There is a famous Harvard Business Review article, “Evolution and Revolution as Organizations Grow,” written by Larry Greiner. Written in 1972, it’s still a relevant and important text for anyone interested in small business growth and development. If you own a fast growing small business, you’ll immediately recognise the main point Greiner makes; that business growth can be hugely exciting- even fun-, but also causes upheaval and sometimes even chaos: and if you aren’t prepared to make some changes as you grow, you might end up in trouble.

In his article, Greiner begins by giving examples of problems or ‘crises’ caused by a lack of awareness of the management needs of different ‘phases’ of businesses. His theory is that each business, no matter what it makes or sells, goes through fairly standard changes as it grows, and that the structures and management styles that work for early-stage companies, may be detrimental to more mature ones- and vice versa.

Greiner’s idea is that in any business, each period of rapid growth will eventually hit a ‘crisis’ phase. At this point, managers or owners will either change their approach, or their business will stop growing- or possibly fail altogether. Recognizing these patterns and changes is the key to working out what’s blocking the business moving forward, and taking control so that you get through each crisis. To do this, business owners/managers need to look back and work out where you’ve come from- to understand where you are on the Greiner ‘growth curve.’

Greiner’s examples of management crises include:

A small research company chooses too complicated and formalized an organization structure for its young age and limited size. It flounders in rigidity and bureaucracy for several years and is finally acquired by a larger company.

and

A large bank disciplines a “rebellious” manager who is blamed for current control problems, when the underlying cause is centralized procedures that are holding back expansion into new markets. Many younger managers subsequently leave the bank, competition moves in, and profits are still declining.

In my own work, a relevant example recently was a family business which had reached 250 employees and had in the past turned a healthy profit each year. They had reached the ceiling and were beginning to falter, both on profit performance and on the controls within the business. The business had been started by the father, an entrepreneur; they now had three Directors, who were unclear where the business was going and as a result all had their own ideas about the future. This led to them pulling against each other, which caused friction between them.

By developing their business plan to focus on key objectives and supporting this with a clear strategy, they identified they needed to:
• Change the organisational reporting structure
• Hold regular senior management meetings to discuss strategic issues, as well as operational problems and achievement
• Improve the financial management procedures
• Develop the people management processes, by introducing an appraisal system, team meetings and greater accountability for staff
• Measure the impact of the sales team

This took 10 months to get in place, but over this time they began to see a reduction in staff turnover, better results from the sales team and a steady increase in business.  Developing a common vision with senior management accountable for their objectives, really began to move the business forward. Being entrepreneurial had taken them so far, but without the development of new management systems the business would have either remained where it was or worse still gone backwards.

Greiner’s Phases of Growth

The below graphic shows the Greiner model, which shows the five (he later revised it to six) phases of growth and the ‘crisis’ which means the manager must change to move forward.

The most relevant Greiner Phase for Mowgli entrepreneurs are probably the first two- Creativity phase and Direction phase, so we’ve discussed them in detail. (You can read more about the rest of the phases in his article, which we’ve linked to at the bottom.)

In each phase, the actions which ‘solve’ the crisis go on, as the company grows, to create the ‘crisis’ in the next phase. (Get it?)

Phase 1 – Creativity

The first phase is characterized by the following:
• Founders are technically or entrepreneurially oriented
• Communication is frequent and informal
• Long hours and modest salaries
• Reactive to feedback from the marketplace

Creativity Phase = The Leadership Crisis

As the company grows, new systems are needed – manufacturing, accounting, personnel, etc. The founders usually do not have the expertise to manage this new set of systems nor can they motivate new employees. This is the Leadership Crisis.

Phase 2 – Direction Phase

This phase is characterized by:

• Functional organization structure
• Accounting systems
• Formal, impersonal communication
• Direction centralized to the new, top managers

Direction Phase = Autonomy Crisis

As the company grows further, centralized management is inappropriate. Lower level managers come to possess better knowledge of the marketplace but are unable to react quickly. There is a demand from the team for greater autonomy but often this is very difficult for owner-managers who find it difficult to let go! However, you have to. The solution to this crisis is to push decision responsibility to lower levels. Managers who fail to do so will see their companies passed by quicker organizations. (You cannot do everything and grow at the same time!)

• Phase 3 – Delegation Phase/Control Crisis: Top management begin to lose control of field operations; and communication issues/coordination becomes a problem
• Phase 4 – Coordination Phase/Red Tape crisis:  Systems begin to outlive their usefulness; too much beaurocracy; disconnect between income generation and needs of the business.
• Phase 5 – Collaboration/Possible ? crisis: Experimentation, new ways of working, delegation of new ideas to employees, etc. The company begins to look outwards and internationalise.

