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Prrrl

III

The Founder and Tearn

. -: ::,... ollcl, Il ri'e rrctuail,v tracked the progress

, . :. -tllcrgilrq compallies, tlle cun-e \\'orrld l)e a
'.-,

Iine witlr rnarlv rtps and downs:

. r,l
__ i;rgged
' _.'
r_':experierrce some-periods of
rvould
:rpanies
.-:::
.
.- , ,:,. ,1:,'ess follorved by setbacks and accompii-

I.

11!es.

illustration, venture stages are shou'n in terms

:inre. sales, and number of ernployees. It is at the
F

.,r

i-r-rrurclirries behveen stages

that nerv ventLrres seem

r1r e\perience transitions. Several researcllers htrve

noteci that a new venture invariabiy goes through
trirnsition and r,vill ftrce certain issues' Thus the
erhibit shorvs the crucial transitions during grorvth

cliief executive
rnost chaland
important
Most
iound"is.
o,
officer
lengilrg for the founding er.1repte,,".tr or a chief

rrrrd the key rnanagement tasks of the

officer is coping w'ith crircial transitions ancl

"reZrti,r"
the change in leadership fo"rrt-going fiom letrding
to leadin! managers-ai a firm grows to rouglilv 30
ernployees, to 50, to 75, and therr uP'
the ,nsearch ontl deaelopment sfrzge , sometitnes

referrecl to as the nascent stage, is characterized by a

single aspiring entrepreneur, or small tearn, doing the

inr.estigation-and due diligence for their business

iclea. Tire nilscent stalge cin be as short as a fer'r'
rnonths or call last yeais' Research indicates that if
an idea is not turned into a going concern rvithin
18 months, the chances of a stirrt-up fall draniaticallrr
Nascent entrepreneurs have n'rany fits ancl starrts, and
the business tnodel c:rn chtrnge often in the process'

The stat't-tt7t sfage usuallv co\rers tlie first two or

three 1ears bui pe.haps as many as seven, is by fru the
rlost perilous stage antl is cllar,rcterized bv the &rect
auld entrepreneurial tnland eihaustive dive,
"rre.gy,
a key team member or
trnd
entrepreneur
lead
of
a
ent
market and fiof
n'itiss
people,
crit-ical
the
Here
hr.o.
rrirnciirl results, and competitir''e resilience are estabIishecl, rvhile investor, barter:, and custorner confidence
is errrrecl. The level of sirles re:rched varies r'videly but
ranges betrveen $2 million ancl $20 million'
rpically
\ nerv compan)/ then begins its higlugrouth
; r,; rs-s['1'lcterized by a continually increasing rate
: grouth or the slope of the revenue culve' The exirlentified
..,- t iroint trt r.vhich thlis occurs can rarely be
,... ., d.,te on the calendar until rvell after the fact lt is
: ::,rs staqe thirt nerv Ventures exhibit a failure rate
tr\.rr1,iinq 60 percent; that is, it is in this stage that

tl,.

..lr,orrs ripen.
-\s .'irth the other stages, the length of time it takes
to go tlrrotrqh the higli-growth stage, as u'eil as the
rraqnitucle irt ch,rnge oicurring during the. p.eriod,
virri'es qre,rtlr Probirbh' the most difficult challenge
for the fbunclinq entrepreneur occllrs during the
high-grouth staqe. u'hen he or she finds it is necessary
'r

$'. \\'. Georg..

'Task Teirus tbr Rapicl

(lrouth," Hon:tLrtl

Busirtr:ss lleoicro,

to let go ofpower and control (through veto) over key

decisiins tliat he or she has always had, and whel key
resoonsibilities need to be delegated without abdicat-

int'ulUmate leadership and responsibility for results'

g;t the challenges do not end there. For example,
sales of Litton's iricrowave oven &vision had reached
$13 million, and it had 275 employees. The longrange plan called for buil&ng sales volume to $100
miliion in five to seven years (i.e.' growing at 40 per-

cent Der vear, compounded). The head of the division

i'Ual.rirrg
studlld the market for the previous two
said.

years, I was= convinced that the only limit on our

growth was our organization s inability to grow as rapidly at the market opportunities.""

stage, a company then

cilled the nr,aturity stage' In this

Fro* the high-growth

moves to what

ii

stage, the key issue for the cgmpalY isrro longer survirrXl; rather,it it ot of steady, profitable growth' The

"
stabilitq stage usuilly follows.

