On the day you start a company, you give birth to a system. Not much of one, of course. It is small and weak — almost helpless. It makes messes all over the place. Its capabilities are few. It can’t survive without your continuous, personal, doting attention. But this blob of a company is the repository of your dreams. It is nascent. It holds the potential to transform the world.
Whether it does or not, of course, is up to you.
The systems of an enterprise are not all equally relevant at every stage. Different systems mature at different rates at different times. At scale, the fit systems enterprise is comprised of five meta systems and at least eight operating systems. To be fit at every stage, these systems must operate consistent with its vision, mission and values.
Successful systems grow in size, complexity, maturity, degree of automation and data drivenness over time. Like a human being, enterprise socio-technical systems start as small cells, where each cell has a small but consolidated role. But over time cells split into more and more differentiated, distributed and discrete components.
In pursuit of the generative and adaptive imperatives, systems mature. They start off chaotic, but in the fit systems enterprise, actors in the system work continuously to improve them. In The Loop leaders put feedback loops in place. More and more human tasks become automated — both through direct software development and acquisition of vendor tools. Systems also become more data driven; data is pushed to all actors in the enterprise so they can use it to continuously improve everything.
For the fit systems enterprise, a natural progression reveals itself:
For instance, if you were the founding CEO, you might have started off as the walking, talking revenue engine system. You ran around and made sales calls, finding your first customers. Years later, at enterprise scale, your company might have 500 people operating a diverse array of revenue engine components. Message creators, channel choosers, distribution planners, sales ops teams, data analysts, sales development reps and account executives all work together to operate the system.
I’m about to describe how system priorities evolve as a company scales. But before I do, I want to offer a thought to those who work inside large enterprises. All large enterprises have to work hard to keep the generative imperative front and center. It is all too easy to ride the coattails of a solid legacy product line, and de-prioritize the investments necessary to innovate. In the fit systems enterprise, these investments are never ignored. Year by year, one sees a slow, steady drumbeat of new products being launched (and older products retired). At times these home grown initiatives may be augmented with strategic acquisitions, such as General Motors did with its acquisition of Cruise Automation. These new product releases and acquisitions are the seeds of the enterprise’s future market-dominating products.
A new product initiative shares many of the attributes of an early stage startup. If you work inside a large enterprise, I encourage you to ponder how the system priorities of early stage companies as described here might be relevant to your new product initiatives and the teams that lead them. As new products scale and their teams become business units, these BU’s need to look a lot like startups (flexible, independent and entrepreneurial), until they have proven their customer value and are big enough to stand up for themselves. Otherwise they will be subsumed into the culture, incentives and superstructure of the mother ship, losing their generative essence. Once again, the story of General Motors is instructive here. GM protected Cruise Automation from the mother ship after its acquisition, giving it the time and space to flourish.
Systems and Company Stage
Each stage of company growth is defined by an imperative, which shapes the enterprise’s bounded purpose. This enterprise purpose, bounded in time, drives system priorities. These priorities are advanced by actions taken in four domains: people, workflows, technology and money.
In the beginning of a company, the generative imperative reigns, and timeframes are short. You need to provide investors credible leading indicators of a value breakthrough — some signal of product / market fit. That’s what will attract funding. This shapes your bounded purpose.
For instance, let’s say you have seven months of cash left in the bank. Your bounded purpose might be to prove sufficient market traction to raise a $5M A round within six months. To fulfill this bounded purpose, you focus on four areas: product discovery, cash management, HR (finding founders), and strategy (for finding a viable business model and an investable thesis). These areas of focus are not yet separate systems; at this stage the entire company is one small system.
As a company scales, the generative imperative remains but the adaptive imperative rises in significance. Years later as you approach enterprise scale, your bounded purpose evolves. You might aim to achieve within 12 months a market share of 25% (up from 23%), while increasing revenue engine efficiency such that you achieve the unit economics threshold of LTV / CAC > 3.0 (up from 2.7). At an even later stage, your purpose may weight the adaptive imperative more heavily. It might be to increase product value as proven by 35% market share in three years, alongside 20% year over year revenue gains for three years while maintaining LTV / CAC >3, and to achieve at least 15% EBITDA margins by the third year while implementing controls that meet the public company standard.
