Why Founders Need to Know about Business Infancy
Photo by Bermix Studio on Unsplash
Young companies have lots of growing to do. Here’s how you can help them grow up big and strong.
It’s a new year, and for us at Findaway Adventures that means five weeks straight of two-day retreats with our investment companies. To prep for the next two months, I’ve been revisiting one of my favorite websites: adizes.com.
It is the home of one of my favorite business strategy thinkers Ichak Adizes who, more than 40 years ago, mapped out the “life cycles” of corporations. Corporate life cycles begin in infancy, grow through adolescence and settle into the prime of life before declining — pretty brilliant analogy I think. The companies that Findaway Adventures supports are in infancy and trying to reach the age of what Adizes calls “Go-Go,” which equates to a healthy, growing childhood.
Infancy begins the moment a founder quits her paying job and signs the loan documents or makes other financing arrangements with investments. These companies typically range from pre-revenue to $100,000 a month in sales. These are companies where ideas can turn almost instantly into actions as a relatively small number of people seize opportunities as fast as they arise. Like an infant making those wobbling first steps and breaking into a trot, the founder constantly learns and adjusts, wearing many hats at once. One of the things we try to do at Findaway Adventures and the Findaway Club is put simple systems in place that help them walk faster and with more support.
What are the common problems that arise in infancy? Here’s what I’m seeing.
Customers experiencing problems with the product not delivering as perfectly as promised, resulting in some negative reviews.
Companies struggling to complete the product or service on time. We are invested in another company right now with long lead times set by co-manufacturers and high MOQs that have placed them in difficult situations.
Companies engaging in ‘management by crisis’ due to having few or no procedural rules or policies in place.
These common problems are hardly fatal in themselves; but left unaddressed, they can lead to greater “pathologies” that can kill organizations. Recently, I was having a great conversation with one of our investment companies that showed all the signs of pathology, including:
The company was unable to continue to fund its negative cash flow. If you run out of money, your company is in trouble. The company made a big mistake that risked an irreparable loss of liquidity.
The company’s founders got so stressed out they contemplated walking away from their baby.
The company’s founders actually found the daily routine becoming mundane and began losing interest in it.
My own experiences working with young companies matches up with Adizes observations in nearly every respect. To grow from Infancy to Go-Go, a young company should:
First and foremost, have a founder who has a passion for the project and a confidence in its success that can trickle down to her team when things go well or go poorly. In the absence of passion and confidence, indifference and doubt will trickle down, instead.
Foster a sense of urgency throughout the team and an action-oriented culture in which everyone is driven by an unquenchable thirst for results.
Whether raising capital, recruiting talent, or selling to customers, make judicious use of external talent and know-how. Don’t rush to hire a full-time staff member until you can support one.
Don’t pack your board with friends and family unless they also bring skills or know-how you lack.
The best organizations are constantly learning, whether this involves improving how you budget, how you learn about your customer and marketplace, or how you staff your team.
Adizes says an infant firm that accomplishes these things and “establishes its products or services with key reference accounts in the marketplace, and begins to enjoy strong demand consistent sales growth and healthy cash flow,” is ready to transition to Go-Go.
At Findaway Adventures, we take these “reference accounts” to mean establishing yourself in direct to consumer, Amazon, and maybe one or two, exclusive brick & mortar retailers.
If you are an Infant company, I encourage you, first, to spend some time on Adizes’ website. Next, read Patrick Lencioni’s influential book The Advantage, which develops Lencioni’s thesis that winning business strategies are built on clarity around why your company exists, and what is the most important thing your firm should do. This may sound simplistic, but it offers the best defense I know of for keeping you focused and not getting distracted each and every little opportunity that comes along.
I especially urge you to use the Adizes material to gauge how healthy your company is by identifying the gaps he points out and how your company is improving to close the gaps so you can progress to the next stage in the corporate life cycle.
As always, please reach out to us if we can help. I’d love to learn how your change-the-world firm is growing through its infancy.
Have a great rest of the year.
Sincerely,
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All credit to my ghostwriting partner, Dave Moore, who is instrumental in getting my thoughts out in a coherent manner & into these blogs. Thanks Dave!