Monoging for RoPid Growth

The transition from rapid gror,r'th to maturity and stability is even less recognizable and less assured in the 2l st

century. Increased rates of new technology adoption

and the reduced importance of asset densiSz to-pin
business model scald make the maturity and stability
stages less enduring' Entrepreneurslin h1s become a
of the modern ffrm'
re{rired
"ompit"ncy
"or" for
'Managng
rapid growth involves a.leadership
orientatiJn iot found in mature and stable environments. (This topic will be addressed again in Chapter
17.) tror one thittg, the tenet that one's respon-sibility
must equal one's authority is often countetproductive

in a rapid-growth venture. Instead results usually

collaboration of a manager with people

or her subordinates, and managers
his
otlier than
responsibilities far exceeding their
have
invariably
anid persot al power can be a way of
Politics
authority.
and stagnant institutions, as manlarger
many
life in
a piece of a shrinking
foiinfluence-ind
jockey
agers
pie in a zero-sum game; but in rapid-growth firms,
po*"t and control are delegated and leadership is
rhu."d. Everyone is committed to making the pie
larger, and power and influence are derived not only
frJm achieving one's own goals but-also from contributing to tlie achievements of others' Influence
also t dJrived from keeping the overall goals in mind,
from resolving differencei, and from develoPlng a

require

cloi

reputation

as a

person who gets results, can lead others,

build Ladership tilent

as well.
"un
and entreentrepreneurs
successful
among
Thus
capacity
a
well-developed
is
there
leaJers,
preneurial
These
power'
formal
utithout
influence
to exert

unid

Nlarch April 1977

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ar1]'-rerlddns rrl]'.rJlrrolsrlc arl+-slrtft? 3u1]r[l+uor

rlll,\\ uel.+o 'serruJrurlsuoc lrrerelJlp ,itrrut r1]L\i Buoln
laB o1 srr.reel Jriaua.rcla.rlua rrp 'oinJuaA lnJSSeJJns
u rrn,r oI erro ]JBXJ ol uerP\ Puts rrorssaJuoJ u o{Etll
o] ur11^\ 'eprllsred o] uer{A\ puu cr3o1 asn o} uaq^\
.uorq ietiJ 'uorlnloser lrrguoc 1e ldepe e,ie aldoacl

Part

,) I _

III

The Fr.lrrtrlel rrrtcl 'lle:Lll

iunlliquitv, tintl risk. u'llich, itl ttlrn, collillollnd to

sirririk tirne. tu-r alrendv precioLts colrliltodit\'. One
lesult of ch:rnge is a series of slrrtck \\'tl\ics rollilig
tirrough rl ne\\' rurcl gron'irtg venture b1- ri'q' tlf rteu'
custorners, ner,,"' techriologi es. new colllPetitors, lle\\'
markcts. itncl neu' people. Irr iticlustries clrtrracterizecl

bv galkrpine teclinologicill change, n'itlr relatir-clr'

,nirir,sc,,le leacl ancl lag tirnes in bringing rteu'products to rnarket ancl in u'eathering the stortls o1'rapicl
obsolcscer-rce. tlre cl'lects of cliange alcl tirrle al'e e\trerllc. For crarnple, the presiclent o{t:r rapicllv gr<lu'
ing, srr-rall coupttter colltpalIV s:ricl, "In our blrsiness it
takes 6 to 12 niontlis to cleveloP a ne\\r cornpi-itcr,
reiiclv to bring to the rttirrket, and prodtrct teclillol<lgv
obsolcscence is nurtiing about I to l2 rnollths." This
tinrr: courpression ILas lteen seen in such intlustries irs
electronics ancl irerospace iri tlie 1960s; slrlall corliputers. iriteqrirtcd circuits. trnc.l silicon chips in the
1970s: nticlocottrptrters in tlie 1980s: tclecotrltnturicirtions. the hrternet, ancl biotechnoloS'irl the 1990s;
iirrcl nanotechnologr, irt thc 2000s.

