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Earl R Smith II, PhD

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It’s seldom the dog that you love that bites you
it’s almost always the one you can barely tolerate.

Many companies fail for reasons that have little to do with their core product or service. It is often the afterthoughts or ‘under-thoughts’ that cause failure when success has been looming on the horizon.

Companies with cutting-edge technologies are regularly beaten by those with more conventional ones – organizations with first rate value propositions find themselves losing to others which do not meet their high standards. The world can seem patently unfair – until you look at the competition – and the competition with the competition – differently.

Evolutionary Ideas

Early in my career as a recidivist entrepreneur I learned, sometimes by the hardest methods, that the business of business is different from the business of the business. You may want to go back and re-read that sentence a couple of times and sort it out before going any further but I will try, in what follows, to show you clearly what I mean.

When a company first comes into existence it is most likely that the entire senior team is composed of individuals who are minor variations on a common pattern. (Age, education, experience, ethnicity, interests, etc) They are comfortable with each other and that goes a long way towards developing the spirit of intense camaraderie that is necessary for any initial success. Each team member may assume (or be assigned) a unique role within the team and company but it is their underlying common characteristics that dominate and define the initial corporate culture .

In the early years a company grows by turning the connections of senior team members, often most notably the CEO’s, into an initial client base. Sometimes this may be possible because some of the senior team have recently left a company which subsequently becomes a client. At other times potential clients may have been supportive of the team’s intentions to launch the company. But, however it occurs, companies which survive the initial stages of growth do so because they have generated, and then cultivated, an initial client base which helps them turn a burn rate into a run rate.

During this stage, corporate functions are serviced either by founders (making it up as they go along) or by narrowly experienced personnel in the business disciplines. So the HR function is managed by a good recruiter and the financial system is handled by a controller. Some of these functions may be outsourced either partially or completely during the early years. The business of business takes a back seat to the business of the business.

The Dogs You Don’t Like

As a company grows in size and complexity the requirements in these ‘business of business’ areas become more critical to its success. Mistakes or errors have more serious implications. The journey from burn rate to run rate – from draining away financial resources to significant levels of net income – is a difficult one for most companies but, once achieved, many companies find themselves in completely uncharted territory and suffering from extreme vertigo. However this transition is managed, a company enters into uncharted waters when it moves into the black.

Companies that manage this transition effectively enter a new evolutionary phase. The transition is non-linear – change is quantum. Some of the characteristics of a start-up are left behind. For instance, they cease being ‘science projects’ and begin the serious journey towards becoming a fully functioning company. They enter onto a path that, with skill, dedication, persistence, wisdom and more than a fair share of luck, may lead their ‘science projects’ towards corporate maturity.

In these early months and years management can mostly provide for the needs of the growing company by sticking close to the ‘dog they love’. By this I mean that, if the company is involved in a particular technology or service, close connection with that technology or service permeates the corporate culture and defines the experience of team members – a gathering of similars. But success and growth brings its own set of issues.

At some point the company’s needs for further growth exceeds the senior management team’s ability to generate new clients and expand the business base. Around this time other – management – issues such as an increasing need for appropriately qualified people to service client’s needs and a rising appetite for financial resources begins to push the management team’s attention towards those ‘dogs that they can barely tolerate’.

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