The critical phases in the lifecycle of a business - Lexo Start up, stabalisation, maturity, stableise etc. o Business Horizons (2008) 51, 341—352

LEL have specified in their brief that once they have a working prototype of their engine they want to use Hulme as their manufacturing base. This has been cited for social enterprise reasons and thus comprises a significant part of the ideology of LEL moving forwards. As such it is an important factor when considering the critical phases in the lifecycle of their business.

Various multistage models have been developed which highlight patterns in the growth of organisations (Scott. 1970; Smith, Mitchell, & Summer, 1985). Models range from three and four stage models (Cooper. 1979; Smitb et al., 1985, Hosmer, Cooper, & Vesper, 1977; Rhenman, 1973), to those with five or more stages (Adizes, 1979; Miller & Friesen, 1984; Van de Ven, Hudson, & Schroeder, 1984). These models can be subcatagorised by the industry/business size to which they are geared: Industry Growth Models (Porter. 1980, Little undated), Large Business Growth Models.(Channon. 1968 and Salter (1970), Small Business Growth Models (Maher and Coddington 1966, Bruce. 1978, Steinmetz. 1969 and Churchill and Lewis 1983), general Growth Models (Scott. 1971, Greiner. 1972, and Lippitt and Schmidt 1967). A major strength of the literature on life-stage models is that it adds to our understanding of the rather complex phenomenon of growth, describing how growth happens and the effect that it has on organizations. For example, Creiner (1972) explicitly viewed the growtb of organizations as a series of evolutions and revolutions precipitated by crises related to leadership, control, and coordination. Alternatively, Chandler (1962) viewed stages of growth as responses to a firm's search for new growth opportunities. Yet most models do not take into account the role of industry, technology, and otber situational variables. Their proponents seem to have postulated them as applying to all organizations, regardless of context. (Tornatsky et al., 1983). The most applicable for LEL are the ‘small business group’.

Miller (1981) found that firms do not necessarily demonstrate an inexorable movement through a linear sequence of stages but rather attain gestalts or patterns of strategy, structure, and environment that may emerge for any number of reasons. Romanelli and Tusbman (1986) argued tbat firms evolve through periods of convergence and divergence related more to technological shifts in tbeir industry than to issues of growth. Furtber, several authors have proposed typologies tbat categorize organizations into a number of profiles but suggest no developmental sequence among types (Gartner, 1985; Hosmer etal., 1977).

Industry Growth Models.Wright,* Little’ and Porter-IO used the product lifecycle concept to illustrate how industries develop and how businesses react to these pressures.8) R. V. L. Wright, Strategy centres: a contemporary managing

system, unpublished paper, A. D. Little Inc. (undated).

(9) A. D. Little, A system for managing diversity, unpublished paper,

A. D. Little Inc. (undated).

(10) Michael, E. Porter, Competitive Strategies: Techniques for

Analyzing industries and Competitors, The Free Press, New York

(1980).

Large Business Growth Models.Channon” and SalterI showed the characteristic changes in businesses as they grow into large multidimensional units which become geographically decentralized.

(11) J. I. Channon, Business Strategy and Policy, Harcourt Brace

Javonovich, New York (1968).

(12) M. S. Salter, Stages of corporate development, Journal of

Business Policy. 1 (1) (1970).

Small Business Growth Models.Maher and Coddington,13 Bruce,14 Steinmetz,4Churchill and Lewis15 and Barnes and Hershon16developed models for small businesses per the above definition.4) L. L. Steinmetz, Critical stages of small business growth,

Business Horizons, February (1969).

(13) J. R. Mahar and D. C. Coddington, in H. N. Broom and J. G.

Langenecker (Eds), Small Business Management, South Western,

Cincinnati (1966).

(I 4) R. Bruce, The Entrepreneurs: Strategies, Motivations, Successes

and Failures, Bedford Libertarian Books (1978).

(15) N. C. Churchill and V. L. Lewis, The five stages of small business

growth, Harvard Business Review, May/June (1983).

General Growth Models.Scott,” Greine? and Lippitt and Schmidt’* developed models that can be applied to businessesof all sizes.

(5) Larry E. Greiner, Evolution and revolution as organizations grow,

Harvard Business Review, July/August (1972).

(17) B. R. Scott, Stages of corporate development. Part I. unpublished

paper, Harvard Business School (1971).

