The 13 Classic Entrepreneurial Growing Pains

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Growing Pains of Early Entrepreneurial Growth

• 1. Turf Battles and Titles 
• 2. Reluctance to Demystify the Magic
• 3. You Had to be Here at the Beginning to be Effective Now
• 4. Office Manager Crisis
• 5. Perpetual Innovation

Of Mid-Entrepreneurial Growth

• 6. Crisis and Rescue Cycle
• 7.  Diversification That is Way Too Early
• 8. Indecisive Teams of Super-Capable People
• 9. The Sequel Is Not as Good as the Original

Of Late Entrepreneurial Growth

• 10. Defiant Innovation Becomes Defiant Isolation
• 11. A Flotilla of 100 Rafts
• 12. Repeated Revolutions with Little Progress
• 13. A Well-functioning Management Team Is Not a Succession Plan

Brief descriptions are below...

Addressing growing pains successfully and when they first come up can help you accelerate growth by solving the underlying problems, which tend to have an impact far broader than the symptoms presented by the growing pain.

Solving them involves bringing the way the enterprise operates into alignment with the its most pressing opportunities and needs.  

Click here for the home page. There you will be able to:

• Complete a complimentary management style assessment that will identify your strengths for particular growth phases
• Purchase the ebook Leadership Is Fluid, which describes these issues and their underlying causes
• Contact Jeffrey Hansen directly for consultations

Tempers flare and members of the enterprise become territorial. 

Although the organization is still small, usually with one to two dozen people, key people claim the roles and responsibilities of someone else in the organization. Personnel problems begin to take more and more management time. The leader spends an increasing amount of energy refereeing squabbles over who should do what and who is responsible for what. People become extremely sensitive to titles, and new titles are doled out to add some structure to the complex web of relationships, to reward past achievements, and to motivate staff for the future. In addition, some employees are overly possessive about their connections and contact with the leader.

The organization’s structure also develops haphazardly as employees begin to fend for themselves and become protective of their information and influence. As a result of these problems, factions develop, and the still-small organization begins to move in a surprising number of different directions. Increased staff infighting distracts the organization from exploiting external opportunities. Although the surfacing of battles over turf and titles may initially seem like a superficial growing pain that can be addressed on a case-by-case basis, these are symptoms of deeper underlying problems and can be a good early warning indicator that more comprehensive changes are needed. 

A common growing pain is a reluctance to demystify the magic that created the breakthrough innovation and all its supporting activities. When this happens, prior practices and procedures are maintained, even enshrined, in the lore and culture of the enterprise. Growth is pursued by simply doing more of what has been done in the past. 

It’s only natural that members of any organization will feel good about the success of earlier efforts — and they tend to develop a strong attachment to the actions they took to produce that success. However, they may view past success as a function primarily of their good judgment and experience; they resist suggestions that they need to restructure and simplify what they do in the present. Above all, they believe two things: first that they have a complete and logical understanding of the various steps they need to take to accomplish their work, and, second, that all steps they currently take have value; otherwise they would not be taking them. 

New personnel take an unacceptably long period of time to understand the enterprise and to become effective. They are dependent on those who have been with the company since the early days. 

Many of the work processes and procedures evolved organically since the business began and have not been made more transparent and rational. In many instances, there is nothing written on procedures and processes for new people to study. Suggestions for change are strongly resisted and sometimes viewed as a criticism of what had taken place in the past. To understand the business, the organization, and how things get done, one almost has to have been there since it began. The first-generation staff enjoys a special camaraderie that can appear as a clique that is closed to newer members of the enterprise. This growing pain limits the growth and development of a larger and more effective team.  

The office manager in this scenario represents any member of the enterprise who serves as the leader’s very loyal “right hand” and manages the many tactical and administrative issues that innovative leaders often readily delegate. As the enterprise is successful and grows, the abilities of this individual are exceeded. Yet at the same time, they are perceived to be indispensable to the day-to-day operation of the enterprise. This growing pain becomes an internal crisis - the leader must decide whether to support a loyal member of the inner circle or to encourage the development of broader-based technical expertise and growth of the management structure.   

The enterprise continues to innovate and does so to the detriment of business growth. Innovation is often where they have developed skills and where they have found success. This is one of the most common growing pains. 

To convince the leader that the enterprise needs some time and effort to develop, launch, sell — in short, to fully capitalize on the existing innovations — is very difficult. New product innovation and out-of-the-box thinking is often how the business became successful and grew to its current point. In addition, innovating is typically what a successful leader of a Concept Development phase prefers to do. 

The entrepreneur continues as the primary mover and shaker in a young enterprise. However, this leader can be overwhelmed by the numerous responsibilities that continue to increase as company growth picks up. Someone suggests that delegating work to others is the answer, and the leader immediately delegates work and responsibilities. 

