Growth Stages for Emerging Companies

It is generally believed that emerging companies go through several identifiable stages of growth, each of which has its own set of "typical" business characteristics and accompanying management issues and problems.  While a single model of growth and development certainly cannot explain or predict everything for the management of a particular firm, it can be useful in providing them with a sense of where the company stands and the challenges that are likely to require their immediate attention and in the foreseeable future.  Armed with that information, management can make intelligent choices about acquiring the necessary resources for the business, establishing priorities for work activities, and designing and managing the organizational structure of the firm.

 

There is no single theory regarding the stages of development of a business that is universally accepted and there is real controversy as to whether or not firms really do need to go through a single, predictable path as they grow and mature.  Various factors, notably significant advantages in communications technology and rising standards of living in foreign markets, have pushed young businesses into global markets soon after formation and created challenges for their managers that were traditionally deferred until the firm had gone through an extended period of domestic growth and expansion.  Companies are also becoming involved in acquisitions and strategic alliances with outside business partners before they have had an opportunity to fully build and stabilize their own internal business infrastructure.  As a result, management may be overwhelmed by the size and scope of the human and physical assets that they need to oversee and the challenges of coordinating activities and strategic goals with new stakeholders who were not part of the original team that conceived and launched the company in the first place.

 

We will delve into stage theories of the evolution of a firm in great detail at some point in the future.  For now, however, let us simply accept the utility of recognizing and understanding the following stages of development for an emerging company: concept stage; formation and organization stage; crisis and survival stage; initial growth stage; expansion stage; and maturity stage.  For those of you who don’t like to think of an emerging company as “mature,” simply apply that description to a specific product line or business unit within a larger firm that is hopefully continuously growing, expanding and integrating new products, technologies and markets that must themselves go through their own formative growing pains and challenges before they become an integral and permanent part of the company’s business.  What I hope to do over the next few weeks is present a series of posts that identify some of the key business characteristics associated with each of the stages—immediate business objectives, predominant management style, organizational structure, and the state of the company’s product and market activities—and the main managerial challenges that come with graduating into a particular stage (e.g., resource management, sales and marketing, and communications and cooperation within the organization).  I’ll also discuss some of the business characteristics and managerial challenges in detail to explain how they change across stages so that founders and managers of emerging companies can understand where they might be heading and plan accordingly.  Finally, I’ll present a few illustrations of how this entire framework can be used as an assessment tool to provide help the executive team of an emerging company establish priorities with respect to business and organizational planning.

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