(18) G. L. Lippitt and W. H. Schmidt, Crisis in developing organizations,

Harvard Business Review, November/December (1967).

Because the authors believe that each stage of a business is preceded by a crisis the model developedby Greiner5 (Figure 1) is important. As this model deals exclusively with small businesses the nature ofthe crises are somewhat different from those described by Greiner. Changes in both external andpurely internal factors can precipitate these crises. As the external factors are usually beyond themanager’s control, monitoring the key issues is important so that he is prepared for possible change. It is being proactive rather than reactive that can spell success or failure in moving from one stage to the next. The transition will often involve relatively major change and the importance of being prepared cannot be overemphasized. The model developed isolated five stages through which a small business grows. It also identified four crisis points that precede the advance into the next stage of development. It is the anticipation of these crises and the successful management of the change that they cause that ensures the survival of the growing small business.

The literature on stages of growth typically implies that problems influence internal organization. However, the findings from the field study suggested that prohlems played a central role in the growth patterns of new ventures and so deserved additional theoretical development. Several studies have discussed the role of dominant problems as contextual factors. The literature on product life cycles (Midgley, 1981; Moore & Tushman, 1982; Porter, 1980) has long proposed that there is a pattern of primary tasks or concerns that firms face for each theorized stage. They may be either functional tasks or strategic positioning issues. This idea is relevant hecause technology-based new ventures typically experience their initial growth around a single new product. The work of Miles and Snow (1978) also offers support. Although not focused directly on small, emerging firms, they outlined a pattern of growth for mature firms facing a change of domain. Their adaptive cycle outlines "the three major problems which management must continually solve: entrepreneurial, engineering, and administrative" (1978: 21). The entrepreneurial problem concerns redefinition of a firm's domain hy the modification of products or market offerings. The engineering problem focuses on the creation of a systems delivery capability for changes. Finally, the administrative problem requires rationalizing and stabilizing solutions instituted in earlier stages. More recently, Block and MacMillan (1985) discussed the role of problems with a specific reference to new ventures. They listed ten milestones that a new venture must pass as it evolves from an idea to a viable business entity. Milestones include such tasks as the completion of concept- and product-testing, completion of the prototype, production start-up, and first redesign and redirection. Galbraith (1982) offered a stage-of-growth model similar to the present model and consistent with Block and MacMillan's (1985) research, in which certain tasks (prohlems) are associated with each stage of growth. Storey (1985), in the only empirical study of the problems of new ventures found in the literature, investigated prohlems facing new firms in the United Kingdom. He found that the prohlems differed by industry as well as by the age of firms.

Socially responsible entrepreneurs: What do they do to create and build their companies?

David Y. Choi , ,

Edmund R. Gray

College of Business Administration, Loyola Marymount University, One LMU Drive, Los Angeles, CA

90045-2659, U.S.A.

Available online 10 June 2008.

These so-called socially responsible, values-led/centered, ethical, or sustainable entrepreneurs endeavor to be good as well as successful by simultaneously achieving economic (profit), environmental, and social goals–—the so-called triple bottom-line (Elkington, 1994). They build profitable companies, and also significantly contribute to the greater good of society, an outcome that they believe traditional capitalism has been ineffective producing.

Figure 1 Three Phase Model of Corporate Social Responsibility

3.1. Commit to a meaningful purpose

Research shows that conventional entrepreneurs start businesses for various honorable reasons that include a desire for more autonomy and a more significant role, greater financial upside, and dissatisfaction with current position, among others (Dobrev & Barnett, 2005; Lee & Venkataraman,2006; Segal, Borgia, & Schoenfeld, 2005). While most conventional entrepreneurs are personally ethical and socially conscious individuals, research for this study indicates that, making an

environmental or social difference was a key motivation for the entrepreneurs in this sample for starting their companies, or became so shortly thereafter.

3.2. Be circumspect about raising institutional capital

The acquisition of needed resources, particularly capital, is a key element in any company’s growth, but it can be a difficult and time-consuming activity for the entrepreneur. Conventional entrepreneurs typically examine various factors such as valuation, fees, interest rates, and investors’ reputation and ability to add value with regard to their decisions to raise money and from whom to raise money (Fried & Hisrich, 1995; Gorman & Sahlman, 1989; Hsu, 2004). Research for this study reveals that raising capital can be even more complicated and challenging for socially responsible entrepreneurs because of their commitment to a social mission. Unlike conventional entrepreneurs, the entrepreneurs examined here needed to be especially selective about their source of financing because they understood that professional investors with traditional views about business could impede their ability to pursue non-financial objectives.

