Is it a two or a three-act play? The nature of business growth

Most companies start, grow and die in a two-act play. During the first act, the entrepreneurial drive of the founders champions the company’s launch of the business idea and pushes up its growth through a strenuous but engaging period of development.

Here revenues start rising and so do profits. The enthusiasm of the founders attracts the better talent in the labour market (whether in finance, marketing and product design) that teams up with the founders in growing the company. Ideas and energy keep on flourishing as new markets are opened and related ventures are explored. This is the first act – complete with exposition and dynamics.

It is here that the playwright stops to reflect. Will this be a two or a three-act play knowing so well that business goes through a life cycle reaching levels of maturity and inevitable decline. The founders are at a cross-road. Do we have the energy and enthusiasm to get the company through its second act? The game has now changed as the market has matured and unless we are in empathy to events happening in the eco system, whether it is changes in society, economy, technology and communication, this can be the final act, of resolution to merge, sell or quit.

It is interesting to note how many companies wind down at this stage when they knew all around that unless they change they will die. Businesses need to be recreated and reawakened and unless the founding team of entrepreneurs and employed talent are in the mood to go for it, the play will get to a close.

At this juncture, we also have the option of moving to a second act in a third-act play. Re-energising the business before it is too late. Should we abandon the successful idea before it gets tired and obsolete? Have we thought well enough of the future by thinking succession, keeping with you the best talent, and not being taken aback by the entrepreneurial flair of some of your employees who are coming up with innovative ideas and initiatives? Several successful companies have been breeding new entrepreneurs who ventured out of their original businesses to new ones based on updated business models that take both technological and social changes on board. They end up competing with their former employers most of the time successfully as they understood that ideas and business models need to change with the times.

Where do we stand in our business today? Will it be a two or a three-act play? The choice is yours, but make sure you think thoroughly before you take the decision.

About the author(s)

Joseph F.X. Zahra is a Malta based economist with over thirty five years of corporate leadership and business consultancy experience.