What stage is your business at?

In part 2 of this article, Anne will help you understand how to apply this knowledge to your business.  Read Part 2 here.

We’ve found a free version of the original Greiner article hosted on the web here , if you are interested in the phases we haven’t described fully above.

I am an Arabic girl who comes from Jordan, this small country that is poor in terms of natural resources but rich in hard workers and brilliant minds. Jordan’s economic growth and employment rate cannot currently absorb all the job seekers that we have in this country; unemployment is a threat that worries all Jordanian youth.

To ensure that Jordan’s many bright young minds were not wasted, Entrepreneurship became a priority of Jordan’s policy makers some years ago and education and skills in this area were strategically utilised. This means that now this generation of Jordanians is increasingly intellectually and culturally inspired- with self-belief and determination- to start a business. As Jordan actively seeks and attracts organisations who drive entrepreneurship and innovative solutions to unemployment, startup businesses have many more opportunities to shine.

On a personal level, my professional experience with youth programs in Jordan- as well as the community work I do in youth capacity building, where I have been guiding entrepreneurs in self-development and communication, has motivated me to share the below advice about what leads to a successful deal with investors. I hope you find it useful!

Transforming your business idea into action and “hunting” an investor is not only about a brilliant pitch… On the contrary things start even before meeting the investor! See here what I mean:

1. Make sure you have a mature unique business idea that is needed, doable, and can be commercialized (“commercializable”).
2. Have your “research-based” understating for the market, its needs, available similar ideas and prices. For example, you may develop brilliant software- but when you do your research, you may find that it is already available as an open-source and free download on the web. So skipping studying your market may waste your time and efforts, and even kill your momentum as a motivated candidate who developed a creative but not innovative product.
3. Ask the experts… A fresh experienced eye never does any harm (and will almost always positively add to your journey).
4. Choose your investor smartly and tailor your approach to each one… approaching a technology lover to open a restaurant may only fill your inbox with rejecting letters!
5. Be ready to meet the prospective investor with a brilliant approach and a rich but briefed presentation. Handle their questions with full faith in yourself and your idea… here differentiate between “confidence” and “Ego”!
6. Once you start to feel the feasibility of your business idea, go and seek legal protection according to your country’s copyright law, and don’t over promote your unprotected idea everywhere.
7. Accept failure as a ‘quality check station’ that helps you to assess yourself, your idea, your approach and any other detail you may have dropped due to being extremely motivated….

Finally, I sincerely emphasize that it requires enormous courage to leave a secured job and choose to be an entrepreneur. Be confident that proper planning, accompanied with will and determination will get you there!

There is a general presumption- particularly in Western, mainstream economic press coverage- that entrepreneurship generally, and SMEs more particularly, are valuable for growth, innovation and development within national economies. Is this actually true?

Well, a 2003 study by Eakin and Kao suggests as much: the study found that increasing the ‘birth rate of firms’ also raises productivity levels in national economies. And Nystrom (2008) reviews all the evidence and concludes that “A majority of the studies on the relationship between entrepreneurship and aggregate economic growth find a positive relationship.” The studies that take a long term view especially support this ( the general gist is that entrepreneurship, to have sustainable positive effects, requires a supportive policy framework and government support).

Who is an entrepreneur?

Within the Mowgli community we often get to hear people’s differing opinions about exactly what an entrepreneur is and what role they play within societies. Personality-wise, entrepreneurs get some bad press. The FT profiled entrepreneurs as ‘often abrasive, rather marginalised people.‘  On our TV screens we might see entrepreneurs depicted as aggressive and even patronising, such as Alan Sugar on the UK Apprentice. (On the other hand, nobody denies that entrepreneurs like Sugar get business results). Why does Mowgli feel supporting entrepreneurs is so important?

Well, let’s define an entrepreneur first. You can find a number of different definitions if you look, but we’ll stay basic. An entrepreneur is someone who starts and runs a business or enterprise. True? Yes, but obviously, entrepreneurs are more than just managers. Some theorists (1) feel that the main difference between an entrepreneur and a manager is that entrepreneurs take more risks. A famous economic theorist called Schumpeter, however, felt slightly differently; he posited that the chief distinguishing characteristic of the entrepreneur was their capacity and propensity to innovate. 

For actions which consist in carrying out innovations we reserve the term Enterprise; the individuals who carry them out we call Entrepreneurs.

