The Sunday Mail
Big Business Ideas
Stephene Chikozho
START-UP businesses in Africa are exciting organisations to lead but their growth may come with inevitable crises. Fortunately, in many cases, these crises are predictable and can be managed.
Growing business environments are characteristic of continual change, ever-evolving policies and procedures.
For many African entrepreneurs, these environments are marked by energy, initiative and ideas. However, as business growth puts increasing pressure on people and systems, excitement can turn into frustration.
Stages of growth
Researchers have identified various stages of growth in business. In many cases, these are described as start-up, growth, maturity and renewal or decline.
However, this article shall focus on six stages of growth and the inherent pain points most African entrepreneurs face at each stage.
The first of these stages is growth through creativity. During this stage, the start-up is small and growth is fuelled by the enthusiasm of its founders. Management procedures, communications and even interactions with customers are usually informal and ad hoc.
However, as more staff join, services and production expand; more capital is required, perhaps from banks or investors; and the need for formal systems and procedures increases.
The founders, who are likely to be technically or entrepreneurially oriented, find themselves faced with their first crisis; they become burdened by management responsibilities that they are ill-equipped to deal with.
This initial crisis is, therefore, one of leadership — who will lead the company out of confusion and solve the new management problems? Change of leadership required for phase two may only be a question of internal reorganisation and an adjustment in style; abandoning the casualness of the company’s early days in favour of greater formality and more rigid systems and procedures.
However, in many cases, the original founders have neither the skills nor the desire to take on more formal leadership.
Under professional managers, business growth continues in an environment of more formal structures and budgets and with the establishment of separate functions, such as production, customer experience and marketing. This is the second stage of growth. It is known as growth through direction. As the new manager takes responsibility for direction, mid-level supervisors or managers act more as functional specialists, but after a while, they begin to demand more freedom to make decisions, leading to the second crisis — autonomy.
This crisis can be solved by freeing the mid-level managers from bureaucracy and allowing the company to achieve growth through delegation — the third stage of growth.
Unburdened by the need to manage day-to-day issues, senior management can shift its attention to strategy and long-term growth.
Stay small or grow?
At this point, a start-up faces perhaps the biggest crisis of all – a crisis of control. The founders may find it hard to give up the responsibility of decision making. When this happens, the founder may decide to remain small, in essence, to limit growth and protect their own control.
Such decisions are praiseworthy. Not all companies can be national, regional, continental, global and all-conquering. In fact, small and medium enterprises (SMEs) dominate the business landscape in most African countries. Some entrepreneurs start a small company to flee the stresses, politics and office-bound agony of corporate life. So, for them, it may make sense to limit growth at this stage. However, other African entrepreneurs such as Nkemdilim Begho, Shingai Mutasa, Ken Njoroge, Olivier Madiba and Michael Jordaan are motivated by the early phases in the life of a new business.
They like to guide a business through its start-up phase, then hand it over to professional managers, so they can move on to new, more exciting projects.
Nonetheless, choosing to remain small does not mean a business will be crisis-free. All businesses, of all sizes and regardless of growth aspirations, will face uncertainties and challenges. It does mean, however, that the business will avoid the requirements of the next stage — growth through co-ordination.
During this fourth stage, increasing centralisation is common. By this time, the company may be relatively large, with operations controlled through a head office.
The firm may appoint executives with experience of managing large, diverse businesses and introduce standard operating procedures. However, the introduction of standard policies eventually leads to the next crisis — a red-tape crisis, in which increasing bureaucracy stifles operations, and growth falters as a result.
A return to informality
Ironically, the fifth stage, growth through collaboration, requires, in part, a return to the earlier days of flexibility. Systems allow greater freedom, teamwork is introduced and network structures are used to recapture the collaborative nature of a start-up, in other words, the organisation tries to operate like a lean, creative company once again.
Once this has been attained, the next crisis relates to the limits of internal growth. Under pressure from shareholders to continually improve returns, further growth can only be achieved by developing partnerships with complementary organisations.
By this sixth stage, a company is already big, possibly very big. Growth through alliances, therefore, suggests that expansion will continue through mergers, outsourcing or joint ventures. The company needs to look beyond its own internal core markets and seek external growth. The actual rate of growth — in terms of customer numbers, revenue or profits within each phase — will vary depending on the individual company. Others may remain small for many years, perhaps never even reach the leadership crisis stage.
The crises of growth
Unstable situations associated with business growth can help African start-up founders to predict and manage the inevitable crises of growth. Even when enjoying the heyday of early growth, African entrepreneurs need to be mindful of the steps required to build the business further. They must put structures in place as soon as possible.
The earlier formal systems and professional management are introduced, the less they will be resented and resisted, and the stronger will be the foundations for continued growth. More importantly, each place, town, city or African country has unique market conditions, and start-ups may not necessarily grow in linear phases as outlined above.
The growth process for businesses in some markets is actually complex and nonlinear.
Some start-ups may miss stages. They can, alternatively, become locked in one particular stage, or even regress, depending on many other complementary factors such as managerial capacities, and the availability of skilled labour for a wide range of services or products.
Nonetheless, an organisation must manage its way through such transitions and growing pains as it continually defines and redefines the scope of its operations, its values and its overall purpose. Without continual growth and progress, such words as improvement, achievement and success have no meaning.
Stephene Chikozho is managing director and principal consultant for Urbane Create Agency, a strategy, marketing and advertising agency. He is also the business development and strategy consultant for Beyond Borders Logistics and Tsoka International. He writes in his personal capacity. You can follow him on social media (Instagram, Facebook, Twitter, LinkedIn) WhatsApp +263772409651 or email [email protected]
