Avoiding the midlife crisis

The common perception is that companies, like people, pass through a series of life stages. Each firm begins with the experimentation and rapid-fire learning of a start-up, passes through a frantic adolescence as it scales its business model, matures into a reliable, albeit dull, middle age and finally lapses into inevitable decline. Extensive research shows this compelling metaphor is fundamentally misleading. Companies are not single entities that pass through a life cycle; they are composed of a portfolio of opportunities at different stages in the life cycle. There are no mature companies, only mature portfolios.

When executives recognise this, they can anticipate how their overall portfolio might evolve, paying particular attention to any imbalances. The first step is to map the four stages. Opportunities begin life as experiments. Like youth, the start-up stage involves constant experimentation. With the opportunity validated and the business model stabilised, the opportunity enters adolescence and scales up to seize market share. During mature adulthood, the opportunity – now a business unit – fights for market share against well-known rivals. The final stage is decline – typically when a substitute arises, consumer preferences shift or a low-cost competitor emerges.

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Published by London Business School