3.4. Promote your company’s values

Entrepreneurs have long been credited with bringing new products or services with superior features that benefit customers to market (Schumpeter, 1942; Shane, 2004). The products and services of the socially responsible firms studied here, however, offered an additional intangible benefit: a sense of satisfaction on the part of consumers from knowing they were supporting an ethical company or a benevolent cause. Therefore, in addition to promoting their products’ features and benefits, these entrepreneurs publicized their values and sustainable business practices as additional means of marketplace differentiation.

3.5. Build a strong value-centered organizational culture

The socially responsible companies examined here placed high priority on creating a strong organizational culture that reflected the entrepreneurs’ values. Most prided themselves on having a cohesive organizational culture that, in return, supported their mission and their companies’ growth. They utilized creative, often highly unconventional methods to earn employee loyalty, and strengthen commitment and motivation within their organizations.

3.6. Make money, but then also make exceptions

All of the entrepreneurs in this study were successful in building financially sustainable companies. They pursued revenue generating and cost cutting measures that were comparable to those of conventional businesses. More than 80% used pricing as a strategic lever in their business model, positioning their high-quality offerings at the high-end of the market where they could charge premium prices. The above findings indicate that while these companies were socially responsible, their goal was not necessarily to make their products affordable to the overall population. They appear to have set prices at or close to the levels that would maximize their profits. Their high-end positioning strategy reflected an economic reality: the existence of large competitors with greater economies of scale. In other words, given their higher cost structure, such as the use of natural ingredients, a differentiation strategy emphasizing high quality was their best chance for economic viability.

3.7. Do no harm: Don’t pollute, or pollute as little as possible

Many of these socially responsible companies took non-conventional and aggressive, and in some cases extraordinary, steps to minimize their environmental pollution and other negative social or environmental impacts. Some of these decisions were financially beneficial, and some were not, but all evolved from a sense of duty to society and the mission of the firm.

3.8. Stay with it for the long haul

The most common conventional exit strategies are an initial public offering (IPO) or a sale to another company, both of which offer financial benefits to the entrepreneurs and investors. Research for this study suggests that the socially responsible entrepreneurs, unlike conventional entrepreneurs, were less anxious about exiting their businesses for pure profit. In fact, their self-imposed high ethical standards could make it difficult for them to take advantage of the conventional exit options.

3.9. Give back a lot: Commit to a giving program

For many of these socially responsible entrepreneurs, donating company profits and time to causes of their choosing was not an afterthought, but an important motivation for their entrepreneurial endeavor. For example, Chouinard of Patagonia, who often referred to himself as an ‘‘accidental businessman,’’ made it very clear that providing money for environmental causes was one of the principal reasons he was in business in the first place (Chouinard, 1993).

3.10. Be a role model for others

Like many conventional entrepreneurs, these socially responsible entrepreneurs willingly shared their business experiences with other aspiring entrepreneurs. But for many of them, being a role model was not just an indulgence; it was a priority and an important measure of their success.

1. Be sure you have a purpose to commit to for the long haul and the unrelenting entrepreneurial drive to see it through (Commonalities 1 & 8).

2. Incorporate your personal values into key areas of the business, including strategy, financing, human resources, operations, and giving programs

(Commonalities 2, 3, 5, 7, & 9).

3. Don’t be shy about making money, and promote your values along with your products and servicesto achieve strong growth (Commonalities 4 & 6).

4. Unselfishly share your experience and ideas with others (Commonalities 10).

Business history is replete with instances of noble ventures that have failed. Hopefully, guidelines from these winners will help improve the success rate in the future.

Financial Support System and Strategy of SMEs in the Incubation

Based on Business Life Cycle

Yanjuan Cui

School of Finance, Dongbei University of Finance and Economics

School of Management, Dalian Polytechnic University

1 Qing Gong Yuan, Gan Jing Zi, Dalian 116034, China

Tel: 86-411-8632-3622 E-mail: tsuiyanjuan@163.com

Ling Zha

City College, Southwest University of Science and Technology

11 San Xing Road, You Xian, Mianyang 621000, China

Tel: 86-816-628-5106

Fenghai Zhang

School of Management, Dalian Polytechnic

International Business Research Vol. 3, No. 4; October 2010

This paper analyses the financial demand characters of SMEs in the incubation based on the theory of business life cycle. The conclusion is that different development phases need different financial support because SMEs in the incubation face different financial cycles.