Eventually, as you head towards IPO and beyond, your purpose might be to build dominant competitive advantage as evidenced by 45% market share, create a globally recognized and respected brand as shown in 95% brand awareness amongst Ideal Customer Profile (ICP) prospects in your target market, diversify your product suite, deliver predictable revenue engine performance, execute flawless accounting and control systems, build a powerful continuous improvement culture and ensure all company systems are resilient and self-organizing, while remaining aligned with enterprise purpose. At this stage, your planning time frame may now extend beyond three years.
Enterprise systems mature due to intelligent acts of leadership. The best leaders are In The Loop. They understand the role of feedback loops in driving enterprise systems toward health. They understand that enterprise systems mature at different times, based on priority.
The journey of company building follows a predictable continuum. I first introduced this continuum in my last book, Funding & Exits:
- Minimum Viable Category
- Initial Product Release
- Minimum Viable Product
- Minimum Viable Repeatability
- Minimum Viable Traction
- Minimum Viable Scaling
- Minimum Viable Expansion
- Minimum Viable IPO Path
- Hot Public Company
This continuum originated with Bruce Cleveland, General Partner at Wildcat Ventures. Bruce developed the Traction Gap framework, in which he defined the first five of these stages — which he called value inflection points. These stages of growth are explained in his new book, Traversing the Traction Gap (2019)¹. Bruce has kindly given me permission to use (and to expand upon) these terms. I have added to his first five the following: Minimum Viable Scaling, Minimum Viable Expansion, Minimum Viable IPO Path, IPO and Hot Public Company.
While each company is unique, as a general rule system priorities evolve somewhat like this:
Chapter 3 identified LTV as a key constraint in a company’s scaling path. Companies exhibiting low LTV business models look completely different than companies with high LTV business models. How a company mobilizes to acquire a new customer worth $0.09 is very different than how one mobilizes to acquire a customer worth $1M. That is because at scale, the following formula must prevail: LTV / CAC >= 3. A company can spend up to a third of its LTV to acquire a new customer.
Minimum Viable Category and Initial Product Release
You start with a thesis. The thesis postulates why you will become a huge company some day. It articulates a category you will dominate, an LTV business model you will adopt and a problem you will solve better than anyone else. You have an untested idea and scant money. Your mission is to find evidence of product / market fit, a viable business model and investors before the money runs out.
At this stage your thesis has high variation. In the early going, it will rapidly evolve in response to market feedback. In fact, the quality of your feedback loops and the pace of iteration are critical at this stage. If you successfully traverse this phase of your company, your evolving thesis will bend towards truth.
As CEO of an early stage company, your means (which is, in systems terms, a stock) influences your goals, which are influenced by the affordable loss principle. You engage in the marketplace (once again, using systems language, this is a flow), engaging prospective customers. Their responses are feedback loops. You also talk with friends and investors. Your early-stage customers and prospective investors co-create your thesis with you (creating either a balancing or reinforcing feedback loop, depending on their degree of excitement). They help you iterate your company thesis. As they do, their own commitments create new means for you (an increase in stock) because traction yields investment and new customers. As theories are proved wrong and mistakes occur, you “make lemonade” by learning from these experiences (a balancing feedback loop). This increases your means and changes your goals. Out of this set of feedback loop interactions, the product and your company slowly emerges.
For the very low LTV company (<$500 LTV), your thesis will be easily provable. Because there is little feedback lag, you can stay small and continuously iterate with online experiments until you begin to catch traction. This has been called the “fruit fly experiments” stage. Extensive formal market research and planning doesn’t make sense for very low LTV business models. It’s better to just start with a grounded thesis, then engage in ideation and rapid prototyping with target consumers. Once you have a basic concept that seems to resonate, you can build a light digital presence, see what happens, and then test and iterate from there.
