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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

. r,l i;rgged Iine witlr rnarlv rtps and downs:' _.' __ r_':-

. .-::: - :rpanies rvould experierrce some-periods of.- , ,:,. ,1:,'ess follorved by setbacks and accompii-

I . - 11!es.

F .,r illustration, venture stages are shou'n in terms

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

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

rrrrd the key rnanagement tasks of the cliief executive

officer o, iound"is. Most important and rnost chal-

lengilrg for the founding er.1repte,,".tr or a chief

"reZrti,r" officer is coping w'ith crircial transitions ancl

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 ifan 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

and eihaustive dive, "rre.gy,

auld entrepreneurial tnl-

ent of a lead entrepreneur trnd a key team member or

hr.o. Here the crit-ical n'itiss of people, market and fi-rrirnciirl results, and competitir''e resilience are estab-

Iishecl, rvhile investor, barter:, and custorner confidence

is errrrecl. The level of sirles re:rched varies r'videly but

rpically ranges betrveen $2 million ancl $20 million'- \ 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 ex-

..,- t iroint trt r.vhich thlis occurs can rarely be irlentified

,... ., 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

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 long-

range 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

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

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

growth was our organization s inability to grow as rap-

idly at the market opportunities.""Fro* the high-growth stage, a company then

moves to what ii cilled the nr,aturity stage' In this

stage, the key issue for the cgmpalY isrro longer sur-

virrXl; 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 stabil-

ity 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-pinbusiness model scald make the maturity and stability

stages less enduring' Entrepreneurslin h1s become a

re{rired "or" "ompit"ncy

of the modern ffrm''Managng for rapid growth involves a.leadership

orientatiJn iot found in mature and stable environ-

ments. (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 countetproductivein a rapid-growth venture. Instead results usually

require cloi collaboration of a manager with people

otlier than his or her subordinates, and managers

invariably have responsibilities far exceeding their

authority. Politics anid persot al power can be a way oflife in many larger and stagnant institutions, as man-

agers jockey foiinfluence-ind a piece of a shrinkingpie 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 con-

tributing to tlie achievements of others' Influence

also t dJrived from keeping the overall goals in mind,

from resolving differencei, and from develoPlng a

reputation as a person who gets results, can lead others,

unid "un

build Ladership tilent as well.

Thus among successful entrepreneurs and entre-

preneurial leaJers, there is a well-developed capacity

to exert influence utithout formal power' These

'r $'. \\'. Georg.. 'Task Teirus tbr Rapicl (lrouth," Hon:tLrtl Busirtr:ss lleoicro, Nlarch April 1977

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,) I _ Part III The Fr.lrrtrlel rrrtcl 'lle:Lll

iunlliquitv, tintl risk. u'llich, itl ttlrn, collillollnd tosirririk tirne. tu-r alrendv precioLts colrliltodit\'. One

lesult of ch:rnge is a series of slrrtck \\'tl\ics rolliligtirrough 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'prod-ucts 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 ittakes 6 to 12 niontlis to cleveloP a ne\\r cornpi-itcr,

reiiclv to bring to the rttirrket, and prodtrct teclillol<lgvobsolcscence is nurtiing about I to l2 rnollths." Thistinrr: courpression ILas lteen seen in such intlustries irs

electronics ancl irerospace iri tlie 1960s; slrlall corli-

puters. iriteqrirtcd circuits. trnc.l silicon chips in the1970s: nticlocottrptrters in tlie 1980s: tclecotrltnturi-cirtions. the hrternet, ancl biotechnoloS'irl the 1990s;

iirrcl nanotechnologr, irt thc 2000s.

Nonlineqr qnd Nonporometric EventsErrtrc'prereuri:rl leacler-ship is charltcterizecl Lrr- notl -

linearincl uotrpi'Lrartetric er-ents. Just :rs the telerisionclir1 not conre irbout lx ,'r successiori of'ilrprovetltelttsin the recho. ancl tlie jct plirnt'c1itl uot erlterq. tt'otr,

crrqinecls turcl scierttists attenrptiriq to cler-erlop a bct-tcr 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 lrttlltlitsancl in stepri'ise leaps. l-or crrttrlllr. .L tlrrlr trrar clott-

ble its sale^s lbrcc il l5 uiotttlis. r',it1rc'r' thrtl r rlr el eiglrtvcars, u'hile anotl-rer utav triple its tlrLtrrtirtt'trtt.iti'lcapacitl, and aclopt tt tteu'nlittcriai: rt'so,trt.' 111itrtrrirlqsvsten imrncdiatelr', rrrther tlttrn rrtilizinq c-rlstiriq c'iL-

pacitv bv ilcreasing overtinte. therl aclclirlg a thirtlil-rift

"in" rnontlts l,ri-er, nnd fitialh acltlitrq ii tr-ri pl.trLt

tlrrcc vears hence.