Corporate finance cycle hypothesis that enterprises can be divided into creation, growth and recession stages, which have the different financing sources such as own fund in creation stage, and credit, loans, leases, bonds in growth stage and so on (Weston & Brigham, 1978).

Figure 1. Financial Demand Characteristics on the Life Cycle and Support System for SMEs in the Incubation

On growth drivers of high-tech start-ups: Exploring the role of founders' human capital and venture capital™�

Massimo G. Colombo ., Luca Grilli Journal of Business Venturing 25 (2010) 610–626

The entrepreneurship literature generally agrees that the human capital of founders and access to venture capital (VC) are two key drivers of the success of new technology-based firms (NTBFs).

As to founders' human capital, the competence-based view contends that higher human capital individuals establish more successful firms; in other words, there is a direct positive effect of founders' human capital on firm growth. Studies in the entrepreneurial finance literature argue that NTBFs created by higher human capital individuals enjoy an advantage in attracting VC. In turn, VC investments lead to superior growth. According to this latter argument, the positive effect of founders' human capital on growth is indirect, being mediated by the attracting of VC. As to VC, previous studies (e.g. Baum and Silverman, 2004) again highlight different motives explaining why access to VC propels the growth of NTBFs. On one hand, VC investors may have better “scout” capabilities than other investors and so they may be able to pick high-growth prospect firms. On the other hand, they may provide portfolio firms with additional competencies and resources, thus exerting mainly a “coach” function.

the results of this paper are in line with the argument of the competence-based stream that founders' knowledge and skills are a fundamental ingredient of the growth of NTBFs. They also highlight that VC investors are an important source of additional resources and capabilities for NTBFs due to the “coach” role they perform to the advantage of portfolio firms. So For these firms rapid growth generally is an indication of wide market acceptance of their products or services. However,

growth is difficult to achieve, with most NTBFs remaining small after several years from their establishment.Feeser and Willard, 1990; Fischer and Reuber, 2003; Barringer et al., 2005

3.1.1. The direct effect

Hinging on the seminal contributions of Knight (1921) and Schumpeter (1934), studies in the competence-based stream argue that firms are bundles of unique, difficult-to-imitate capabilities that are the main source of their sustainable competitive advantages (e.g. Grant, 1996). Therefore, growth differentials among NTBFs can be explained by their distinctive capabilities (or lack thereof).

The distinctive capabilities of NTBFs are closely related to the knowledge and skills of their founders, and thus to theirhuman capital endowment (Cooper and Bruno,1977; Feeser and Willard,1990; Colombo and Grilli, 2005a). On one hand, in a very uncertain business environment, when an individual identifies a new business opportunity, the only option available to take advantage of it is to start a new firm, because of the idiosyncratic, noncontractible nature of entrepreneurial judgment (Foss, 1993; Hodgson, 1998; Alvarez and Barney, 2002). On the other hand, to successfully exploit this new business opportunity, complementary context-specific knowledge (e.g. knowledge relating to complementary technological fields; technological, marketing, and managerial knowledge) that is generally dispersed among different individuals needs to be combined and integrated. In principle, one of these individuals (i.e. the founder of the firm)may hire the others,who then becomethe firm's salaried employees.Nonetheless, integration and coordination of the knowledge possessed by “specialists” are more effective if they are members of the founding team and so have a stake in firm's profits. Individuals who have greater educational attainments, greaterwork experience, especially in the same sector as the new firm (i.e. industry-specific human capital), and greater entrepreneur-specific human capital developed either through a managerial position in another firmor in prior self-employment episodes, are likely to have better entrepreneurial judgment andmore specializedknowledge than other individuals. So, they are in a better position to seize neglected business opportunities and take effective strategic decisions crucial for the success of the new firm.

In accordance with the competence-based argument illustrated above, we derive the following hypothesis. H1. The human capital of founders has a direct positive effect on the growth of NTBFs.