Nonlineqr qnd Nonporometric

tte n:tohdiLtnu'ill cotttiutte tcl gtl clut tlf llusitress

as rlc\\' proclucts lttrcl pr', )crssts elllerge-illst :rs tlre
aclvcnt of the zipper et'aclici'ttecl sttme of' the buttorr
inclustn,, the r-i,Lctrntt-t cleancr ilecililatecl the llrooln
inclustrr,. ,rncl the PCi sipc'tl out tlte trpeu'riter.

rc-strlts iLre rtot jttst t:toltLtittnary. thev

rlr-ry. Corrp:Lrrics

Counlerintuitive, Unconventionol Decision

Moking Yet r'Lnotlre'r cltartlctet-istic rll rapicllv
grcxr,inq r-entures in tlie erttreplettellrial clorllaitr is
counteri ntr iiti\,'e. uil (rorl\ etlti rlnal pattc'rns o1' decisiorl

urirking. For errlnple, it cotnputer lirrri neerlecl tir

decidi- u'lrat ,rpproach to take itr cler-el<lping trncl introcluciiig three neu. prttdtrcts itt atr tmcelrtiliu. risl<r'lrlarkepl,r'cc. E,rch pr6posed tteu'procluct ,l1,p",,r"il t., 1,.'
riirnecl at tlte sarrre encl user rnirrket, ancl tlle' Persoll
Iictrdi ng cacli pr<i ect u-as simil arlr- c-n tllisitlstic. crl illdcnt. tlnd cletc'r-r ninccl altorrt succeecli rrg. A tri'rcliti or i i'rI
er probletri u-ortld ltare llecn to
rGie,nline tlie size iuicl grou'th rirtcs of c'aclt rnarl<et
segrnentr e'r-ithrilte tlic probable t'stirlltttcs rlf firture
,eve,rrre costs rltcl crtpital rc:cltriretlrcnts fbr thcil rrc'cu-

approach to stich

Events

rac\.; colnpill'e tlte cliscourtted, prescnt vtthrc rlash {lou'

Errtrc'prereuri:rl leacler-ship is charltcterizecl Lrr- notl linearincl uotrpi'Lrartetric er-ents. Just :rs the telerision

tliat lvoulil elnerge frorn each projc'ctr arrd select tlie

project u,ith the ltiglrest vielcl r-ersrrs tlte requirccl
intenial litte ol rettrrtt. Srrclt irn ittlalvsis soilretittlcs
overlooks thc {irct that niost rapid grcxvtll corttprtlries
hin-e rnilnv ercellelrt itlterniltir-es; trorc collllllonlr-, thr:
ne\\.r) ess of tech n olog'. tlic in t ti'tttr ri h. ol' the llarketplilce, irncl tlie mpicl cliscor.cn' o['fiu:therr .rpplicittions
in:rl<e it rir:tuirllv irtrpossible tci knolv lr4riclr of atn'
urocluct propos.lls is ltc'st. Thc corllputer firtl d.'citlctl
io s,r1ryroit all tliree ncu'proclucts r'rt ottce, :rntl a sigrlific'ilnt rtcri- brrsiless l'as Lnilt arcltulcl each ortc. Neu'
rrriLrket rrichers u'ere cliscovr:retl simttltiuleouslr,, atrcl
tlLe rurcour errtional rrpploiLcli paitl olf.