The situation deteriorates shortly after delegation takes place. Details are overlooked, errors are made, and the essence of the vision is not fulfilled. Eventually the leader must return to the scene in a rescue operation, which reinforces the idea that the leader is absolutely indispensable to the day-to-day activities of the business. And some time later, once again, the leader becomes overwhelmed. Delegation again appears to be the best solution. The cycle is repeated. 

This Crisis and Rescue Cycle prevents the leader from addressing new issues; it also hinders other members of the enterprise from developing their capabilities. Throughout this cycle, the organization makes mistakes, people overlook details, and execution of decisions is poor. The leader cannot devote attention to other matters and must fight rearguard action on internal issues rather than being focused on the battles for business growth that lie ahead.

The firm sees itself as a fount of new ideas and innovations while riding the success of its early innovation. The leaders are enjoying the exhilaration of creative innovation and want to keep doing more of it. Any hint that some effort should go to internal management issues is met with scorn. “Our little company is not going to become a stuffy old bureaucracy,” they vow. As a result, the company devotes its collective energy to developing a diverse product line.

Meanwhile, competing firms pick up those innovative ideas and exploit them more effectively in a targeted manner. Without a solid revenue stream from any of its products, the firm begins to strain under the burden of developing and promoting its numerous products. The innovators’ initial surge of energy begins to dissipate as fast as their start-up funds.

Without the direct involvement of the initial Commanding Visionary leader, what was once a decisive and responsive organization stagnates. People avoid making decisions. All required information is collected and assembled, but no one brings the issue to a point of resolution and determines who will do what to make something happen. Weakness arises not so much because wrong decisions are made but because no decisions are made, and little action is taken. 

This situation is related to the Alpha Visionary Effect, referring to the beneficial way an innovating leader helps maintain the singular vision of the firm by seeking people who are loyal and support it — as opposed to having independent visions of their own. These members of the organization are rewarded for their continued loyalty to the leader’s vision. As discussed earlier, the Alpha Visionary Effect can be positive as long as the singular vision is needed to efficiently move forward. 

In the Innovating mode, everyone has a vote, but the only vote that counts is the leader’s. Everyone participates in the process and there is a sense of consensus decision making, but there is just one decision maker. Others are loyal to the vision of the leader, gather information, and participate in discussion, but the leader calls for an end to discussion and authorizes action.

When the involvement of the leader decreases, he no longer plays the role of precipitating the decision. Everyone performs just as before, but the decisions do not get made as quickly or as effectively.

The scenario goes like this: a company’s initial breakthrough product is introduced in the marketplace and proves extremely successful. The company gains significant momentum from the first burst of sales. As the original product begins to mature, management decides to initiate the next major innovation as a way to rejuvenate the business. 

Management decides to introduce a sequel to the initial groundbreaking innovation with the hopes that the new product will rewrite the rules of the industry, just as their first one did. They believe that success is assured: after all, the firm can now provide all the support, depth and guidance that was lacking when the first innovation was developed on a shoestring budget. 

The enterprise creates a second innovation using its current Planning operational mode. A group of people representing the different relevant disciplines forms a task force or design team to develop breakthrough innovation #2. The best design work, best technology, and best of everything else the firm has to offer is brought to bear on the design process. 

Inevitable design tradeoffs are made as the design team tries to get the best mix of attributes for the innovation. Yet team members, by virtue of their own experiences with innovation #1, focus only on the areas they know and try to avoid all the mistakes they made with #1. 

Market research and understanding external market dynamics were often not an important part of their past success with innovation #1 (remember, earlier on, the enterprise knows more about what the market wants than the market itself). But in attempting breakthrough #2, they want to rewrite the rules of the industry again. While all the best departmental expertise is represented, these efforts typically must contend with several barriers to success. 

First, the design team for #2 is essentially a committee. Committees tend to make defendable decisions that can stand up to the scrutiny of group discussions and objective analysis. These decisions often represent a safe path full of compromises between teams that are working on the project along with other efforts. The often settle on a product that approaches a low common denominator or the perspectives presented. The product quite often does not represent strong singular vision and or the boldest of the ideas expressed. Individuals, on the other hand, can make decisions based primarily on insight and intuition and can seek to stronger way of crystalizing the vision into a product. 

Second, to achieve breakthrough innovation, an individual or team must be able to deviate from the expected and accepted and to cut across a company’s functional divisions while immersed in information relating to the innovation. Unfortunately, such far-reaching individual autonomy is not consistent with the formalized structures and practices associated with the interests of a design team or a successful Planning operational mode. The sequel, sadly, misses the target: it is notably mediocre and does not rewrite the rules of the industry. The marketplace is influenced little by its arrival. 