3.1.2. The indirect effect mediated through VC investments

Since the pioneer work of Jaffee and Russell (1976) and Stiglitz andWeiss (1981), the argument that there are imperfections in capital markets that render external financing expensive and constrain firms' investment decisions has been gaining ground in the finance literature (see Fazzari et al.,1988 and the literature mentioned in Hubbard,1998). NTBFs are the firms that suffer most from these capital market imperfections (Carpenter and Petersen, 2002a). In fact, it is quite difficult for investors to ascertain ex-ante the risks and returns of the projects of firms that lack a track record and are developing innovative technologies. Therefore, an adverse selection problem arises, as investors are not able to disentangle NTBFs that have high quality projects from those that have bad quality ones. It is also very difficult for investors to monitor ex-post the behavior of high-tech entrepreneurs. Under these circumstances there is a moral hazard problem, as entrepreneurs may behave opportunistically after obtaining external financing. The above mentioned adverse selection

and moral hazard problems might be alleviated through use of collateral (Berger and Udell, 1998). Unfortunately, most assets of NTBFs are intangible and/or firm specific, so they have little collateral value. As a consequence, it is difficult for NTBFs to obtain adequate external financing and most NTBFs are forced to exclusively rely on personal capital (i.e.founders' savings and capital provided by family members and friends, see again Berger and Udell, 1998). In turn, these financial constraints prevent high potential NTBFs from growing as fast as they would with adequate financing (Carpenter and Petersen, 2002b).

Fig. 1. Conceptual model on the relationship between founders' human capital, VC financing and the growth of NTBFs. Legend: H1: The human capital of foundershas a direct positive effect on the growth of NTBFs; H2: The human capital of founders has an indirect positive effect on the growth of NTBFs, mediated by theattracting of VC investments; H3a: The characteristics of the human capital of founders that are positively associated with the growth of NTBFs are also positivelyassociated with the likelihood of obtaining VC; H3b: The characteristics of the human capital of founders that are positively associated with the growth of NTBFs aremore so for VC-backed than for non-VC-backed firms (i.e. VC investors as a “scout”); H4: The characteristics of founders' human capital that are positivelyassociated with the growth of non-VC-backed NTBFs have a smaller effect on the growth of VC-backed NTBFs (i.e. VC investors as a “coach”).

In order to gain a better understanding of the relative importance of these two mechanisms, one again needs to examine jointly both the effects of VC investments and founders' human capital on firm growth and the role of founders' human capital in attracting VC investors.They support the view that the industry-specific work experience of founders is a crucial determinant of firm growth (Cooper and Bruno,1977; Feeser and Willard,1990; Colombo and Grilli, 2005a). Conversely, the evidence relating to founders' education and prior management experience is more controversial (see Stuart and Abetti, 1990; Westhead and Cowling, 1995; Almus and Nerlinger, 1999; Colombo and Grilli, 2005a).

More interesting for the purpose of the present work, the empirical literature is almost silent on the mechanisms that explain the positive effect of VC investments on firm growth. As far as we know, Baum and Silverman (2004) is the only econometric study that tried to assess the relative importance of the “scout” and “coach” roles performed by VC investors. Their econometric results

indicate that the firm-specific characteristics that are positively or negatively associated with firms' revenue growth diverge from those that have a similar effect on the amount of pre-IPO VC financing. They deduce that VC investors are mostly interested in firms to which they can add most value post-investment through their “coach” function. In accordance with the evidence provided by previous studies inspired by the competence-based perspective (e.g. Cooper and Bruno, 1977; Feeser and Willard, 1990; Colombo and Grilli, 2005a), our findings clearly show that firms founded by individualswith selected human capital characteristics (i.e. greater university-level education in management and economics and greater prior work experience in technical functions in the sector in which the new firm operates) can leverage the distinctive capabilities associated with the knowledge and skills of their founders to grow larger than other firms. So founders' human capital has a direct positive effect on firm growth. It also has an indirect positive effect mediated by access to VC and the dramatic positive impact on firm growth of VC investments, as suggested by the entrepreneurial finance literature. In particular, our econometric results confirm the evidence provided by previous empirical studies that VC investments are attracted by the perceived management competence of firms' founding team, proxied here by the presence in the entrepreneurial team of one or more individuals with prior managerial experience. The university-level education in management and economics of founders also has a positive effect on the likelihood of receiving VC.