Traction can be measured. For an ad based media company, it is demonstrated in the number of monthly impressions, unique visitors, average time on site and other key metrics. In media, remnant CPMs (cost per thousand) hover well below $1. For highly specialized traffic, CPMs might reach, on the high end, $30. So monthly traffic has to be in the millions before it gets interesting. Let’s assume $5 average CPMs and full ad utilization. A site with 1,000,000 monthly impressions would post just $5,000 in monthly revenue. So the Very Low LTV company will stay small until it has tested and iterated its way into significant monthly traffic. To get there, SEO is the only option. As a rule, media company LTV profiles fall below a level that would justify investments in digital marketing. The arbitrage math doesn’t work.
If your product falls at the high end of the Very Low LTV range (closer to $500), demand generation arbitrage may prove successful. Search engine marketing campaigns and email marketing may yield enough return to justify the cost. Once again, the dominant theme at this stage is test and iterate. The load on strategy and planning is light.
As you move up the LTV scale from Low LTV ($501 — $10,000) to Mid LTV ($10,001 — $100,000) to High LTV ($100,001 — $500,000) to Very High LTV (>$500,000), a problem arises. The higher the LTV profile you exhibit, the greater the time lag between marketing / sales investments and sales outcomes. It’s easy to be fooled into thinking you have a value breakthrough when really you’re not quite there. The pipeline looks super healthy, until it isn’t. Or B2B customers might purchase your product, but cancel after two quarters or one year. The rate of churn is hard to detect early on.
As a result, successful higher LTV business model companies keep very close to their earliest customers. They test, iterate and optimize while still in beta, often physically spending time with customers in their own work environments. They seek to deepen understanding of the problem to be solved by standing side by side with the customer, observing, questioning and proposing “what if”. This is the customer development path articulated by Steve Blank in Four Steps to the Epiphany²:
At this stage your top priorities are to identify your market and top priority segments, develop your category and product thesis, recruit founders, embark on the road towards product traction and raise cash. Your initial product is light and non-scalable. You built it using agile and lean principles. Its purpose is simply to confirm market signal.
At this stage your company is a single cell organism. The systems of strategy, planning and architecture; product discovery; cash management, HR and culture are so interwoven they are essentially one. Everything in the company is immature. People wear multiple hats, workflows are chaotic, most work is manual and there is no organized method to capture data.
Minimum Viable Product
Your product becomes minimum viable when you have evidence of traction. For a Very Low LTV product, you have built a beta-phase online presence. You are posting steady month over month gains in online traffic. If your business model is a self-service online transaction, you have begun to post sales and the monthly number, though low, is trending upward. Early customer feedback is promising.
For products characterized by business models above Very Low LTV (i.e. Low, Mid, High and Very High), you have built a light beta-phase product. It has a small number of features. You have secured a handful of initial customers through a human sales process. These “early adopter” customers see potential in your product, and are receiving enough value from the features you’ve built to stick with you. At this point it’s not important to rationalize your LTV / CAC unit economics. Your goal is just to confirm MVP.
Your team remains small — just the founders. But your systems have begun to separate. One system — the product discovery system — works at the nexus of customer discovery, product and business model. You iterate product features with light, non-scalable product development. Another system — cash management — is focused on finding investors. CEOs at this stage may spend two-thirds of their time in fundraise mode. A third system — strategy, planning and architecture — has begun to emerge as founders argue over the path forward.
Minimum Viable Repeatability
Now that you have proven you can attract and keep a handful of early adopter customers, it’s time to show you can acquire more of them with repeatability. For all but the Very Low LTV business model, the act of customer acquisition becomes a system of its own — your revenue engine. For the Very Low LTV business model, not so much. Your revenue engine and your product are commingled at this stage.
The team is now slightly larger; if you are a Mid LTV company you might have hired your first salesperson. If you have raised enough cash, you might have added more engineers and product managers.
The systems active in your company are now:
- Strategy, planning and architecture
- Product discovery (beginning to morph into product management)
- Revenue engine (except for Very Low LTV companies)
- Cash management
The product discovery system has begun to move from chaotic to architected. Processes have begun to emerge — for product roadmap prioritization and for development. Now that value has been discovered, the team begins to shift to optimizations and feature additions. This marks the beginning of the shift from a product discovery system to a product management system. Roles have begun to differentiate: product has separated from engineering, and within engineering the front end role has begun to separate from the back end role.