Saeed Omar, Mowgli Social Entrepreneur

Schumpeter’s thinking helps us to tie up the definition of the true entrepreneur with their potential to change economies and benefit society.

Who’s Schumpeter?

Cox (2001) comments “Born in Czechoslovakia in 1883, economist Joseph Schumpeter was far ahead of his time.” He outlined and articulated the workings of the capitalist market and growth cycle in several books and pamphlets and his thinking remains extremely influential. His approach was that “economies don’t grow, they evolve,” and that innovation on the part of small business owners – entrepreneurs- was a driving force of change and progress, even though it made other products and practices obsolete- what he called ‘creative destruction’.

As Schumpeter saw it, all firms had a life cycle; and this life cycle constantly provides opportunities for other firms to innovate even as the original firms reach the end of their profit making activities (if they cease to keep up). In the words of the Library of Economics and Liberty:

“[...] Schumpeter was among the first to lay out a clear concept of entrepreneurship. He distinguished inventions from the entrepreneur’s innovations. Schumpeter pointed out that entrepreneurs innovate not just by figuring out how to use inventions, but also by introducing new means of production, new products, and new forms of organization. These innovations, he argued, take just as much skill and daring as does the process of invention. Innovation by the entrepreneur, argued Schumpeter, leads to gales of “creative destruction” [...which], he believed, causes continuous progress and improves the standards of living for everyone.

The Economist magazine launched its famous column in Schumpeter’s name in 2009, with the rationale that capitalism the rise of modern business should be viewed positively for its effect on societies. In their words:

Joseph Schumpeter was one of the few intellectuals who saw business straight. He regarded business people as unsung heroes: men and women who create new enterprises through the sheer force of their wills and imaginations, and, in so doing, are responsible for the most benign development in human history, the spread of mass affluence.

Now, there are several obvious cautionary points to make about the benign intentions of business. And it’s important to be aware that this is not the last word on the matter; for example, another key theorist was Kirzner, who highlighted the key trait of the entrepreneur as that of identifying opportunities. Schumpeter’s theories have been criticised (here’s an example- this paper says that rather than creating opportunities that knock everything into disequilibrium and force others to innovate, the true entrepreneur is actually fulfilling economic potential and moving the economy towards an equilibrium where every economic opportunity is realised. Think about it!)… Even so, whatever you feel an entrepreneur actually is, the research I’ve quoted here all  still points in the same direction; entrepreneurs have a positive effect on economies. If that’s true, then supporting them at a personal level is surely the best way of ensuring that their impact remains positive and human-focused.

A group of Mowgli entrepreneurs with their mentors in 2010

Here at Mowgli, we meet entrepreneurs every day- and not only are they innovative, positive and driven, they’re also human. A mentor to talk to helps them remain focused- and most importantly, keep an eye on the bigger picture and their strategic future. Such clarity and forward thinking is crucial in order to avoid what Schumpeter called the ‘death of the firm.’ Not only that, creating lasting personal relationships between mentor and mentee is just as important for Mowgli as the wellbeing of the business; in order that the entrepreneur keeps their community and their personal goals in mind as their firm grows, not just money. As Schumpeter wrote, profit can only motivate a firm for so long; keeping a firm and a dream alive is about something more- the desire to keep innovating.

Further reading:

1) There’s a good article on defining entrepreneurial traits: Brockhaus and Horwitz (1986) ‘The Psychology of the Entrepreneur.’ The Art and Science of Entrepreneurship (1986) pp25-48.

2) Cox (2001) has written a fantastic article, downloadable for free here, which gives all the Schumpeterian quotes I’ve used here and an overview of his key theoretical insights.

3) Mowgli have written a paper called ‘The Critical Phases of Mentoring in the life of an Entrepreneur’. You might notice that the phases correspond to the life cycle of the firm- very similar to what Schumpeter was talking about. Click here to read it on Slideshare.

The BBC feature also describes the particular problems of being an entrepreneur in Russia.

http://www.bbc.co.uk/news/business-13546177

Now, take the case of the high-powered CEO who rewards herself with a luxury penthouse in an upscale boulevard. She shows me around and when I mention that she must be proud of her beautiful new home, her first response is a reference to the large mortgage and the monthly interest payout that came with the swanky house. Can she really enjoy the new acquisition?

Instances of success stories where the incumbents wallow in pity instead of savoring their moment of glory are aplenty. The story is the same for all classes of people – politicians, entertainers, sportspersons, artists, professionals etc.

This brings us to the moot question. Why then do successful people fail to enjoy the success and end up getting more stressed? They are clearly intelligent and talented folk who should know better and it is such patterns of behavior that my good friend and leadership coach, John O’Neil has addressed in his seminal book, “The Paradox of Success.”