Does patenting help high-tech startups?qChristian Helmersa,_, Mark Rogersb,c

Ourfindings suggest that patentees have higher asset growth than nonpatenteesof between 8% and 27% perannum.

A particular concern is that even though the patent system is specifically intended to help smaller and startup firms it may be that the behavior of larger firms, the rapid growth in overall patenting and uncertainties over enforceability are, in fact, disadvantaging smaller firms.6

Our findings thus imply that firms benefit in two related ways from patenting: applying for a patent is associated with a lower likelihood of failure and higher asset growth within a firm’s first five years of existence. In summary, there is statistically significant evidence to claim that patents help startup firms to grow faster than nonpatenting startups.

Boldrin and Levine (2008, p. 42) assert that [n]either Google nor YouTube nor Skype is the golden egg of the patents’ chicken, and in fact they do not use patents to retain their competitive advantage, suggesting that these firms do not owe their spectacular success to patent protection. While this may be true for these companies, our findings suggest that patents may play some role in improving new firms’ performance more generally.

A comparative study of six stage-gate approaches toproduct developmentRachel PhillipsParametric Technology (UK), Coventry, UKKevin Neailey

University of Warwick, Coventry, UKTrevor BroughtonUniversity of Warwick, Coventry, UK

product develop- ment is a vital process for most manufacturing firms' growth and prosperity (Zirger and Maidique, 1990)

External DIAGRAM. Wheelwright and Clark (1992) highlight three critical driving forces behind the product development process:1 Intense international competition. In- creased number of competitors capable of competing at world-class level.2 Fragmented, demanding markets. Customers demand high levels of performance and reliability.3 Diverse and rapidly changing technologies. Increased knowledge and existence of technology.

Internal

The success of a project based on introducing a new product into a market, will be reflected in the management of the product performance against the time and cost of producing the right product: . Product performance. The product must meet the demands in the market for value, reliability, and distinctive performance.

. Product development time. Speed of development is imperative, as it will allow the firm to ultimately bring the new product to the market early.

. Product development cost. Development cost will dictate the product's cost.

"experimentation" stage-where the fledgling company lacks both resources and product and is not at all sure of how the business will develop.

How successful entrepreneurs are in gaininng revenues in this experimentation phase depends on:, Their own technical expertise.

The ability to identify opinion leaders as customers.

· The ability to identify customers who can afford to pay for technical consulting services.

· Focusing on specifIc types of consulting problems so as to build the knowledge base in a way which is consistent with the desired product development objectives.

· Avoiding over-commitment to individual contracts wbichcan not only divert the team from their product development goals, but also make the fledgling business overreliant · on one source of revenue.

The success of the fum's hrst product-and hence the early success of thefIrm depends on:

· the importance of the product to the customer;

· th.e degree of product innovation;

· the' A

· the scope of product specihcations;

· the technical expertise of the founder(s);

· neither underpricing l10r overspecifying;

· top management commitment to the success of theproduct.

Figure () Product technology positioning at start up. 38

is the product designed to be a robust, general purpose product which can be sold to a wide variety of market groups, or is it a specialist product designed for a specifIc user (vertical) market? The advantages of market s~eClakation relate to the obvious fact that the products are speci:bcally suited to the unique needs of the market, and that market development costs are typically lower than for product specialists.

Degree of

innovation as

perceived by

customer

Maturity of technology

Figure () Success Potential Matrix.

Stage of Market Life Cycle

Emerging Growth Maturity

New start-ups Typical entry strategy

Likely product class Most likely product segment

Least likely specialized niche

Growth potential of entry strategy

Highest Average Least

Figure () Entry strategies and the market life cycle.

High – vertical market

Business focus based on specific

knowledge of customer

groups

Low (horizontal market)

Low High

Technical expertise of founding team

Figure () Risk model of start up activities. 56 5

Product-Market Development

1 orientation to customers' needs;

2 emphasis on strong technical superiority;

3 continuing involvement of the entrepreneur;

4 focusing scarce technical resources;

5 access to multiple sources of technology;

6 managing sympathetically.