There is now a nascent revenue engine. For the Very Low LTV company, the engine is built into the ad operations workflow (for a media company), or the freemium and ecommerce features (for a self-serve product or marketplace company). For all other LTV profiles, the revenue engine emerges as a separate system, with a salesperson (and, usually, the CEO) pursuing a prospect engagement process. This process is chaotic and immature.
The cash management process has begun to mature. As CEO, you have begun to develop a more methodical fundraising approach. Story development is efficient and effective. You tell a story that combines proof of traction and indicators of a big opportunity. You efficiently filter prospective investors. You create a tightly managed engagement process.
With the product management, revenue engine and cash management systems all placing demands on scarce resources, the founding team spends more time in strategy sessions — determining priorities and parsing out resources. This is the fourth system — strategy, planning and architecture. It too has begun to mature from its initial chaotic state.
Minimum Viable Traction
The primary focus at this stage is on the revenue engine. For the Very Low LTV business, you have begun to optimize conversion from top of funnel, to mid, to bottom. For the Low LTV business, you have begun to shift from human customer acquisition to digital. Because of the unit economics constraint, you seek to automate everything you can. Experiments with digital demand generation are underway; you are iterating your way towards positive arbitrage. You may have begun testing whether you can increase conversion with a high velocity call center for fulfillment, at a conversion increase high enough to justify the additional cost.
For the Mid, High and Very High LTV businesses, you add salespeople and seek to expand beyond your initial beta customers. By now you should be trending towards the unit economics boundary condition of LTV / CAC >= 3.
A tight market segmentation scheme has begun to emerge. You have begun to define the key personas — buyer, user and influencer. Brand identity (your value proposition, competitive positioning and key value statements) is forming. The marketing function is still nascent — perhaps one person. You might be renting additional capacity from an ad agency.
To scale your revenue engine and increase the pace of product development, you must hire. With more people, you must contend with the values and norms by which you will work — your culture. A consistent hiring process and emerging culture are the first indications that the HR system has begun to emerge.
As the revenue engine scales, customers must be billed. And so the accounting system emerges. When you started the company, all you had was an excel spreadsheet and a bank account. But now a temp CFO has been hired, the chart of accounts has been defined, you’re on QuickBooks, you have added a couple of clerks and you have begun to manage accounts receivable and accounts payable in a more organized way.
On the product side, demands are heavy and rising from existing customers. You have now shifted fully from product discovery to product management.
You have begun to pay more attention to digital leverage. The technology team has begun to formalize agile development and delivery, and key architectural decisions are being made. It is now time to refactor the platform based on reactive microservices architecture so that it can scale and grow while still remaining flexible and efficient. The product and engineering team may split into two domains at this point — perhaps a features team and an infrastructure team. This is the first step in the continuous atomization of domains that will occur as the company scales. This precipitates the emergence of a nascent engineering system — the meta system that cultivates the disciplined agile delivery method and brings standards, tools, frameworks and cloud-based infrastructure to software development.
Technology begins to emerge in other systems as well — such as the revenue engine and accounting systems. These are mostly vendor tools. The need to integrate these tools emerges as a problem, one that will be soon addressed by the emergence of a new system — DataOps. At this point, however, engineering and DataOps are still commingled.
Cash continues to be a priority. Now fundraising is a CEO core competency. With the rate of spend scaling quickly, the cash management system (comprised of fundraising and expense management) matures. It remains a top priority system.
To manage all of these priorities, the strategy, planning and architecture system grows in importance and maturity. There is now a regular cadence of weekly executive staff meetings, quarterly business reviews and twice a year strategic planning retreats. Norms have developed to manage top team conflict. You may have adopted the OKR (Objectives and Key Results) framework, to make prioritization decisions and to manage effective execution. You have begun to identify the key performance indicators (KPIs) that are important for each system. These are signs of the growing maturity of the strategy, planning and architecture system.