When the company’s early disruptive innovations become part of the conventional wisdom that the company helped create, the enterprise does not listen to or value the information the industry is able to provide. Once the groundbreaking innovation has been accepted and integrated into the marketplace, the market will give ample feedback about the product and how it can be improved and customized to meet more specialized needs. Companies suffering from defiant isolation don’t listen to the market. If they do, they do not take it seriously. As a result, they can miss significant opportunities for continued growth.

When a new young company makes a big splash in the marketplace with a bold innovation, it may make the headlines and be the talk of the town for a time. This taste of fame can be heady stuff, enough to convince the leaders that their defiance of the norm has contributed to their success. Defiance of conventional wisdom is often a crucial ingredient in the creation of a breakthrough innovation. This belief that you can create a new product or business where none has existed before can become a part of the company’s self-concept. 

During the period of disruptive innovation, an insightful and effective entrepreneur often defies prevailing practices and techniques and the articulated demands of the market. In the early days, he and his team were working at the coalface — directly in touch with the market. They probably did in fact know more about what the market needed than the market could articulate, and listening to what was said wasn’t important at the time. Unfortunately, defiant innovation in the early days can easily atrophy into a defiant isolation later on. As time passes, the decision makers become removed and insulated from the coalface of the market by organizational layers and the distractions of running a business. Plus, the attitudes of defiance have become part of the organization’s culture. Listening and responding to the market are simply not part of what they believe is successful. These innovators continue to believe that they know more about what the customer wants than the customer does. 

If this behavior continues, the enterprise can become out of touch with the market and its own customers. It can become locked into what the Pioneer customer class sought. It can be locked into the defiance of market intelligence. It can fail to keep up with the development of the very market it helped to create. It can fail to take advantage of the market’s demand for variations of its initial product. 

Defiant innovation easily becomes defiant isolation. 

In this undesirable legacy, a company that has been aggressive in adding more staff and introducing new products and business units experiences little coordination and cooperation among the various business units. The organization and its business become fragmented and none of the lines of business are developed to their fullest potential. The only coordination is done by informal agreements between the heads of the individual businesses. 

Instead of being a coordinated venture seeking to maximize its activities as a whole, the firm is a collection of boutique efforts, with few becoming well-developed and with little synergy among the entities. Rather than being a well-coordinated fleet of a dozen ships able to move in a coordinated fashion to meet objectives, the organization is a flotilla of 100 rafts moving with the current and unable to focus efforts.

The skipper of each raft competes with the skippers of other rafts for favorable winds and guides their raft to wherever the winds seem strongest. Although sometimes there are alliances between skippers, the lines are not tied tight. It’s clear to each skipper that all the rafts are just barely staying afloat, and one can never tell which raft will go under. Independence from the other groups is a survival strategy. Observant employees may begin to realize that two different business lines within the company serve the same segment of the market with redundant and overlapping functions and fear for their jobs.

The legacy of the flotilla of 100 rafts has its roots in the bias toward innovation and trial-and-error opportunism characteristic of Innovating organizations. Starting new enterprises is what they do — and this thrust becomes ingrained as part of the culture. Developing plans, and cultivating focus and reliability are not. When faced with the choice of marketing more of what one is already doing or doing something new, doing something new invariably wins. 

One way for an organization to deal with the need for different management practices and priorities during different phases is to undergo a complete change in management teams. Through these cultural revolutions, the entire company can quickly leap from one business phase directly into another, seemingly overnight, and yet retain the quality of a homogeneous culture.

Entire management structures and philosophies are revamped as the organization moves through different phases. Because there is a relatively complete purging of prior influences, diverse ideas fail to accumulate, and what does persist is seen as an unwanted holdover of a prior regime. Rather than becoming more capable of handling any mode of operation required, the organization is still as one-dimensional as it was early on. In fact, it becomes more rigid instead of more flexible. Its collective memory about how to create an innovating organization, for example, can be reduced.

The new leaders for a particular phase have previously achieved some success practicing a certain approach to management, usually at another organization, and so are adamant that their approach is most successful now and forever. Circumstances inevitably change, however, and their time will end.

This undesirable legacy becomes apparent after several leadership changes. 

Different management teams are created to serve different purposes. Many that are built around a Visionary Commander are designed to complement for the Visionary's strengths and weaknesses.  

This is appropriate. A visionary leader may wisely create a team with people who are good at things that the leader is not. The beauty of effective teamwork is that the team can behave as one. Yet, the roles being played by each person can be very different. 

If the visionary leader is taken out of the team and must be replaced, the experience, skills and biases of the remaining members may not prepare any of them to effectively lead the enterprise going forward. Their experience is useful, but may not have prepared any of them to be the team's leader.