Different life cycle stages of a company require different leadership styles
At Nordic Busines Forum 2018, Aswath Damodaran was talking about the different stages of a company life cycle. His speech covered how a company’s valuation is looked differently at different life cycle stages of the company, but also how different leadership skills are needed from the CEO.
One of the most staggering part for me was to understand how companies can behave differently, almost like humans do at different stages of their life. Start-ups can be like teenagers, who don’t care about the consequences and can focus on new ideas with no fear of action, whereas mature companies are not willing to take risks and are focusing on steady finances, almost like adults do. The companies are valued differently at different life cycle stages, but also should be lead by a different set of skills.
Start-ups need visionary leaders, who can take a role like Steve Jobs. For young companies, the valuation is based on the story. Growth phase companies need ‘Bob the builder’ type of person, who can focus on building growth and ensuring that the growth is based on a stable and repeatable way of working.
Mature companies need “Don the defender”, who is capable of following the costs and investments diligently. Cash flow needs to be positive and investments calculated carefully. No bigger risks are taken. For a declining company ‘Larry the litigator’ is the choice. This is needed due to the hard decisions of what to let go and sell, in order to keep the company alive. In my opinion, this needs a strong character who really can make tough calls.
After Damodaran’s speech, I spent time to reflect and think through, in which of these stages I would be at my best. I have experience from the start-up world but felt that even though I can be a visionary leader, I am a bit hesitant of making bold decisions and then change the direction quickly if needed. I have also worked in a mature and almost declining business, where I had too strong ideas for development. I didn’t have the patience to wait and didn’t fully understand the importance of cash first, ideas second.
So for me, a growth phased company is the best. I can build structures but keep the vision up in the air. I can have several focus projects and delegate responsibilities to other leaders in the company. I can accelerate the growth and have the energy to lead by example but at the same time the patience to see the big picture first.
What kind of a leader are you? What are your strengths? It would be nice to hear your thoughts.
If you are interested in seeing the whole speech of Aswath Damodaran, you can see for free at https://www.youtube.com/watch?v=c20_S-QgvsA