The following systems are now operative in your company:
- Strategy, planning and architecture
- Engineering (combined with DataOps)
- Product management
- Revenue engine
- Human Resources
- Cash management
Minimum Viable Scaling
Now that your product has achieved a meaningful value breakthrough, you are off to the races. In the product management system, product and engineering have broken into multiple domains — with one or more feature teams, one or more client teams (IoS, Android, desktop, etc.), and one or more infrastructure teams.
In the remaining enterprise systems the focus is on building enterprise resiliency and removing limits to growth. Domain teams have emerged in the revenue engine system and accounting system. Principles of self-organization are now widely held, and domain teams are increasingly clear as to their assigned business outcome objectives.
The culture has taken form, and has become an important source of resilience. Data standards, protocols and infrastructure are emerging across the enterprise. You now seek to increase competitive advantage and maximize the rate of growth. But whereas in the past you concentrated just on the generative imperative, the importance of the adaptive imperative is rising. You are especially focused on building resiliency by increasing feedback loops throughout the ecosystem and the enterprise, and improving the performance of self-organized domain teams. Twelve of the thirteen systems are now operative. With proof of product / market fit, the product discovery system has become the product management system, and you are not yet big enough to recreate a separate product discovery system. These are the operative systems:
- Strategy, planning and architecture
- Product management
- Revenue engine
- Human resources
- Cash management
- Corporate development
By now, the engineering system is coming into its own. Engineering is the system that guides software development methods and provides its infrastructure. Systems integration has become a more significant challenge; API and data sharing protocols have emerged. Disciplined agile delivery methods are maturing. Reactive microservices architecture is the development standard; services are built to be loosely coupled, responsive, resilient and elastic.
The goals of the engineering system are now to:
- Reduce the time to production
- Lower the rate of release failure
- Reduce the time to fix bugs
- Reduce the time to system recovery
- Reduce the risk of security breach
DataOps has now separated from engineering. It is an independent system. The purpose of the DataOps system is to ensure that data is ingested, normalized, retrieved and made accessible for analysis by teams across the enterprise.
Data has begun to grow in its variety, volume and velocity. You have begun to define data protocols, data flows and data infrastructure to ensure one source of data truth for every bounded context. You are working to democratize data access. While this system is still immature, attributes of a data driven enterprise are now visible in your company.
As to the revenue engine, your priority at this stage is to uplift system maturity. By now you should be starting to operate within the unit economics boundary of LTV / CAC >= 3.
As your pace of scaling hits an inflection point, stress is placed on the accounting system. At this stage, the volume, variety and velocity of data flowing through the system forces a scaling and efficiency breakthrough. This usually involves a significant system redesign, impacting people, workflows, technology and financial flows.
At this point, the control system begins to separate from the accounting system and emerge as an independent system. The control system provides defensive resilience to the enterprise. This includes financial audits, tax, legal, compliance and insurance. At this stage the control system is immature: for instance, it’s unlikely you have bought all the types of insurance you will eventually need. Your method of managing legal issues is likely to still be ad hoc. Your tax planning may be incomplete. But control is now an independent priority.
The human resource system is now a top priority system. Your processes for recruiting, hiring, reviewing, promoting and terminating employees has matured. So too with your culture system — you are actively nurturing your aspirational culture. You have inculcated data driven principles as a part of your culture. You have begun to focus on uplifting leadership competency, especially in middle management. You are particularly focused on developing leaders who are In The Loops, who understand the power of digital leverage, who support self-organization in teams and who set a high performance bar.
In the fit systems enterprise, cash management is now at full maturity. The fundraise process works like an engine. Growth investments and expense management are executed based on detailed cash flow projections. Your CFO is focused on increasing cash buffers by lining up debt financing and keeping cash positions way ahead of cash burn.
At this stage it makes sense for some companies to initiate the corporate development system. M&A may become a tool in the toolkit. Assuming sufficient access to investor cash, a company can contemplate tuck-in acquisitions to round out the product suite.
A company’s LTV profile still governs the nature of product management and the revenue engine. But as a company scales, most systems other than these begin to look increasingly similar.
In the fit systems enterprise, atomicity rises. One domain team splits into two. Across the company’s operating systems, work is divided into ever more discrete tasks, each tightly aligned but loosely coupled. Teams architect, implement and continuously improve workflows, using data. Data is increasingly democratized, with dashboards available to domain teams throughout the enterprise.
