Types of strategic challenge

Corporate life cycles, though the metaphor is apt enough, are different from human life cycles. For one thing, the corporate life cycle shows much greater variation over time – cycles can be both shorter and infinitely longer. Secondly, the corporate cycle is not linear; corporations can move back from a later phase to an earlier one[1].  Each corporate stage has its own specific patterns: what is quite normal in one phase would be completely unacceptable in another phase. Conversely, ways of dealing with problems that are effective in one phase can be worthless or spell disaster at another point of the life cycle. Finally there is not one best ‘universal position’; the optimum depends on the specific circumstances in which a company operates.

The ‘natural’ cycle progresses through the four stages consecutively to its logical ending (provided the organization does not stay too long in the expansion phase and die from overexertion). A firm can progress through all four cycles and ‘die’ in a matter of years. There are also casualties along the way: failing to make the necessary transition at the right moment can mark the beginning of liquidation.

However, among existing organizations the natural cycle is not the rule[2]: organizations tend to gravitate towards a point of equilibrium which is consistent with a certain phase, depending on the nature of their core business.

Alternatively, change efforts are directed at the organization to move it from one phase to the other, since some phases obviously provide better conditions for success. Moving the corporation back from a later phase to an earlier one, (“rejuvenating”), forms an important part of the change programs initiated and sustained by top management. The rejuvenation process could be applied to either the corporation as a whole, or to parts of the firm where it is especially profitable to reinstate the conditions for renewal and growth.

The transition points between phases each have their own dynamics and reference points. It is important to recognize these and to manage them. However, for those involved in the actual situation, this can be hard. Since they are used to go by the traditional (financial) indicators, which still indicate ‘success’, there is a period in which they live in a fool’s paradise. Leadership tends to interpret the situation in terms resistant to change, rather than as calling for change. What makes rejuvenation so hard, is the fact that in the course of time values become entrenched and ways of doing become ‘holy’.  Many elements, though effective in their heyday, have become ‘sacred cows’ and actually impede success. Moss Kanter (2001) speaks about the ‘legacy problem’, that causes established organizations to fall into a laggards-position when circumstances change. These legacies cause many organizations from the industrial age to suffer from basic assumptions of obsolete business models like ‘variety is bad’, ‘experience matters most’, ‘bigger is better’ and ‘innovation is an exception’ (Hamel, 2002) and to defend what is actually hampering them. In a really constipated organization the only effective measures to deal with these legacies are rigorous ones. In the eyes of the guardians of culture, such measures are usually unacceptable and even indecent.

[1] This option is -sadly- not open yet to humans.

[2] Obviously, the more adept organisations are at survival, the more the chances they will still be around.


change strategies