Relotive lnexperience The managetlettt teilttL

rnar, be rel:rtivelr' inerperienced. The erplosire llirtlItrud grou.th of these firrns are usutrllv rrnirlue cr etlts

thilt cannot be replicatecl, and rriost of the piec:es irr

the puzzle-technologl', applications, customers.people, the fin-n itsel{-i'Lre usualll' t'reur

Ropid Grorvth ond Disruptive TechnologyAnv rrov teclrriologr- tliat is significantlr- cheaprr. isrnuch higher-perfbrrning. htrs greater fi rnctiorialitr', oris more convcnient to use u,iil revolutionize u'orlcl-u,icle marl<ets bv supcrsecling existing teclrriologies."Paracligrn slii{ting" is ii u'ell-u'orl connottttiol.r\ltliough the term n-iav souncl negtttive to srlrne. it isin {irct nerrtrtrl. It is ncgtttir-e onlr'to orgi'Lrtizatiotis thatare Lrlpreparc'd for cirange trncl friil to aclapt. The

rc-strlts iLre rtot jttst t:toltLtittnary. thev tte n:tohdiLtn-rlr-ry. Corrp:Lrrics u'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 llroolninclustrr,. ,rncl the PCi sipc'tl out tlte trpeu'riter.

Counlerintuitive, Unconventionol DecisionMoking 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 tirdecidi- u'lrat ,rpproach to take itr cler-el<lping trncl intro-cluciiig three neu. prttdtrcts itt atr tmcelrtiliu. risl<r'lrlar-kepl,r'cc. E,rch pr6posed tteu'procluct ,l1,p",,r"il t., 1,.'

riirnecl at tlte sarrre encl user rnirrket, ancl tlle' PersollIictrdi ng cacli pr<i ect u-as simil arlr- c-n tllisitlstic. crl ill-dcnt. tlnd cletc'r-r ninccl altorrt succeecli rrg. A tri'rcliti or i i'rI

approach to stich er probletri u-ortld ltare llecn torGie,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-

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

tliat lvoulil elnerge frorn each projc'ctr arrd select tlieproject u,ith the ltiglrest vielcl r-ersrrs tlte requircclintenial litte ol rettrrtt. Srrclt irn ittlalvsis soilretittlcsoverlooks 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 r r t ti'tttr ri h. ol' the llarket-plilce, irncl tlie mpicl cliscor.cn' o['fiu:therr .rpplicittionsin:rl<e it rir:tuirllv irtrpossible tci knolv lr4riclr of atn'

urocluct propos.lls is ltc'st. Thc corllputer firtl d.'citlctlio s,r1ryroit all tliree ncu'proclucts r'rt ottce, :rntl a sigrlif-ic'ilnt rtcri- brrsiless l'as Lnilt arcltulcl each ortc. Neu'rrriLrket rrichers u'ere cliscovr:retl simttltiuleouslr,, atrcl

tlLe rurcour errtional rrpploiLcli paitl olf.

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 firllthirt 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 rrsuallv has three clistirguisliirlg fei'Lttrrc's:

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

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

orgirlrizaticlrlsirritsflrst{il.e\iei11.sitSitgrerr,toS,5rniI-1iciri.T]rir:d,tbeorgtrnizirtiorraIstnlctrtrclisusrltrIIr,f]at(i.e..ithas1'crr.lna1]:lgell)e}1t1al'ers).ilrrc1tIlereiscitstaccessibilitr. to tlie top tleclsiorr rtriiliers. But tlier illbr- :rrraiitv arrcl fluiclih' of orqrlnization strLrcttrres lurcl pt-o-

cecL,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:rtcrapic1clrarrqesu.hile nitrintnining finrrncial trncl opertrtiortal cohesiol r.

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