Low-variation tasks in the enterprise have begun to benefit from rising automation.
The strategy, planning and architecture system is now mature. You have refined the planning balance between now, near and far. While short term oversight of priorities and execution effectiveness continues, strategy and planning now looks further down the road — at least 12 to 18 months ahead. Projects with long lag times are under active consideration, including significant technology platform upgrades, reorganizations and workflow redesigns.
Minimum Viable Expansion
At this stage, emphasis shifts back to the generative imperative. Now that your first product has established itself in the market, it’s time to expand. This expansion may be into new segments, or new geographic markets, or to adjacent product offerings aimed at your existing ideal customer profile. The product discovery system returns to center stage as the vehicle for product expansion. One or more experimentation domain teams are created to advance the work of the product discovery system.
Meanwhile, the product management system has become mature. Customer support and product operations are scaling effectively. Issue escalation is efficient. The product management system is now comprised of multiple domain teams. Separate domain teams might exist for top of funnel digital engagement, the digital onramp, various product features (such as reporting and analysis), mobile vs. desktop and infrastructure. Each of these teams are working to fulfill business outcome objectives, expressed in time: now (next three months), near (next 9–12 months), and far (vision for the domain). These teams have become effective at working towards these objectives in a self-organized way, employing disciplined agile delivery methods and leveraging reactive microservices architecture.
The revenue engine has scaled and diversified. For the Very Low LTV company, new channel partnerships now drive fire hoses of traffic. Automation has been introduced wherever it drives speed, quality and efficiency. For other LTV business model companies, channel has also increased in importance. Brand identity is tightly expressed. Messaging is tight. Workflows are efficient. The revenue engine system’s maturity is now high; performance is consistent.
The accounting system runs like a Porsche engine. Audits prove that numbers are accurate and controls are working. Roles have diversified. Multiple domain teams are at work and self-organized. These teams pursue continuous improvement, and work with adjacent technical teams where appropriate. These development teams focus on the automation of low-variation human steps.
The control system is beginning to mature. Holes are being filled in areas such as security and insurance coverage.
The cash management system has diversified and matured. The banking relationship has expanded to include diverse services such as foreign exchange management and various types of debt instruments. You have access to new forms of capital, from venture debt to late stage growth equity to private equity.
The corporate development system has matured. You now manage a steady pipeline of acquisition prospects and filter them through a well designed vetting process. You have a tight process from term sheet to final deal, and a tight post-acquisition integration process. You have to differentiate your integration approach, depending on the acquisition thesis.
The meta systems have begun to play a key role in maintaining the health and resilience of your enterprise. The governance system provides healthy oversight and challenges assumptions. The strategy, planning and architecture system articulates strategic priorities and ensures enterprise-wide alignment. Leaders work hard to get the balance right between now, near and far. The culture system brings focus to mission critical values and behaviors that would otherwise atrophy. The engineering and DataOps systems provide the light rules and governance frameworks that ensure local system autonomy and self-organization, while still ensuring full alignment with enterprise purpose.
Because of your rising scale and complexity, a new risk has emerged. People throughout the enterprise live inside an increasingly large and diverse company. Each worker has a limited line of sight, working within pre-established processes. It is easy for the average worker to see process as a proxy for business performance. But processes must serve results. In The Loop leaders challenge self-organized teams to actively question whether established processes are still working in service of the business outcome objective. These leaders fight against a “process is the king” mindset; they encourage teams to rip out processes that are no longer driving the right business outcomes.
Minimum Viable IPO Path, IPO and Hot Public Company
These final three stages of growth share much in common. If you’ve achieved the Minimum Viable IPO Path, you’re approaching public company readiness. All operating systems are fit and trim. Roles have diversified, workflows are efficient and scaled, technology is delivering significant leverage, and financial investments have been rationalized, delivering strong ROI.
Your executive staff is comprised of digitally literate systems thinkers who seek to push responsibility as low as possible in the enterprise. They work hard to keep the enterprise generative, resisting the tendency to turn inward. The product discovery system is a first order priority: senior executives understand how easy it is for existing value to decline.
