During a recent conversation with the leaders of a well-known consumer products company, the concept of “product lifecycles” came up. The context was how different skills are needed to innovate, nurture and grow products that are at different stages, and so “corporate lifecycles” and “business lifecycles” were also discussed.
On the flight back to Barcelona, I thought about the underlying similarities between these various “lifecycles”. All of them involve transition. At each stage, the product/company will face different competitive environments. Leaders will need to identify and adopt appropriate strategies and tactics in order to grow or protect market share. Naturally, different leadership capabilities will be needed to guide product teams, business units and corporates through these stages.
A quick internet search revealed that the concept of “corporate lifecycles” was propounded in a 1987 book by Dr. Ichak Adizes, a management guru and former professor at UCLA. As I read more about his model, I began to appreciate its inherent power and applicability to executive search.
We at LS International constantly seek ways to transform executive search with the objective of ensuring that both the corporate clients we serve in the consumer products space and the executives we place in senior management roles benefit. By sharing my point of view on how the “corporate lifecycles” concept can be applied to executive search and hiring, I hope to stimulate debate and discussion that leads to better ways of working and superior outcomes.
Consumer companies are evolving rapidly but are mature businesses at their core
Most large consumer companies have mature businesses. Their products are well-accepted, their brands are well-known, and they have built robust supply chains. All these contribute to steady cash flows, which allows the Boards of these companies to invest in new products/markets and pay dividends regularly.
The corporate lifecycles model also posits that mature companies will sooner or later start to decline if leaders do not act. Through organic or inorganic product development and brand building, consumer companies must balance their strategic initiatives to stay as mature and solid businesses.
Hiring tied to the business unit/company’s stage in the “corporate lifecycle” will deliver superior outcomes
Aswath Damodaran, professor of Corporate Finance and valuation at NYU’s Stern Business School, draws parallels between companies and human beings. Both grow from newborns to adults and eventually, decline. And just as humans don’t like aging, neither do companies. Yet, the tendency of companies to fight this natural process is often a major reason for loss in value.
For all business entities, valuation (either by the stock market, investment analysts, or private investors like VC/PE funds) is a key metric of success, with the performance of senior leaders usually measured by appreciation in stock prices. Although valuation depends on expected future financial performance, Prof. Damodaran points out that “A good valuation has a story and the balance between the story and the numbers changes during the course of a company’s life cycle”.
At each stage of its lifecycle, companies (or business units within them) need leaders who can deliver both on the “numbers” and the “story”. Businesses therefore need leaders who are “age-appropriate”. These leaders must possess the skills to navigate the business safely through the current phase of its lifecycle. Selecting talent must explicitly factor the lifecycle stage of the business unit or enterprise to find the right talent for key leadership roles.
Prof. Damodaran identifies four types of CEOs/leaders companies need, depending on where they are in their corporate lifecycle:
- Young companies need “Steve the visionary”, aka Sarah the visionary, who has a vision and can tell powerful stories that excite and enthuse employees, customers, business partners and other stakeholders. Such leaders must be willing to take calculated risks and blaze new trails because there is not much history to go by.
- Growth companies need “Bob the Builder”, aka Barbara the Builder – leaders who can build a business and manage growth in a calibrated manner so that the enterprise as a whole works in synch to deliver what is needed. While risk-taking will be necessary, the ability to take market leadership and capitalize on early growth opportunities when there is less competitive intensity is more critical.
- Mature companies (like most blue-chip consumer companies) need “Don the Defender”, aka Danielle the Defender– someone who can successfully build moats to keep competition off from eating market share and margins. Such leaders must focus on running a steady ship to ensure that investors get their expected returns.
- Even the best-run companies will eventually decline if they do not reinvent themselves and become “young” again- perhaps with a new portfolio of products that contributes to the bulk of the revenues and margins. Companies in this stage need “Larry the Liquidator”, aka Linda the Liquidator, to monetize assets that have outlived their utility (e.g., sell off brands or high-cost manufacturing facilities etc.).
While industry experience, broad/deep functional expertise, knowledge of markets, etc. are all necessary attributes when searching for the best talent, companies (and the consultants they work with) must also keep in mind additional competencies and capabilities needed given the lifecycle stage of the hiring entity. These must be clearly listed and prioritized so that executive search professionals can identify a suitable candidate pool, shortlist the best profiles and finally, ensure that the best talent joins.
As I go over some of the senior-level executive placements that LS International has enabled, I realize that we have subconsciously applied “corporate lifecycles” thinking in some of our executive searches. I believe the time has come to make it a deliberate component of the way we work.
I would love to hear your views on my thoughts around the need to integrate Ichak Adizes’ “corporate lifecycles” thinking into executive search. You may also write to me at firstname.lastname@example.org, if you and your colleagues would like to understand how this thinking can help you attract the right talent.
By Lauren Stiebing, Founder of LS International