Companies are complex adaptive systems with many intricate parts, that are required to work in symphony, and when they fail to do so, can be detrimental to the livelihood of the said company.
In some ways companies are a bit like us humans. They are born as small entities and they have the potential to grow.
For human to grow, they require surplus metabolic energy (calories we consume); this is the difference between the total metabolic energy minus the energy we use to maintain existing cells.
Similarly for companies, to grow, there needs to be additional capital (financial energy) available after paying off the existing cost of conducting business (salaries, infrastructure, other costs). Organisations achieve this by minimising costs so as to increase profits which can then be inserted back into the company for further growth.
Eventually both companies and humans reach an impasse (this is life on the balance beam), when the cost of maintaining the status-quo is equal to the incoming energy or capital.
Eventually us mortal-humans fall of the balance beam, when the cost of maintaining existing cells is greater than the the incoming metabolic energy and as we age, we slowly drift off the balance beam towards the end of life. We have through the advent of better healthcare, access to clean water and sanitation, managed to increase the number of years a human can expect to live, however we have not managed to delay falling off the balance beam indefinitely. (Hopefully one day technology might help up move up from the balance beam)
Unlike us humans, a company on the other hand, has two possibilities:
Either, it can fall off the balance beam towards the end of life because the cost of doing business is a lot higher than incoming capital. This can happen for many reason: your customer´s preferences change, your customers adopt another product, or your product no longer meets the needs of your your customer.
You manage to go upwards from the balance beam, extending life of your company. That is the aim of this mini-blog series.
Falling off the balance beam can be described in many ways, but I define it as losing marketshare for consecutive years to a point when you are not able to recover whilst new entrants or other incumbents in the market are consistently meeting customer needs so that their revenue and market share increases.
To exemplify this, we can think of the classic case study examples: Apple vs Blackberry, Netflix vs Blockbuster, Facebook vs MySpace.
What follows is a series of short essays that provide a guide on how to think about things that matters when building a company that lasts — prevents it from falling off the balance beam.
These are the topics I am writing about — I will release them as and when they are ready. These chapters can be read in isolation.
- Intro: How to build a company that lasts
- #1 Why do you exist
- #2 Bold leaders double down
- #3 Do you know your competitors
- #4 Short-term money dilemma
- #5 The right way to increase your company´s worth
- #6 The first rule of innovation is: you don´t talk about innovation
- #7 How to align your entire team and empower them
- #8 Company-centric metrics vs user-centric metrics
- #9 Build teams that help customers make progress
- #10 How to escape when you´re stuck in a rut