead, they don their professional masks and proceed as automatons.
• Everyone is busy. No surprises here, but when things are truly dysfunctional, broadcasting that the work is being done can be a better career advancement strategy than actually doing the work.

Trying to adopt a new strategic direction in this phase is much harder than in the growth phase (where everything is primed). But it's still possible — fresh thinking, a renewed approach to leadership and strategy, and a game-changing approach to workplace culture can turn things around (see chapter 5 for more on this).

For if we don't, we meet … *cue moaning dirge and darkness * …

The Inevitable Kraken of Doom

Ah! The inevitable demise! This is where companies find themselves entering decline. At this stage, all efforts are a little bit too little, too late. The Kraken is here, and it feeds upon the sweet nectar of your irrelevance. If only you were more nimble and adaptive! If only you had explored new pathways to stay relevant!

Decline happens when an enterprise no longer generates value. This usually happens as a result of:

• Default thinking and arrogance. As we've explored, it's difficult to see default thinking (and the ongoing influence it has on the decisions we make). Deliberation is required to break out of default thinking and explore alternative options. But, even when viable alternative options are laid out, leaders can still succumb to arrogance — to view previous successes as indicative of future success.^[4] They stop asking questions, believing they already have the best answers.
• Bureaucracy, politics and the Curse of Efficiency. Sometimes innovation and progress are halted because of large egos and/or political manoeuvring. Or decisions are made just to keep shareholders happy. When efficiency or personal preferences are given higher priority than meaningful progress, things begin to decline.
• Disruption. This usually happens when large organisations don't have a sense of emerging threats or opportunities; when they are not attuned to emerging technologies and intersecting trends. And when they are not fostering quests to generate new pathways for strategic growth. As a result, they don't lead proactively, but instead are blindsided by disruption, and forced into a reactive scramble to maintain market leadership. Facebook's ‘Little Red Book' — a manifesto of the stories and perspectives that continue to shape the company — has a great line: ‘If we don't create the thing that kills Facebook, someone else will.'

Enterprises engaged in this final phase are usually characterised by desperation. They are highly likely to adopt widely audacious goals, and risk perception goes way out of whack. They either rally to old thinking, or desperately put their hope in cheap tech or ‘magic wand' solutions.

If an organisation finds itself in this situation, it has either failed to anticipate or manage an external threat — like disruption from a new technology, a change in regulations, an environmental disaster — or it simply has failed to keep up to date with customer needs, let alone stay ahead of them. This usually happens when there is a combination of the Curse of Efficiency and dogmatic adherence to default ways of doing things.

Operationally efficient? Yes. Reasonable? Yes!

But adventurous and pioneering? No. And at this point, perhaps the best hope is that the organisation is bought out by a savvier enterprise, which might use what's left of the customer base and distribution channels to better effect. This essentially resets the cycle, and we go back to the new/fresh thinking of the startup phase.

There will be casualties, yes. And most won't survive.

Much better to embark upon quests earlier, before things get desperate.

* * *

This whole ‘default growth arc' (aka the rainbow of growth and despair) kind of reminds me of the default life plan, which looks like this:

Get born, go to school, go to university, get a job, save up for a wedding, get married, switch jobs, save up for a house, get a mortgage, have a kid, switch jobs, work hard, get a promotion, take a holiday, have a second kid, work harder, see kids through university, get another promotion, have a midlife crisis, recover, work hard, retire, go on a holiday, settle down, look after grandkids, die.

Of course, that's just the default template.

There is a better way …