John writes that the paradox of success has its genesis in the shadow. Everything that demonstrates success – money, fame, power – tends to feed the shadow. The shadow is our hidden self that we don’t like to acknowledge or that we have been discouraged from showing. The shadow generally remains hidden but can occasionally appear in real life, such as when we unintentionally insult someone, lose a job or face a marital crisis.

It is at such times, that one needs to step back and take some time out to ruminate. Ideally taking time to observe and reflect is best done in a retreat. What is a retreat? A retreat can be any amount of time you spend away from your usual productive round of activities, as long as the time is spent in pursuit of learning… more about oneself and one’s surroundings.

While some may recognize the shadow lurking below the success, others may not feel this situation. Still others may rise to a level that they train themselves to ignore the shadow and live for the moment. Even so, they might feel a sense of dissatisfaction souring the taste of their achievements.

A Time for Retreat and Reflection

There is a time in every life
when the very act
of looking back and taking stock
becomes essential
to going forward.

Without the light
that shines out of the darkness
of the past,
we cannot chart
a new path
to the future.
Monastic spirituality
is built around
a life of retreat and reflection.
In every Monastery of the Heart,
there must be regular times
set aside
to go down
into these inner recesses of the soul
once more, alone and centered,
to take another look, a new kind of look,
at ourselves.
Retreat, reflection, Sabbath,
and soul-space
are of the essence
of the monastic spirit—
not for our sake alone
but for the sake of those
who depend on us
to make the promise of creation
new again.

Excerpted from The Monastery of the Heart: An Introduction to a Meaningful Life by Joan Chittister (BlueBridge)

Ask yourself, when was the last time that you retreated into solitude? Retreats can be as short as a few minutes. It can be a session of meditation, a short walk in a peaceful park, enjoying a game of your favorite sport or immersing yourself in music or dance. In effect, a retreat is a refuge from a world in where you lost yourself and a place where you can find yourself.

Being an entrepreneur is not just about running your own business, it’s about a whole set of thoughts, beliefs, assumptions, actions and behaviours that run alongside how you approach business and the ride it takes you on.

We are currently running a discussion on Linkedin entitled, ‘what is most important thing an entreprenuer should know or think about before starting out’ and the responses so far have been almost all about the way an entrepreneur thinks rather than practical business skills.  If you would like to add in your own two-pennorth then you can find the discussion on our Linkedin Group.

In the meantime, here are some thoughts from some of the panelists from New York Entrepreneur Week on what they think an entrepreneur is.

http://youtu.be/lZKhZmvJuZY

A helpful way to become focused on your physical presence is to experience your body through yogic postures. Not only is this a relaxing way of tuning out the outside world for a few minutes and concentrating on how you feel physically- excellent for mental wellbeing and to ease bodily aches and pains- it also helps you become more attuned to your physical presence and learn how to connect with the world around you.

The video below is a helpful resource. While it is suitable for beginners, Mowgli advises that you consult your doctor before attempting yoga for the first time and that you do not try these postures if you are pregnant or have back problems.

Don’t worry if you can’t achieve all the postures- it’s really just about experiencing a range of physical movements and becoming more aware of your breathing- notice the way your muscles and ligaments flow to create actions.

Done with positivity and energy- and more importantly, with total commitment to the moment- every conversation, sales pitch, and presentation you do can be ten times more effective. Got any more great resources on communications skills? Let us know by tweeting at us @mowglitweets!

“The Johari Window is a communication model that can be used to improve understanding between individuals within a high trust team or in a group setting.  Disclosure, self-disclosure and feedback are part of effectively using the Johari Window.”

The two concepts behind the Johari Window are:

1. Individuals build trust and safety in relationships and teams by disclosing information in a high trust environment,
2. Individuals learn about their impact on others.  ‘Blind spots,’ or personality traits or behaviours that may be outside their own perception can be revealed.

Feedback helps to shrink the blind spot, while simultaneously expanding the public self.

“Nermeen Hassan says mentoring an entrepreneur is the “best thing” she has ever done – and she has done some interesting things.”

Read the full story here: http://www.thenational.ae/business/economy/mentor-aid-for-entrepreneurs

You may even be familiar with the term ‘intrapreneur’ who is a person who brings the skills, abilities and attitudes of entrepreneurship to the work place and who will almost certainly be employed, but you may be unfamiliar with the latest buzzword to hit the headlines which is the ‘social intrapreneur’; who, according to Sam Conniff in The Guardian is “an entrepreneurial individual, within a private company, driving the business towards making social impact while achieving it’s business objectives”.

