Modeling Language Spotlight
Stages of an Enterprise
September 30, 1996

Like the other models of the MG Taylor Modeling Language, the Stages of an Enterprise Model is protected by copyright. You can use it only by meeting these four conditions.


Here's the model

Green stands for times of stability and success. Orange stands for warning. Red indicates behavior far from homeostasis, which if allowed to continue, will lead to the death of the system. Blue represents times of flux around the entrepreneurial button.

Now let's look at the stages:

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Stage

Activity

1. Conception This is where ventures and enterprises originate. Scribbles on napkins, nagging dreams, a persistent or alarming push by the external or internal rate of change.
2. Looping Most ideas go through a roller coaster ride of peaks of success followed by valleys of near collapse before they become viable--capable of separate existence.
3. Success At this stage, the enterprise is viable. This means it understands as an organism how to maintain its metabolism from month to month, and how to grow.
3a. Overshoot and Collapse If the enterprise does not learn how to maintain homeostasis, it may overshoot its envelope of healthy growth and then rapidly collapse upon itself. This stage is sometimes called the "Hollywood Star" syndrome.
4. Entrepreneurial Button Newly conceived ideas within an existing Enterprise, even if tested through the looping stage, cannot become viable unless the Entrepreneurial Button is pushed. There must be an overt recognition of the need for and value of the new idea or it will not be allowed to grow.
5. Maturity The Enterprise passes through probably its longest and most stable stage. This is also the most favorable time for spawning new enterprises although many ventures fail to do so until it's almost too late...
6. Turnaround Ventures lose their ability to maintain homeostasis and begin to collapse. Usually this is due to a lag time in the organization's ability to respond to or anticipate external or internal rates of change: it falls behind or leaps too far ahead and is exposed. Careful crafting allows the organization to return to the Maturity stage.
7. Death Eventually all organizations reach their demise. Usually this is good. Sometimes it's the easiest way for the enterprise to allow new ideas to escape and try for viability. And even if the name of the corporation does not change, sometimes, its old self dies and a new one is born in its place.

The Mystery Axis

This is a familiar model to most people in the MG Taylor network. So here's a tricky question for all of you experts. Let's assume that the model is plotted against an "x" and "y" axis. The x axis represents time. The diagram below shows the model plotted in this fashion. [Note that the turnaround stage has been changed to a deep dip in the Maturity curve in order to fix the somewhat disconcerting idea that the turnaround takes you back in time.] The question is, what label might you place on the y axis?

Any guesses? Productivity? Not really. Start-up teams can be very productive but they're depicted way down on the curve. How about homeostasis? That would be closer and would work if we assumed the homeostasis of the enterprise to be the x-axis, and moved it up level with maturity. Anything above the axis would be like a fever, and anything below it like hypothermia. But this still doesn't feel quite right. What property of Enterprises begins near zero, rises to a peak in success, falls of in maturity, dips in the turnaround, and then dives to the x-axis in death?

I'll leave you hanging and return to the problem later. Better yet, e-mail me with your ideas. Maybe even do a Personal Journal page on the question!

Journal Assignment: Let's say that the Stages of an Enterprise model represents the behavior of the enterprise in state space. The horizontal axis is time. What are some good candidates for the vertical axis? If you wish, you may adjust the position of the origin (zero point) on the y-axis by moving the x-axis up or down.

 

Pushing the Button: Innovation vs Improvement

Below is another modification of the model. In this case, instead of showing a peak at the Success stage which falls off to a lower Maturity plateau, the curve continues upwards at a gentle slope (the blue line). This represents continuous improvement in the enterprise. The y-axis in this case can be roughly termed "quality of product/ energy expended"--a sort of hybrid of quality and efficiency.

To make a big leap of innovation, however, the Entrepreneurial Button must be pushed. This means one of several things:

  • An entirely new entity is born, unencumbered by the structures and culture of its parent. Perhaps the company spawns a subsidiary, or a venture with a partner. Or enterprising employees go off on their own with better ideas that were not being heard. The result is the zone of innovation (the green line) for the new entity. The parent may go on to struggle for quite a while, unable to transform itself from within.

  • The parent organization undergoes a metamorphosis or rebirth, shedding its inhibiting cultures, philosophies and policies. The result is the intergenerational enterprise trajectory (the red line) which shows the parent organization making steady improvements and then leaping to a new level of innovation.

In either case, the Entrepreneurial Button is not simply a zone where transformation just happens. The button doesn't occur at some predetermined location in the model, although there are more or less favorable times--one of the most favorable being the period of maturity, just after success.

Pushing the button is a conscious decision. Much of the conceptual work will already have been done. The new idea will have passed through some looping already before the decision is made to launch it. The people making the decision are not always the executive management. An idea can be so powerful that it may "seek out" other people to launch it if no one in the parent organization is interested. The classic, if overused, case is the visit by Steve Jobs to Xerox PARC where he saw the system that would later be born as the Macintosh. In this case, Xerox management did not push the button, but Jobs did.

Pushing the button may be a trigger point in moving the new idea/organization from Scan into Focus [see the Scan Focus Act model].

The Entrepreneurial Button can be thought of as a membrane of sorts. It's both an incubator and crucible within which the new idea will be nourished and also besieged. It's most vulnerable at this point. Before entering the button, the idea is just an idea, but pushing the button sanctions it, making it a real opportunity or threat to some. Once it's out of the top side of the button's membrane, the idea has become a viable enterprise, capable of fending for itself. Only while it's in the membrane does it need special support and defense.

Several other articles on this website address this model and its variations directly. For a metaphorical comparison of the model with quantum mechanics, click here. To read about the act of consciously invoking the overshoot and collapse path in the quest for increasing returns, click here.

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