They effectively balance now, near and far. They understand that certain investments take time to pay off.
They are cultural evangelists. They value and seek to nurture self-organization. They keep teams focused on business outcomes. They challenge teams not to elevate process above results.
Your attention as CEO turns to defining the enterprise’s bounded purpose, identifying the boundaries of systems and domains, building alignment, building the culture, developing leaders, increasing system resilience and nurturing self-organization. You work hard to ensure the generative imperative remains central in strategic priorities: despite today’s product success, you know markets shift and competitors lurk. Day-to-day execution is now the responsibility of others. Your planning horizon has extended outward.
As CEO, the cash management system now chews up big chunks of your time. You hold frequent meetings with hedge fund managers and analysts. You spend lots of afternoons with your head of Investor Relations and CFO. Investment bankers are fully engaged, paving the path towards IPO. Or you work with a talented team ensuring you are prepared for your next quarterly earnings call.
In the fit systems enterprise at this stage, the revenue engine delivers consistent results.Your product discovery system pumps out a slow but steady drumbeat of well conceived expansion products. The product management system executes the necessary fixes, finishes and fills with precision while adjacent operating teams deliver day to day customer service and support.
The control system has been stress tested to validate its public company readiness. There are no longer any holes in financial reporting, tax, insurance, security or data privacy. The HR system delivers company-wide support, both to maintain a healthy culture and to support the inflow, outflow and leveling up of people. The corporate development system is a sourcing machine, scouring the market for strategically sound acquisition opportunities. Access to public market cash creates the capacity for a grander vision fueled by larger acquisitions.
But the work to sustain the fit systems enterprise at scale has just begun. As CEO, you struggle to keep connected to the ever-evolving ecosystem that surrounds your enterprise. As the weight and momentum of the existing business grows it becomes harder to embrace outside-in insights and confront their implications for future direction. Enterprise wide alignment is also more difficult to achieve as functions and systems grow in size and diversity.
As the enterprise begins to feature multiple business units, it becomes more difficult to respond to issues and opportunities that do not fit cleanly into one. This requires you to cultivate new organizational forms, such as tiger teams and skunkworks teams. You delegate to these teams the authority to cut across existing business units and incentive structures, to solve problems and seize opportunities in a customer-centric way.
The growth in enterprise complexity is unavoidable as you scale. The only effective response to this complexity is to increase the density of 10Xers. So you work to build systems and processes that improve recruitment, hiring and on-boarding. You also challenge leaders to develop, assess, and if necessary, prune so that organizational competency steadily rises.
The meta systems have now become all-important: governance; strategic planning and architecture; culture; DataOps and engineering. Together, they ensure priorities are responsive to ecosystem realities and aligned with enterprise capabilities. They support the development of digital leverage, ensuring that the enterprise’s technology is modular, scalable and changeable. They nurture the scaling of data-driven, self-organizing teams inside all enterprise systems.
Whereas once you as CEO could directly drive change, now you appreciate that change will be driven primarily by middle management and frontline domain teams. The fitness of your enterprise now depends on the quality of your vice presidents, directors and managers. And so you have rededicated yourself to the work of uplifting leaders. Functional competency and emotional intelligence are no longer enough. You need leaders who see the dynamic, integrated nature of things and understand the power of digital leverage. Leaders who understand the power of culture. Leaders who know that people, workflows, technology and money flows must work together to advance enterprise purpose. In other words, you work hard to build In The Loop leaders throughout the company.
An In The Loop leader can better detect, define, prioritize and crack the next right riddles inside the enterprise. Time and time again on the journey of company building, you will need to step back and ponder what matters now. As this chapter shows, system priorities follow a fairly predictable pattern. But the specifics are always unique. That’s why the density of 10Xers is such a critical success factor in the fit systems enterprise. People always make the difference between good and great — at every stage.
- Cleveland, Bruce, and Wildcat Venture Partners. 2019. Traversing the Traction Gap. Radius Book Group.
- Blank, Steve. 2013. The Four Steps to the Epiphany: Successful Strategies for Products that Win. K&S Ranch Publishing LLC.