The road to success is always under construction. / Lily Tomlin /
The lifecycle of a company and its development phase correlations have been investigated by several researchers. A popular American economist Ichak Adizes has developed a theory of corporate lifecycles. The theory is based on development stages of any living organism – it is born, grows, ages and dies.
In theory, everything looks simplified and understandable but in reality, in each of development phases, companies have to overcome very different – larger and smaller – challenges. Although a lifecycle consists of many development steps or stages we offer to look at companies and their key challenges through a prism of the “Z-model”.
The conventional author of the model is a process management expert Andris Balodis who has collected a variety of visions and incorporated them into one model. The model is based on different theories, including Adizes’ theory of companies’ lifecycle. Why Andris has named it Z-model – you will find it out by getting to know the model.
Efficiency and productivity are the main challenges of every company in two time categories – short and long term. Graphically it can be represented as follows:
The ‘task’ included in the 1st quadrant may seem obvious, since everyone aims to create a product or service which is appreciated by customers. However, the key criterion in this quadrant is to create a product or service which makes customers return again and again. It is crucial factor for most businesses so that they could exist.
The task of the 2nd quadrant – to create a system – does not mean to load you with extra amount of work by implementing complex operations and process analysis and making descriptions. On the contrary, to create a system means to quit ‘needless’ operations that have no added value in order to save time, avoid errors and defects in production or communication, and make the daily work simple, easy and understandable to increase sales and profit.
3rd quadrant. Even if your product is unique and irreplaceable, it is only until competitors come up with even better solutions. Therefore, the third quadrant predicts that, in the name of future stability, you have to create new, innovative products or services – the potential income generators in the future.
4th quadrant. Companies exist in an environment that is constantly changing. No system, no matter how perfect it is, can exist forever. Those who are able to adapt to changes most quickly are still able to maintain a high working efficiency. Jack Welch (the former CEO of General Electric) once said: “If the rate of change inside an organization is less than the rate of change outside… their end is in sight.”
The correlations and the ‘transcript’ of the Z-model name can be seen in this picture:
The key principles that apply to this model:
- The transition from one quadrant to the next is possible only successively (as shown in the picture).
- Successful organization’s existence and development cannot do without one of these four quadrants.
- An organization at the same time can be in only one quadrant; it is not worth it to create a system if there is no product created which makes customers return again and again. The sigh for moving to second quadrant is a growing number of customers who return and, as a result, you have motivation and ability to meet the demands in high-quality and with minimal resource usage.
Why you cannot jump directly from first to the third quadrant? The third quadrant, in essence, represents R & D function that requires financial resources. This money should be earned and it is not possible to do this (in long term) if you are working only in the first quadrant. Moreover, an innovation can become a source of long-term success in an environment with efficient processes and systems.
What happens if a company ignores the third quadrant – innovation? In a competitive environment, sooner or later, another company enters the market with a new, innovative product or service. It’s is only a matter of time.
The questions you can ask to yourself as a manager:
- To which quadrant is given the greatest attention in my company?
- To which quadrant should be given the greatest attention in my company?
- What are the major challenges working in a particular quadrant?
It should be noted that these quadrants can be attributed both to the organization as a whole and to particular departments, product or service groups, or business branches.
The highest stage of development
According to Adizes theory, a “new” organization is flexible and capable of relatively simple change, but its behavior due to lack of control is unpredictable. By contrast, behavior an “old” organization is controllable, but it is not anymore so flexible and able to change and adapt. At that point, the organization is able to be both flexible and controllable; it no longer fits in any of these groups. In other words, the organization is in the superior or the highest stage of its development.
Unlike living organisms, which development cycle (born, grow, age and die) is inevitable, companies are able to achieve this ultimate or the highest degree and stay in it by using different methods and taking various decisions and actions.
Ichack Adizes argues that the greatest challenges for organizations are raised particularly by direct transition from one development stage to the next; the companies either learn to overcome problems and move forward, or get “infected” with an unusual illness that prevents the further development and which cannot be resolved without outside professional intervention.
According to our experience, many entrepreneurs confirm that, in a context of the Z-model, the second and third quadrants have the most importance in their business. However, many businessmen manage to succeed, but only part of them manages to keep success for a long time.
Excellent firms don’t believe in excellence – only in constant improvement and constant change.
/ Tom Peters /
That’s why many entrepreneurs believe that now is the time to create and build business processes and systems that could provide an environment for innovation and long-term success.
Good luck!