Popular Posts

Sunday, 31 October 2010

Where Are You on Your Company's Life Cycle? Try the PAEI Code!

Every company has its life cycle and sadly during the recession quite a few have come to the end of theirs.   Some businesses seem to go on for ever and some shine brightly for a while and then the light goes out just as quickly.

The trick is to estimate where you are on the life cycle of the business and there are quite a few points to consider, all of which can indicate not only where you are but also where you are heading.

A neat technique is the PAEI code.   This is used to give a subjective assessment of the business at various stages of its development and while it is obviously not definitive, it can help the leader to see how the business is changing and hopefully progressing.

It works like this.   P stands for productivity, the amount of effort which is put into the business across the board and by everyone concerned.   A stands for administration, the way in which the business is administered, how effective it is and also how unobtrusive it is to the outside world.  

E stands for entrepreneurship, the ability of the business at all levels to develop their markets, their product range and to look for new and profitable "rivers of cash"; those new ventures to diversify the activities of the business.   Finally I means integration, the manner in which the people in the business feel and indeed are engaged and empowered to make decisions, to do the right things rather than to do things right, and generally act and operate as a genuine team.

So how does it work?   If we assess a typical start-up business and score each of the PAEI components on a one-to-five basis, P (productivity) will almost certainly be a five because a vast amount of effort has to be put into all the activities of a business in its early days.   On the other hand, A (administration) will probably be rated at one or two simply because of the need to "do the job and sort the paperwork out later".   Not ideal of course but inevitable.

The level of E (entrepreneurship) is also likely to be at level five for perhaps obvious reasons, but I (integration) will tend to be at a lower level, probably two or three again because of the high level of time and effort being put into developing the business rather than the people.

Now move forward a couple of years.   The P level will probably remain high, the A will have started to increase to keep pace with the way in which the business is growing, the E level may start to diminish somewhat in the face of the need for patient trading, and the I level will also have increased as more people come on board with the consequent need to develop them and their abilities.

Fast forward to perhaps ten years after the start up when the business is beginning to shows signs of adulthood.   P has diminished significantly because A has increased dramatically.  E has almost disappeared and I either rates highly or in some cases, very low.

It is at that stage that the business needs a kick to drag it back into the start-up phase and to ensure that it doesn't just plateau and then go into the inevitable decline.

So, take a look at where you are right now.  If your assessment is that there is still entrepreneurship in the business, that the administration is at an acceptable level and is not leading to ossification, that your people are working hard and effectively and are well engaged, then that's fine.

If, on the other hand, all the signs are of premature ageing of the business, then now is the time for new thinking, innovation and a measure of risk taking.


For further information visit www.maa-uk.co.uk 
To contact us, email to ivan.goldberg@maa-uk.co.uk

1 comment:

David Caton-Roberts said...

Ivan, Once again thought provoking.

As the business matures and the level of administration increases the business, or indeed the organisation, can catch a sever case of ossification. A condition which means that the patient gets so wrapped up in administrative issues or 'doing things right' -- as you correctly point out -- that it can no longer function. It suffocates itself.


A very useful model for allowing a mature business to remain entrepreneurial and innovative is the one used by McDonnell Douglas in the last century - known as a 'Skunk Works'

(Readers of your blog may find a little bit of further research on the idea of skunk works useful).

Sir Alex Ferguson, the manager of Manchester United, has his own skunk works in the form of a youth team programme and regular purchases from afar. He also understands that there comes a time when the old order must move on. Brian Robson, Roy Keane, Steve Bruce, David Beckham are testament to this. I wonder as what point Sir Alex will see himself as no longer the innovator and merely an administrator? I digress.

Opportunity

The strangle hold of administration and bureaucratic ossification that grips an organisation can, and does, present opportunities for the new business.

There is nothing more frustrating for a customer, a client, or indeed a student/patient/citizen to be presented with an organisation that now exists for its own purposes, and no longer for the benefit of the people it serves.

It is at this point that opportunities arise and new businesses, new organisations, can and do succeed.