This section focuses on six market developmer1issues common to the small high-tech fum trying to groVl in itschosen target segments. The six issues are:

1 building and maintaining credibility;

2 building market differentiation;

3 linking with large customers;

4 developing appropriate distribution and selling;

5 managing the marketing effort;

Consulting

Standard niche products

Test reports/Design reports

Contract R&D

Custom Niche products

Semi-custom niche products

Standard products/mass market but sub-contract manufacturing

Standard products. mass market and in-house manufacturing Hard

start-ups

Increasing risk

Soft start-ups Resource Commitment

6 speed to market.

Dictionaries define the word "crisis" as a "turning point", but for many of us it has a negative meaning to do with panic. While companies certainly have to change at each of these points, if they properly plan for there is no need for panic and so we will call them "transitions".Larry E. Greiner originally proposed this model in 1972 with five phases of growth. Later, he added a sixth phase (Harvard Business Review, May 1998). The six growth phases are described below:Phase 1: Growth Through CreativityHere, the entrepreneurs who founded the firm are busy creating products and opening up markets. There aren't many staff, so informal communication works fine, and rewards for long hours are probably through profit share or stock options. However, as more staff join, production expands and capital is injected, there's a need for more formal communication.This phase ends with a Leadership Crisis, where professional management is needed. The founders may change their style and take on this role, but often someone new will be brought in.Phase 2: Growth Through DirectionGrowth continues in an environment of more formal communications, budgets and focus on separate activities like marketing and production. Incentive schemes replace stock as a financial reward.However, there comes a point when the products and processes become so numerous that there are not enough hours in the day for one person to manage them all, and he or she can't possibly know as much about all these products or services as those lower down the hierarchy.This phase ends with an Autonomy Crisis: New structures based on delegation are called for.Phase 3: Growth Through DelegationWith mid-level managers freed up to react fast to opportunities for new products or in new markets, the organization continues to grow, with top management just monitoring and dealing with the big issues (perhaps starting to look at merger or acquisition opportunities). Many businesses flounder at this stage, as the manager whose directive approach solved the problems at the end of Phase 1 finds it hard to let go, yet the mid-level managers struggle with their new roles as leaders.This phase ends with a Control Crisis: A much more sophisticated head office function is required, and the separate parts of the business need to work together.Phase 4: Growth Through Coordination and MonitoringGrowth continues with the previously isolated business units re-organized into product groups or service practices. Investment finance is allocated centrally and managed according to Return on

Investment (ROI) and not just profits. Incentives are shared through company-wide profit share schemes aligned to corporate goals. Eventually, though, work becomes submerged under increasing amounts of bureaucracy, and growth may become stifled.This phase ends on a Red-Tape Crisis: A new culture and structure must be introduced.Phase 5: Growth Through CollaborationThe formal controls of phases 2-4 are replaced by professional good sense as staff group and re-group flexibly in teams to deliver projects in a matrix structure supported by sophisticated information systems and team-based financial rewards.This phase ends with a crisis of Internal Growth: Further growth can only come by developing partnerships with complementary organizations.Phase 6: Growth Through Extra-Organizational SolutionsGreiner's recently added sixth phase suggests that growth may continue through merger, outsourcing, networks and other solutions involving other companies.Growth rates will vary between and even within phases. The duration of each phase depends almost totally on the rate of growth of the market in which the organization operates. The longer a phase lasts, though, the harder it will be to implement a transition.

Tip:This is a useful model, however not all businesses will go through these crises in this order. Use this as a starting point for thinking about business growth, and adapt it to your circumstances.

Using the ToolThe Greiner Growth Model helps you think about the growth for your organization, and therefore better plan for and cope with the next growth transitions. To apply the model, use the following steps:

1. Based on the descriptions above, think about where your organization is now.

2. Think about whether the organization is reaching the end of a stable period of growth, and nearing a 'crisis' or transition. Some of the signs of 'crisis' include:

People feel that managers and company procedures are getting in the way of them doing their jobs.

People feel that they are not fairly rewarded for the effort they put in.

People seem unhappy, and there is a higher staff turnover than usual.

3. Ask yourself what the transition will mean for you personally and your team. Will you have to:

Delegate more?

Take on more responsibilities?

Specialize more in a specific product or market?

Change the way you communicate with others?

Incentivize and reward you team differently?

By thinking this through, you can start to plan and prepare yourself for the inevitable changes, and perhaps help other to do the same.

