Whether it is an industry sector (NAICS) or a geography, all markets start, emerge, grow. Most markets go through periods of high growth before settling into stable growth. Nearly all end up declining at some point.
We are going to focus on three stages and the leadership tension that must exist for success:
- Emerging
- High-Growth
- Stable Growth
Your process around strategic decisions, planning, and execution should be existing an emerging market if you don't see that market moving into a period of high growth where you can develop economies of scale and earn a return on your investment in the emerging market. This is the purpose of strategic market experiments.
Your strategic market choices for major resource allocation must be a combination of high growth and stable growth markets. Stable growth markets should always be watched for signs of continued slowing so you can re-allocate resources before it moves into a declining state.
Simple market stage definitions:
- Emerging: An emerging market, such as renewable energy exhibits rapid growth often exceeding 7-10% annually. Regulations are emerging and change frequently. Customers and competition also change frequently. Though overall growth exceeds GDP growth and inflation, it is often volatile.
- High-Growth: Markets like data centers growing at rates in excess of 15% compounded annually.
- Stable Growth: These markets track closer with general growth rates of 3-5% annually such as GDP, inflation, and population.
Critical differences between markets and companies:
- Market stages are different than the stages of contractor growth driven by headcount.
- Leadership combinations required at each stage of market growth are different than the overall leadership focus required at each stage of contractor growth.
These must be integrated but they are different and need to be looked at separately even though they likely include some of the same people.
Leadership strengths (Adizes Model):
There is no single trait that defines a person, so these are all generalities. They are however valuable for discussion and planning purposes. Ichak Adizes describes four key personality traits of producer, administrator (process), entrepreneur, and integrator in The Ideal Executive - Why You Cannot Be One and What to Do About It.
- Entrepreneur (Ideas): A visionary who identifies opportunities, takes calculated risks, and drives innovation to adapt and grow the organization.
- Producer (Outcomes): A results-driven individual focused on generating tangible outputs, ensuring productivity and meeting immediate organizational goals.
- Administrator (Process): A process-orientation dedicated to organizing, structuring, and maintaining systems to ensure efficiency and operational stability.
- Integrator (People): A people-centric focus on building relationships, fostering collaboration, and aligning team dynamics to ensure organizational cohesion and culture.
Effective Tensions:
Spoiler Alert: The book belongs on your leadership bookshelf. The spoiler is that no one is strong at all four and different situations require different strengths. The ideal executive has a combination of all strengths themselves and more importantly, they have deep respect for all strengths which allows them to design and lead effective teams.
As applied to different stages of market growth, you need the following critical combinations:
Emerging Markets:
An emerging market requires the combination of the entrepreneur and a producer. These strengths provide the right combination of exploration and exploitation in the market as Roger Martin describes. An emerging market is rapidly evolving and requires constant exploration to find the market and the opportunities with it. On their own, the entrepreneurial strength will spread the organization too thin which introduces additional risk and slows down the transition into high-growth markets.
The balance is a producer - someone who will drive for repeated results and hates distractions. The first tension is pulling the producer towards a new idea. They will tend to thrive in high-growth markets where they can rack up win after win. This is probably the person you would describe as always getting the omelet made but breaking a few eggs along the way.
The second tension that comes up is the entrepreneur wanting to change directions as they explore more while the producer wants to stay the course focusing on what's working.
As emerging markets are rapidly changing, it is difficult to differentiate between a distraction and opportunity. Effective leadership of this team requires understanding the beautiful tension between entrepreneur and producer.
High-Growth Markets:
As the market shifts into high-growth, much of the exploration is complete and the focus is on exploitation. For this, you need lots of people with a production focus. As you add more people including the required support functions, the headcount will require a focus on management systems to keep everyone aligned. This leadership strength is one around administration and process.
The tension exists because customers are pulling the team forward at breakneck speed, so the producers are focusing on doing whatever it takes to get the job done. This is where lots of necessary technical and organizational debt are taken on during the building process.
The leader focused on process seems to be constantly slowing things down working to integrate technology, process, and people looking at the critical inflection points.
It is during this growth phase of a market that both Quality Control (Right Outcomes) and Quality Assurance (Right Process) come together. You will see progression through all levels of standards.
Leading this balance requires a deep understanding of people and involves tools like standard skip-level meetings, town halls and AMA (Ask Me Anything) sessions to understand what's happening with the people (internal and external) along with the objective performance metrics like safety, quality, productivity, and financial outcomes.
It will feel like trying to remodel a Gulfstream G500 jet with room for 15+ passengers into a Boeing 747 with room for 500+ passengers while the plane is in the air.
Stable Growth
The first year or two of a high-growth market is exhilarating. When working to put the right processes in place for scale while adding people to the team at a rate of 15-50% per year, that exhilaration will start to turn into stress. If the right levels of staffing, right structure, and right processes aren't put into place, that stress will turn into exhaustion and turnover.
This is when the mix of leadership strengths needs to shift towards people orientation - the integrator.
All markets progress towards stability and that is something to be prepared for. As a market transitions into more stable growth, it can still have years or decades of runway for the company. The focus now is on optimizing the process to maintain profit and cash flow as customer's tighten up their operations.
More and more of the production focus and business management is integrated into a tight process.
There will be turnover on the team as some of the highest producers will be moved to other markets moving into the high-growth stage. There will be people on the team who feel stifled by the tighter processes.
There will be grumbling about "My way has been working - why change?"
There will be inevitable grinding between functional areas as their workflows become more tightly integrated - for example, it may "cost" the PM a little more time to "save" Purchasing a lot more time making it a good trade but frustrating for all parties involved.
This is a necessary evolution but makes the role of the people integrator even more valuable.
Overall leadership of this team requires maintaining that balance, reminding the team that this business is a stable "Cash Cow" that supports the exploration of new markets and creates the cash flow necessary to scale high-growth markets.
Contact us to talk about your company, vision, markets, and team. An experienced but unbiased 3rd party can be invaluable in helping you sort out the many challenges and opportunities faced when growing a business.
