Stages of Organizational Growth
Key challenges that need to be overcome at each stage of organizational development and growth, to successfully navigate the transitions to higher levels of growth and profitability are outlined below. Stage 1 and 2 are typically considered the entrepreneurial phases of the organizational lifecycle. As companies exit stage 2 and enter Stage 3 and beyond, the need for a professionally managed organization , marked by a different set of skills , capabilities, and business practices is required to move on to higher levels of growth and success.
Stage 1…. The key challenge in stage one is establishing “proof of concept”. Which essentially means that the business concept or idea is valid and there is a market for the product or service, that someone is willing to pay for.
In summary, developing a successful stage 1 organization typically requires the following:
- The ability to define a market need.
- The ability to develop, acquire, or provide a product or service that will satisfy the identified market need.
- The ability to build an organization that is capable of functioning on a day to day basis to provide the product or service.
Stage 2…. The key challenge in stage two is Scale up. The company needs to build the organizational capabilities (0rganizational Infrastructure) necessary to facilitate its growth and operations on a much larger scale than the previous stage of development. This involves acquiring the resources needed to facilitate growth , including the financial resources, human capital, technology, and space. It also involves developing the day to day operational systems needed to run the business. It is extremely difficult for most companies to accomplish scale up without experiencing a variety of organizational growing pains. Unfortunately, many companies who make it through start up in stage 1, flounder in stage 2. This often happens because the problems associated with managing an organization that is growing quickly is in many ways different than what was needed to be successful in stage 1.
In summary, developing a successful stage 2 organization typically requires the following:
- The ability to acquire resources.
- The ability to develop complex operational systems.