Want to find out more?  You can read the entire article here: http://www.guardian.co.uk/social-enterprise-network/2011/jan/31/social-entrepreneur-business-insiders-change

Claudia Cahalanem wrote in the Guardian earlier this year (http://www.guardian.co.uk/money/2011/jan/08/social-entrepreneurs-good-business) about how social enterprise is beginning to hit the mainstream through education, which has traditionally been the harbinger of new ideas.  The plethora of courses, workshops and books on the subject that has recently burgeoned and are set to change forever the status of the social entrepreneur from lonely, isolated maverick to being someone at the forefront of a new global movement that really could change the world.

1. Starting your business for the wrong reasons.  Many people start businesses as a result of a change in their working lives.  For instance, they may be made redundant and can’t find alternative employment so decide that they may as well work for themselves to earn some money.  Others believe that working for themselves will give them more time for their hobbies or their family, if this is the case then you need to finely balance what you need to earn with the time you have available to you.  Starting a business isn’t easy, and most small business owners would say that they now work harder and longer.

2. Poor Cash Flow or Capitalisation.  You need money to make money, in other words if you don’t have enough coming in to pay your suppliers then you will soon be in trouble.  You need to be certain that you have enough in the bank to tide you over for the first few months until the invoices starting being paid.  Your business may not reach break-even for a couple of years.

3. Poor location.  This applies equally online and offline.  For retail outlets you need to be certain that you will be able to see the footfall.  There is a reason why many big stores are situated in shopping malls, and that’s because the volume of passing ‘traffic’ is so great.   Just because premises are cheap doesn’t mean they are appropriate and if you rely on passing trade to be noticed then your business may be doomed before it’s even begun.

4. Lack of management skill and understanding. It is tempting when you are starting out to try to save money by doing it all yourself, but in reality people don’t know everything they need to know in order to make a business successful.  The variety of skills necessary include financial understanding, marketing, purchasing, advertising, networking, communication, sales, production and hr and employment.  Every business owner will have experience in one or more of these areas, but the real skill is in knowing when to call in extra support and help.

5. Poor planning skills.  In order to succeed you need to have a plan for where you are going, this includes planning for financial success as well as for business success. Without a business plan, an entrepreneur has no idea of where they are headed or how long it will take to get there.

6. Under or over-expansion.  These are two faces of the same problem, if you don’t expand at the rate your market is demanding then you will be missing sales and losing market share; yet if you expand too quickly you will be wasting money and resources you have yet to earn with no guarantee that they will be replaced.

Of course, these are the negatives, with a little help and insight there is no need for any business to fail.  Working with experienced people can help you to overcome any potential problems and that’s why the Mowgli Foundation provides mentors to entrepreneurs and small businesses with potential.  Click here if you’d like to know more.

My assumption (silly really, because I ought to know by now that you should never assume anything) was that people would be talking about ‘skills’ their mentor might have/need, what has happened though is that all the comments are about the ‘qualities‘ a mentor needs instead.  So far people have said they wanted such things as

• Passion
• Wisdom
• Common Sense
• Inspiration
• Trust
• Honesty
• To be non-judgemental and have a sense of humour too
• Patience
• Prepared to listen
• Good business skills and experience gained from running their own business – in other words they walk the walk, not just talk the talk

These are all essential skills for an effective mentor to a. gain and b. develop.  So, do you have any others that you would like to add, either here or on the Linkedin discussion?

This morning I was given a piece of information and then checked the statistics for myself too, that piece of information was that if every small business were offered an incentive to employ just one extra person, we could remove unemployment completely here in the UK.  According to the Office of National Statistics there are 2.10 million enterprises registered for VAT in the UK and there are about 2.5 million registered unemployed (that is people claiming some sort of benefit).

Not all businesses are registered for VAT because not all are required to register, so it might be a fair assumption that there might be an additional 400,000 entrepreneurs out there who don’t figure in these statistics.  In fact, there are probably more than 400,000.

I appreciate that there are politics involved, skill shortages and other little things like the minimum wage, but surely there is an argument to be had that says ‘give the benefits to the businesses and entrepreneurs to create the employment needed for those who are currently not working rather than paying people to not work’.

This post is, of course, oversimplifying a massive debate, but if we already know from research that the majority of new jobs in many parts of the world are created by the growth achieved by entrepreneurs starting small and medium enterprises.

• Small and Medium Sized Businesses Drive Economic Growth in the UK
• Smes Primary Source of Social and Economic Stability