4. Plan and take preparatory actions that will make the transition as smooth as possible for you and your team.

5. Revisit Greiner's model for growth again every 6-12 months, and think about how the current stage of growth affects you and others around you.

Industry Growth Models.Wright,* Little’ and Porter-IO used the product lifecycle concept to illustrate how industries develop and how businesses react to these pressures.8) R. V. L. Wright, Strategy centres: a contemporary managing

system, unpublished paper, A. D. Little Inc. (undated).

(9) A. D. Little, A system for managing diversity, unpublished paper,

A. D. Little Inc. (undated).

(10) Michael, E. Porter, Competitive Strategies: Techniques for

Analyzing industries and Competitors, The Free Press, New York

(1980).

Large Business Growth Models.Channon” and SalterI showed the characteristic changes in businesses as they grow into large multidimensional units which become geographically decentralized.

(11) J. I. Channon, Business Strategy and Policy, Harcourt Brace

Javonovich, New York (1968).

(12) M. S. Salter, Stages of corporate development, Journal of

Business Policy. 1 (1) (1970).

Small Business Growth Models.Maher and Coddington,13 Bruce,14 Steinmetz,4Churchill and Lewis15 and Barnes and Hershon16developed models for small businesses per the above definition.4) L. L. Steinmetz, Critical stages of small business growth,

Business Horizons, February (1969).

(13) J. R. Mahar and D. C. Coddington, in H. N. Broom and J. G.

Langenecker (Eds), Small Business Management, South Western,

Cincinnati (1966).

(I 4) R. Bruce, The Entrepreneurs: Strategies, Motivations, Successes

and Failures, Bedford Libertarian Books (1978).

(15) N. C. Churchill and V. L. Lewis, The five stages of small business

growth, Harvard Business Review, May/June (1983).

General Growth Models.Scott,” Greine? and Lippitt and Schmidt’* developed models that can be applied to businessesof all sizes.

(5) Larry E. Greiner, Evolution and revolution as organizations grow,

Harvard Business Review, July/August (1972).

(17) B. R. Scott, Stages of corporate development. Part I. unpublished

paper, Harvard Business School (1971).

(18) G. L. Lippitt and W. H. Schmidt, Crisis in developing organizations,

Harvard Business Review, November/December (1967).

Because the authors believe that each stage of a business is preceded by a crisis the model developedby Greiner5 (Figure 1) is important. As this model deals exclusively with small businesses the nature ofthe crises are somewhat different from those described by Greiner. Changes in both external andpurely internal factors can precipitate these crises. As the external factors are usually beyond themanager’s control, monitoring the key issues is important so that he is prepared for possible change. It is being proactive rather than reactive that can spell success or failure in moving from one stage to the next. The transition will often involve relatively major change and the importance of being prepared cannot be overemphasized. The model developed isolated five stages through which a small business grows. It also identified four crisis points that precede the advance into the next stage of development. It is the anticipation of these crises and the successful management of the change that they cause that ensures the survival of the growing small business.

Table 1. A model for small business growth

Industry structures and suppliers. - Lex Value Chain. - Lex

Hey Lex,

Been reading through this report from Blackboard and have noticed some things perfect for you if you haven't found it already.

It's attached:

In particular these bits are good:

Introduction to Technology and Manufacturing Readiness Levels (TRLs and MRLs)

A recurring issue to developers and adopters of new technologies is how to successfully communicate their accomplished or expected stages of technology development and readiness for manufacture. This set of Automotive TRLs and MRLs aims to help facilitate this dialogue and in doing so help with technology commercialisation, development work with new partners, planning supplier engagement and bringing new capabilities to market, through common understanding. Readiness levels provide common terms to define technology from concept to commercial production and through to disposal, and have a proven effectiveness from the aerospace and defence sectors. Independently, readiness levels can also assist with self-assessment, monitoring progress and planning goals and actions.

1. Relationship between Technology Readiness and Manufacturing Readiness Level

The table which follows details ten stages of maturity for a product to:

deliver its function (Technology Readiness)

be produced (Manufacturing Readiness)

Automotive Technology and Manufacturing Readiness Levels Table

'Ii ~ . 11 .. Technology and th~'Value Chain· ',,;

Technology is embodied in every value activity in a firm, and technological change can affect competition hrol1gh its impact on virtually any activity. Figure 5-1 illustrates the range of technologies typically represented in a firm's value chain