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Growth, for any organisation, is an epic journey filled with twists, turns, and profound transformations. This voyage isn't limited to revenue figures; it encompasses the very essence of the company —the people who power it. In this exploration, we'll delve into the dynamic interplay between growth stages, inflection points, and the vital synchronisation between organisational development and revenue attainment.
1. The Founder's Odyssey
Every success story initiates with a spark of inspiration—founders conceiving groundbreaking product ideas that hold the potential to revolutionize industries. This initial spark is fanned into flames by securing the necessary funds to create prototypes and initiate testing. As the product begins to gain traction and the demand swells, a pivotal shift occurs—the introduction of a small but motivated team, often comprising friends and network connections who share the founder's enthusiasm. This nascent team becomes the bedrock of the organisation, collectively embracing the 'We Get Shit Done' mantra. Here, every hand is on deck, from office cleaning to investment pitches, showcasing an unwavering commitment to the venture's success.
During this stage, founders immerse themselves in a dialogue with customers, intently listening to their feedback and swiftly incorporating it into product enhancements and acquisition activities. This customer-centric approach fosters a sense of agility and adaptability, driving fast iterative innovation.
Inflection Point 1: The Emergence of Specialist Managers
Around the 50-employee mark, an inflection point emerges—a critical juncture where the organisation realizes that the generalist "all-hands-on-deck" approach has its limitations. The very practices that ushered growth till now begin to show signs of strain. It's a crossroads where the trajectory of growth stagnates, signaling the need for a significant transformational leap. Enter the specialists - people who infuse functional best practices. Finance evolves from spreadsheets to efficient accounting systems; sales transitions from ad hoc targets to a consistent pipeline; engineering refines deployment speed through metrics-driven reliability, security, and durability initiatives; HR streamlines hiring processes and so forth.
Inflection Point 2: The Rise of Middle Managers
Scaling onward, the organisation approaches the 100-employee milestone, a threshold that ushers in a new inflection point. This stage brings with it an exciting yet challenging realization—specialist managers are now the bottleneck as they oversee burgeoning teams and decision-making. To conquer this impasse, a fresh set of changes is imperative. Middle-level managers step onto the stage, empowered to delegate effectively. These middle managers are individuals who not only manage their teams but also guide day-to-day operations within their functional spheres. Their hands-on approach ensures that growth continues, encompassing customers, revenue, market shares, and, most importantly, people.
Inflection Point 3: Achieving Alignment
As the organisation's headcount edges toward 200, a unique set of challenges arises—a lack of alignment across multiple teams and functions. The company grapples with inefficiencies, productivity slowdowns, and potential resource wastage. This divergence marks the third inflection point, prompting the introduction of formal processes and operating systems. Objectives and key results (OKRs) foster shared goals, while product prioritization processes manage competing demands. Automation becomes the norm, whether it's streamlining customer onboarding or enhancing the overall customer experience.
Inflection Point 4: Balancing Innovation and Alignment
Around the 400-employee mark, a distinctive shift materializes—the organisation becomes entangled in its own processes. The initial culture of innovation now faces the risk of being suffocated by bureaucracy. At this inflection point, simplification is paramount. Formal processes evolve into guiding principles, and decision-making authority is decentralized. The focus pivots toward nurturing collaboration, granting autonomy to cross-functional teams to solve challenges in real-time.
Inflection Point 5: Embarking on Non-Organic Growth
As organic growth plateaus, startups hit the fifth inflection point. This stage is akin to a strategic crossroads—expansion through non-organic avenues such as acquisitions, mergers, or joint ventures. While these strategic alliances open doors to new markets, customers, and skill sets, they also introduce complexities. Integrating divergent cultures and identities requires careful orchestration to ensure continued growth.
2. Growth's Dual Journey
Understanding growth isn't a linear affair; it's a symphony of two harmonizing arcs—people and organisations, and business and revenue. Stephen Millard's segmentation of the revenue journey into Start, Build, and Scale phases (Breaking down the $1 to $100m revenue journey) sheds light on the revenue perspective of this symphony.
START: Fanning the Flames of Product-Market Fit
The Start phase encapsulates the initial push from zero to $3 million in revenue. Here, the primary objective is achieving Product-Market Fit. This stage is marked by a constant quest to refine the product understand customer needs and deliver value. Businesses at this stage are in search of that perfect alignment between their product and the market demand. It's a time of exploration, experimentation, and evolution.
BUILD: Mobilising momentum through Go-to-Market Fit
Once product-market fit is attained, the business enters the Build stage, where revenue growth shifts into higher gear. This phase spans the journey from $3 million to $30 million in revenue. The primary focus shifts towards achieving Go-to-Market fit. This entails establishing efficient channels and strategies to deliver the product to customers effectively.
