Blog

Businesses Have Trajectories

Trajectory is one of my favorite words in the English language.

I think of that word when I contemplate whether there a business life cycle anymore. And, what does that cycle look like?

The traditional business life cycle once consisted of Introduction, Growth, Maturity, Decline.

That timeline, or lifeline, was somewhat elongated, as the pace of change in the world and the business itself was relatively predictable. And, if you think about it logically, it wasn’t really a cycle at all.

To consider the stages businesses, or even entire industries go through, look no further than the business of music formats:

The music business has forever changed, and while tastes and the delivery systems for consumers to consume music have evolved because of technology, it doesn’t change the fact that we like music and it creates enjoyment. The features and benefits still accrue, although the delivery mechanism has evolved.

Wonder what happened to the factories which made eight-track cassettes? My guess is those facilities were either 1. closed, or 2. adapted, around 1982, according to this chart (black area). Likewise, vinyl (which has recently made a nostalgic rebound in bookstores, e.g.) flamed out around 1991 according to the chart above (dark blue area); do we remember having cassettes (pink area) around until 2003 or so? Probably because automakers kept putting cassette radios in cars for a long time after they were commercially relevant. (You can almost date stamp cars themselves based on whether they have anti-lock brakes, side impact airbags, or Bluetooth.)

A more recent model has about seven phases in the business life cycle:

Seed, Startup, Growth, Establishment, Expansion, Maturity, Exit

There are problems with this assumption. First, life, and business, is not unidirectional. Business is generally nonlinear.

Businesses often move in more than one direction. Why? Things change. Client relationships change. Ownership structures change. The industry changes. Margins change.

See, life changes.

Is it entropy? A structural breakdown? No, it’s improvement. Isn’t streaming sound better than eight-track music? (Although as a once-audiophile/photography enthusiast, there is still something special about the sound that blares from my SAE receiver amp and the warmth of photos taken with an old Nikon F-body, or my father’s old classic 35MM Argus C/Four and film).

So none of this change is a cycle, because eight-tracks and cassettes aren’t “cycling back” anytime soon, thankfully.

Life is like the seasons…After winter comes the spring…So I’ll keep this smile awhile…And see what tomorrow brings = “Cycles,” Frank Sinatra

What’s important is, just like sound formats change, that the company, more specifically, the management, changes and adapts.

It might be time for a more fluid paradigm for business life cycles. In fact, perhaps the concept of a cycle is a misnomer. It might be more relevant to describe it as something which came out of an aeronautics laboratory. It’s a trajectory.

I believe business has three phases: Launch, Flight and Landing.

Launch is the early phase of getting both product (or service) and market, traction. That is, you actually have a product or service and a market of customers receptive to enjoying it. One cannot sell luscious oranges from a cart if one does not have luscious oranges to sell. You can sell the concept of an orange, sun-ripened, sweet, cool, refreshing. Your customer can’t actually consume the product attributes or “utility” of the orange if the cart is empty. This is where startups fail. Too much emphasis on imagery and concept and not enough on experience and reality.

Once the rockets are up, who cares where they come down, that’s not my department. = Wernher von Braun

Flight is the natural trajectory of the product (or service). It’s selling, people like it, it has a market, distribution, heck, even reviews! There is no feeling in the world like building a business and creating daily and weekly growth — new customers, new opportunities, pushing revenue higher and higher. But never forget profit! Business owners and managers don’t need the practice, they need results. The old adage applies here, “you can’t lose margin on each unit and make it up in volume;” furthermore the “build it and they will come” approach is loaded with potential pitfalls. It’s best to have a great product that people want and bring that product to as many people as possible.

And all this science I don’t understand; It’s just my job five days a week…A rocket man, a rocket man…and I think it’s gonna be a long, long time = “Rocket Man,” Elton John

Landing is the third stage of business trajectory. There are many kinds of landings for products and services, and of course, it’s best to avoid the crash kind. It’s also best to avoid the 1960’s NASA splashdown kind, with rapid reentry and increased heat and confinement, hoping the parachute opens, and hoping the Coast Guard finds where your capsule lands. The best kind of landing is the soft, gentle kind, where owners and managers have the luxury of capitalizing on their forethought and planning a mutually beneficial exit. It might be an ESOP structure, partnership divestiture, succession plan, or sale to a private group or private equity fund.

“Edison’s electric light did not come about from the continuous improvement of the candles”- Oren Harari

One thing is certain, everything changes and business is always dynamic, never static, and always full of risks, challenges and opportunities. On the business’ trajectory path, it’s critical for the ownership and management to know exactly where they are, and to be prepared for the inevitable changes that come.