Following up on my thoughts about normal learning curves, here I ponder the ‘flat’ learning curve, because management teams’ learning curves frequently turn out to be rather flat. How come?
Time and again I observe a behavior pattern in small to medium enterprises. Probably it also occurs at large enterprises, but that’s not my turf. What I see, is a series of phases.
People start a company together. They have lots of enthusiasm some competence, and no real long-term plan (strategy). After all, who knows how long they will be around?
They struggle a bit, but manage to survive and pay their bills.
Then they manage to get a big client.
Still small – with very low overhead – the big client generates lots of revenue and excellent profit.
So the management team (or owners, usually the same group of people at this point) decides to reward themselves with nice cars, other benefits, and also to grow the business (and the overhead). Still no real strategy. Daily work keeps them busy, money is flowing in. Why bother?
Then (and this can be after several years) the big client disappears, cancels the contract, or even just reduces the volume significantly enough to turn a profitable business into a loss-making one.
Alarm bells start ringing, and the management team – for the first time ever – is forced to think about being cost efficient to survive in the short term and having a real strategy for long term success. This is, where many businesses fail. They cut cost again and again (usually via layoffs) until there is no company left and then file for bankruptcy.
Some, however, get through this and manage to find their feet again. They take the necessary steps, define a strategy and start implementing it. And, lo and behold, success returns.
At that point, things are looking good again. Still some legacy issues to solve, but a plan to do so. Emphasis is on a sound strategy for long term success and sustainable growth. Scenarios have been considered and as far as possible prepared for. In fact, things are going so well, that we are approaching a (somewhat less pronounced) Exhilaration Phase with all the related carelessness … again.
Rinse, Repeat … Fail
Previously made plans, scenarios, and strategies start collecting dust. They are neither reviewed, nor updated. Business is booming … again. Daily operations require their full attention … again. The hard learned lessons are seemingly forgotten and old habits take over … again. In other words, their learning curve is rather flat.
And so it goes. Some companies appear to be incapable of breaking this circle. And I honestly don’t understand why. All they have to do is to apply the same common sense, strictness, foresight, planning, and care that they use during the Disenchantment Phase even and especially when things are going well.
The time to repair the roof is when the sun is shining.
– John F. Kennedy, State of the Union Address January 11, 1962
How do you see yourself? Is your learning curve flat?