In the Build stage, businesses need to professionalize their operations, from refining the Go-to-Market functions to creating a repeatable customer lifecycle process. This is the phase of building processes, optimizing sales and marketing strategies, and developing a growth engine. The emphasis here is on replicating success and achieving consistency in customer acquisition, retention and expansion.
SCALE: Owning the category with Multi-Market Fit
With a well-established growth engine and revenue ranging from $30 million to over $100 million, businesses transition to the Scale stage. The primary objective shifts to expanding the business's reach and influence – Multi-Market Fit. This can be achieved through launching new products, entering new markets, or even exploring adjacent industries.
To achieve Multi-Market Fit, the focus turns to maintaining consistency and predictable growth. The business aims to dominate its category and continue being a market leader. This involves meticulous strategic planning to navigate the challenges that arise from increased competition and market saturation. Simultaneously, businesses look for new opportunities in adjacent markets to fuel further expansion.
3. Convergence of Narratives: Organisation & people + Business & Revenue
The beauty of growth is its cyclical nature—a rhythm resonating between organisational and revenue growth. The narratives intertwine, leading to a synchronous experience of inflection points, challenges, and transformations.
In this section, we'll delve into the foundational aspects that underpin Start, Build and Scale and explore how startups can effectively address their evolving needs. By examining the 6 Foundations - People & organisational Strategy, Structure, Capabilities, Process & Systems, Data, and Principles - we will gain insights into how businesses can overcome inflection points and foster sustained growth.
The Start Stage: Laying the Foundations
In the initial Start stage, the primary focus is on achieving product-market fit and growing revenue from zero to $3 million. At this juncture, startups tend to adopt a reactive approach to People & organisational Strategy, allowing for flexibility and quick adaptation. The organisational structure remains flat, with founders or a tight-knit group making decisions based on immediate needs. Team members often wear multiple hats and excel as generalists, accommodating the resource constraints inherent in this stage.
Processes and systems are informal, centered around iteration and testing, which can lead to a lack of formalized procedures. Data collection and basic reporting are present but may lack depth. Founder-led leadership shapes the organisation's culture and dynamics.
The Build Stage: Navigating Complexity
The Build stage marks a transition from the flexible Start phase to a more structured and deliberate operational model. Revenue grows from 3 to 30 million, and startups encounter three organisational inflection points. Here's how the six foundational pillars evolve:
1. People & Organisational Strategy: The approach shifts from reactive to structured, aligning with the business's Go-to-Market strategy.
2. Structure: The organisational structure evolves to accommodate increased complexity, with decentralized decision-making to prevent bottlenecks. Differentiated managerial roles emerge as specialists and managers take on specific responsibilities.
3. Capabilities: Teams become more specialized, enhancing efficiency and expertise in key areas.
4. Process & Systems: Formalization and standardization become key as processes are streamlined and systems are made consistent and accessible.
5. Data: organisational data matures, transitioning from basic reporting to leveraging data for diagnosing challenges and optimizing operations.
6. Principles: Founders' influence gives way to embedding company values, principles, or manifestos that align the organisation's actions and behaviours.
The Scale Stage: Expanding Horizons
In the Scale stage, businesses pursue expansion into new markets, with revenue growing from 30 to over 100 million. The focus shifts to tailoring a global operating model to cater to localized needs equitably. Cross-functional teams and real-time decision-making become crucial to respond effectively to challenges.
1. People & Organisational Strategy: The strategy shifts towards inclusive localization, ensuring equitable practices across geographies.
2. Structure: A matrix approach emerges with cross-functional teams, enabling better problem-solving and responsiveness.
3. Capabilities: Complex responsibilities expand to navigate larger and more dynamic markets, often requiring experienced executives.
4. Process & Systems: Automation and interconnectivity between functions improve efficiency and alignment.
5. Data: Data utilization advances from forecasting to prediction, providing a competitive edge in a dynamic landscape.
6. Principles: Key principles guide actions and behaviours, with flexibility for evolving partnerships like M&A or joint ventures.
4. Orchestrating Growth
Growth is a masterpiece woven from various threads—people, organisations, and revenue. The key lies in recognizing and embracing the inflection points that punctuate this journey. These points aren't roadblocks; they are transformative catalysts that propel startups to higher echelons of success. The convergence of revenue milestones and organisational growth stages creates a tapestry that illuminates the path forward—a path that startups, armed with insight, can tread confidently, realizing their full potential.