not conre irbout lx ,'r successiori of'ilrprovetlteltts

in the recho. ancl tlie jct plirnt'c1itl uot erlterq. tt'otr,
crrqinecls turcl scierttists attenrptiriq to cler-erlop a bcttcr pistorr etigitte llli1lle. so toil ere'uts clcl lrot fillklu'
strrriqht liues. proqress rit'ithtlli'tic',llh. or e\ e1l aPPeilr
rerl:rted u1thirt firrtts. R:ithcr. i1rtr occ'rtt' iti lrttlltlits
ancl in stepri'ise leaps. l-or crrttrlllr. .L tlrrlr trrar clottble its sale^s lbrcc il l5 uiotttlis. r',it1rc'r' thrtl r rlr el eiglrt
vcars, u'hile anotl-rer utav triple its tlrLtrrtirtt'trtt.iti'l
capacitl, and aclopt tt tteu'nlittcriai: rt'so,trt.' 111itrtrrirlq
svsten imrncdiatelr', rrrther tlttrn rrtilizinq c-rlstiriq c'iLpacitv bv ilcreasing overtinte. therl aclclirlg a thirtl
rnontlts l,ri-er, nnd fitialh acltlitrq ii tr-ri pl.trLt
il-rift
"in"
tlrrcc vears hence.
clir1

Relotive lnexperience The managetlettt teilttL

rnar, be rel:rtivelr' inerperienced. The erplosire llirtlI
trud grou.th of these firrns are usutrllv rrnirlue cr etlts
thilt cannot be replicatecl, and rriost of the piec:es irr

r r

FIuid Structures ond Procedures Nlost rapicl

qrou th r-cntures also clel\' cont.cntion:ll <lrgtrrlizational
pr,Lttenrs iurcl structures. It is collltllon to fin<l a firll
thirt has gro\\Ii S25 tnillion. S50 nrillion. rlr cverr S150
rnillion lrcr verlr irt sirlcs arrcl tliat still has no frrrrnrll
orgiluizirtiortal chart. If arr orgi'Lnizirtional chart rlocs
erist.

it

First,

it

rrsuallv has three clistirguisliirlg

fei'Lttrrc's:

people, the fin-n itsel{-i'Lre usualll' t'reur

is inerit:rblv out of clilte. Seconcl. it cfiariges

frecprerrtlr'. For eritttrp[e. orte linn ]rircl e-'iglrt lrlitj( )r' l'c-

Ropid Grorvth ond Disruptive Technology

orgirlrizaticlrlsirritsflrst{il.e\iei11.sitSitgrerr,toS,5rniI1iciri.T]rir:d,tbeorgtrnizirtiorraIstnlctrtrclisusrltrIIr,f]at

the puzzle-technologl', applications,

customers.

Anv rrov teclrriologr- tliat is significantlr- cheaprr. is

rnctiorialitr', or
is more convcnient to use u,iil revolutionize u'orlclu,icle marl<ets bv supcrsecling existing teclrriologies.
rnuch higher-perfbrrning. htrs greater

fi

"Paracligrn slii{ting" is ii u'ell-u'orl connottttiol.

r\ltliough the term n-iav souncl negtttive to srlrne. it is
in {irct nerrtrtrl. It is ncgtttir-e onlr'to orgi'Lrtizatiotis that
are Lrlpreparc'd for cirange trncl friil to aclapt. The

(i.e..ithas1'crr.lna1]:lgell)e}1t1al'ers).ilrrc1tIlereiscitst

accessibilitr. to tlie top tleclsiorr rtriiliers. But tlier illbrrrraiitv arrcl fluiclih' of orqrlnization strLrcttrres lurcl pt-ocecL,ies clo not ,ri.--,.,, c,x,,,.lness or slclppinc'ss u{ren it
collres to qo:rls. strrnrlitrcls. or claritl' ol clirectjorr irllcl

purposc. Ratlier, tliev trarislate into respolrsii.cttess

.rrlc1rc'i.rc1irresstolrbsorbalicl:lssjlnil:rtcrapic1clrarrqes
u.hile nitrintnining finrrncial trncl opertrtiortal cohesiol

r.

'
=

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