Why is second stage growth so hard for businesses to achieve?
Businesses in the organic growth stage take off like a rocket, grow like crazy, and steal business from bigger competitors every step of the way. Then all of a sudden, they find the growth slowing, profitability slipping, and people in the company fighting with each other, and they just can’t seem to get ahead of it.If this sounds familiar, welcome to Whitewater.
For the first time in a long time, the business’s existence seems to be under threat. It can be so bad that many founders mistakenly believe their business has run its course and is in the final stage, Death Rattle.
The truth is, they are on the right cusp of the most successful stage, Predictable Success. However, to get there requires the founder to make an incredibly important decision, I call the Founder’s Choice. Before we can get there, we need to see how the company got into Whitewater in the first place.
Getting into Whitewater
It’s often unclear just when Whitewater starts. It’s not a conscious decision. Instead, the root causes of the problems in Whitewater start back in Early Struggle. You get out of Early Struggle by finding a profitable, sustainable market before you run out of cash. You succeed in Fun by mining that profitable, sustainable market.
If that all sounds a bit academic, let me put it this way. You start and grow your business by saying yes to just about everything anyone is willing to purchase.
There’s a wild west nature to your sales. While you probably refined what you sell over time (you didn’t even have a real price sheet when you started), the answer is still yes to just about anything the customer wants.
And this is right! This is the exact strategy you need to succeed in a startup. It works because you are small enough, internally simple enough, to bend, pivot, and facilitate almost anything. You and your team will stay up all night, painting blue widgets pink if that’s what it takes to make the customer happy.
Your incredible responsiveness may very well be your primary selling point. You could be stealing business left and right from much bigger competitors precisely because of the agility of your organization. But it is also a ticking time bomb.
Saying yes to pink widgets is easy when it’s only your first widget, your second color, and your third customer. You and your small team can easily make the changes need to make it happen.
However, the number of widgets, colors, and customers has grown continuously for years now. What used to be an incredibly simple operation is becoming increasingly complex.
Your team is growing too. Internally you now have departments, managers, policies, meetings, and memos, and this ad-hoc, make-it-up-as-we-go system shows significant signs of strain.
Here’s the problem of Whitewater and the real problem of second-stage growth. Your organization has built an incredible capacity to deliver consistent quality in the face of simplicity, but nothing about your organization is simple anymore. The complexity is a major threat to your ability to provide consistent quality, and something has to change.
Getting out of Whitewater
If the problem of Whitewater is complexity, what is the solution?
Systems and Processes.
If you’re like most Visionaries I know, you intuitively already knew what I was going to say, but you desperately hoped it was something else.
It is true; organization-wide systems and processes are the only way for your business to break through Whitewater and achieve the incredible second-stage growth that is only possible in Predictable Success.Systems and processes are the tools that transform an organization into a well-oiled machine that can deliver consistent quality in the face of complexity, and that is what it means to scale. Click To Tweet
Systems and processes are the tools that transform an organization into a well-oiled machine that can deliver consistent quality in the face of complexity, and that is what it means to scale.
Here are the six areas where you will get the highest return from systems and processes
- Org Chart: When focusing on your org chart, the goal is not to create a beautiful flowchart; it is to build a ‘machine for decision-making.’
- Lateral Management: With the new and improved org chart in place, you can shift your focus on those decision-making groups’ ability to consistently make and implement high-quality team-based decisions for the good of the enterprise and not favoring any one function or any one style. This approach allows you to drive the ‘machine for decision-making` forward.
- Cross-functional Teams: With lateral management, there’s a strong focus on cross-functionality at the leadership level. Now, we can use a similar model to build out cross-functional teams throughout the organization. This will create/improve the organization’s ability to work across all functions between silos at all levels organically and naturally. It will help you to eliminate redundancy, duplication, and information blind spots.
- Alignment: When we use the term alignment, we are specifically referring to the degree to which everyone in the organization: knows, understands, is committed to, and works effectively toward the organization’s common goals. The power of alignment comes when it creates an environment in which all non-trivial actions and decisions taken throughout the organization move the organization closer to its shared goals. For more on alignment and culture, check out the four-part series on how culture changes as an organization grow toward Predictable Success.
