Best companies stay on top because their leaders stay open to new ideas

Why are some organizations successful year after year while other seemingly extraordinary companies eventually fall by the wayside? I believe it comes down to having leaders who understand how to manage innovation and growth throughout the life cycle stages of an organization.

By ALBERT A. VICERE
GUEST COLUMNIST

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Think about the stages companies experience throughout their evolution.

It begins at the startup phase when an often "crazy" idea becomes the germ of an organization. If the crazy idea catches on, the company experiences growth, the business develops, demand begins to exceed capacity and the new company begins to expand and develop. Growth invites competitors and imitators, so eventually maturity sets in and growth slows. Unless the organization takes action to revitalize, it begins to decline. Absent dramatic action, a crisis hits, decay sets in, and the company is on its way out.

Before you panic, it is possible for companies to manage this cycle.

Just look at GE, 3M, Johnson & Johnson and countless other companies that have stayed relevant and effective for decades. But it’s rare that a company will survive unscathed once it moves into decline and decay.

Under CEO Lou Gerstner, IBM revived itself with a massive restructuring and an expanded business focus. But for every successful turnaround like IBM’s, there are examples like Digital Equipment Corp., Westinghouse, and other formerly great organizations that couldn’t right their ships.

Long-lasting organizations stay vital by resisting decay. As they mature, their leaders successfully manage the tension between innovation — doing things differently, offering unique products, changing the rules, and adaptation — and perfecting and improving existing products, services and processes. They realize that the healthiest organizational cultures maintain a balance between these two perspectives. They constantly strive to get better, yet they remain open to new ideas and new ways of thinking.

How do they do it?

They recognize that the life cycle stage of an organization often has a parallel connection to the mindset of its senior-most leaders. Consider startup organizations. They tend to be on the cutting edge and their leaders are passionate zealots bent on success at all costs. Though many startups don’t survive, those that do can change the world with their passion and focus.

If the organization survives and starts to grow, its leaders tend to become aggressive conquerors, creating new markets and conquering competitors who are often too slow to respond to the new threat in this exciting and intense phase.

As intensity and excitement give way to growth, the organization seeks out investment capital so it can meet demand and keep growing.

Processes are developed, rules arise and structure emerges. The company moves into the mainstream.

As growth begins to level or slow, the structured, process-driven company moves into potential decline. The focus tends to shift to rules, systems, and efficiency. If that administrative mindset becomes the dominant focus of leaders, bureaucracy sets in. A firmly entrenched bureaucracy can isolate senior leaders from the reality of a maturing business environment. They can become removed, aloof, elite, out of touch with reality and destined for disaster.

What can a leader do to stop the progression into bureaucracy and decay?

It’s simple. Take a good, hard look at your organization.

Better yet, ask your people and your customers: Where are you on the life cycle? Can you sense any of the fiery passion of the early stages? Are you open to ideas and new ways of thinking or preoccupied with systems, processes and efficiency? Do you have the right mindset and focus for the life cycle stage of your organization? Do you have a balance of perspectives in your leadership team to keep you from becoming a victim of your own success?

Being an effective leader comes down to seeing and understanding the patterns in your organization. The key to maintaining success and sustaining performance is to recognize your organization’s life cycle stage and who, if not you, might have the leadership qualities needed at any given time.

Albert A. Vicere, a nationally known leadership coach, is a professor of strategic leadership at Penn State’s Smeal College of Business and president of Vicere Associates Inc. His Web site is http://www.vicere.com.