- Empowerment: This level of clarity through an organization can create incredible empowerment levels at all levels of the organization. Empowerment is the ability of an organization to make, implement, monitor, and adjust high-quality decision-making at the appropriate level throughout the enterprise. It gives you nimbleness and flexibility at scale.
- Individual Ownership and Self-Accountability: It almost seems like an oxymoron at the beginning of this transition, but the goal of all of these systems and processes is actually to create Individual ownership and self-accountability throughout the entire company. When you do, it unlocks an enormous growth capacity within the organization.
Getting Stuck in Whitewater
There are two primary ways organizations get stuck in Whitewater either the founder fails to decide which route to take or the organization simply fails to understand how they need to change to get through.
The Founder’s Choice
All these systems and processes stuff isn’t quite as easy as it seems. Not that it is hard to do, but because of what it means for you as the founder. For all those systems and processes to work, they must apply to everyone, including the founder.
Every founder in Whitewater has to make the choice to go all-in and adopt systems and processes as co-equal to vision and innovation OR to pull back the reigns, slow the growth, limit complexity, and return to Fun.
Both are 100% valid options.
If you started your business for freedom and autonomy or are happy with the lifestyle business you had back in Fun, you can go back.
If you have a vision for the company to be so much greater than it is today, the path to that vision goes through Whitewater and into Predictable Success
Many founders start Whitewater thinking they can solve the problems at hand by doing more of what has always worked. Selling more of whatever it is the customer is purchasing, then pushing through whatever gets in the way of fulfilling the order.
This approach only makes things worse. It increases complexity rapidly, frustrates and disenfranchises employees, undermines management credibility, and kills momentum in the organization.
Eventually, they realize systems and processes are necessary, but they mistakenly believe they can reach Predictable Success by systematizing everyone else. They hire Processors, task them with bringing order to the chaos, and then continue creating more confusion. It’s not intentional; it’s just the wrong tool for the job.
What is actually going on here is they see Predictable Success as a sort of Fun+ where they can keep doing everything they’ve always and somehow continue growing forever.
It just doesn’t work this way.
You can get out of Whitewater back stepping back into Fun, or pushing forward into Predictable Success. Either option is 100% ok. The only option that isn’t valid is not to choose.
Organizations get stuck in Whitewater when the founder can’t choose what they want for the company.
For more on the founder’s choice, check out this article The One Choice Every Founder Must Make
Failure to understand the new way
Systems and processes have to re-shape the way the entire organization does business. Often organizations in Whitewater are lead by a group that has never been here before.
They started in the early days of what was then a ragtag team who thought they could make a difference. Today, they’re responsible for making the decisions that lead to a multi-million dollar business. For them, this is uncharted territory. Much like the founder, they have to wrestle through this very new way of doing business. They have to invite a very new voice in the leadership of the organization. And they have to embrace a very new culture, one that some of them may not like.
Fortunately, this is not uncharted territory. While it may be your first time, there are roads paved by those who’ve gone ahead of you. One of the fastest ways to get through Whitewater is to find someone who’s been down that road, knows the route well, and can guide you each step of the way.
Someone who knows the way will help the organization to understand what was indeed core and should be preserved versus that which was was necessary for the past but must be left there.
Whitewater is easily the biggest challenge a business will face after it is up and off the ground. Two roads lead out of Whitewater: One back to Fun and the other forward to Predictable Success.
If you are in Whitewater, the first thing you need to do is assess both routes and decide which way you will go. Choose carefully, because if you only walk part of the way down that road, you are going to find yourself miserably stuck in Whitewater. If, on the other hand, you commit to your decision, you can thoroughly, thoroughly enjoy your time in Fun or Predictable Success for as long as you’d like!
If you think you are in Whitewater but aren’t quite sure, I’d like to encourage you to take the free Lifecycle assessment at https://bit.ly/Lifecycle-Quiz to find out for sure and to see around the corner at what is next for your business!