What’s the key to a successful business? Why do some sink and others swim? Is it just a case of having the right product at the right time? Or is it that the company is good at managing and deflecting crises when they arise? The Greiner Curve is a simple tool that lays out the typical “pinch points” that many businesses encounter as they grow from small start-up to global corporation.
The Age of Start-Ups
These days you only have to turn on the news to hear about yet another start-up being launched. Airbnb, for example, Uber and Spotify – all have made the headlines in recent years and all have achieved success.
Popular home-swapping service Airbnb is now worth around $900m. Its customer base has grown from a measly 47,000 in 2010 to 17 million in 2015. Meanwhile, taxi app Uber announced that it had reached the two billion journey milestone in 2016. At the same time, music streaming service Spotify revealed that it had surpassed 35 million subscribers. This put it ahead of Apple Music (15 million subscribers) and Jay Z’s streaming app Tidal (4.2 million subscribers).
But not all start-ups are successful. Zirtual and Nouncer are just two examples of businesses that began with a great idea, but floundered because of poor management.
On-demand virtual assistant service Zirtual – which, at its height had more than 500 employees and thousands of clients – folded in 2015 because it grew too fast. Although its revenues were high, it was ultimately spending more than it was making. The service’s owners paused it and let employees go, all in just a week.
Despite securing initial funding, micro-blogging site Nouncer was also unable to take its business to the next stage of growth. Founder Eran Hammer revealed that, “…money was not the issue…”. Instead it was an inability to “find the right people,” and a failure to “build the right team” that had let him down.
Ninety Percent of Start-Ups Fail
In fact, around nine in 10 start-ups fail. According to research undertaken by CBI Insights, the reason why most fail is down to a lack of market demand (42 percent). Other factors, such as cash-flow problems (29 percent) and having the wrong team in place (23 percent), were also significant reasons for failure.
We’ve all heard of famous entrepreneur Elon Musk’s rise to the top. The businessman – now reportedly worth $11.1bn – saw two of his ventures, SpaceX and Tesla, brought close to collapse in 2008. Musk subsequently revealed that both businesses have had “multiple near death experiences.” Despite this, both SpaceX and Tesla are now hugely successful and renowned the world over.
Another of Musk’s early ventures was an online payments service called X.com. He established it after he identified a business opportunity in internet banking. Although the market was still very much in its infancy at that point, the opportunity was a good one and profitable. However, Musk soon realized that his lack of financial knowledge was holding the business back. He made new partnerships with financial experts and, together, they founded online payments service Paypal – a company now estimated to be worth $46.6bn.
How Can the Greiner Curve Help?
These “multiple near death experiences” are exactly what the Greiner Curve describes – the obstacles that fast-growing companies have to overcome.
Altogether, the tool describes five main phases of growth, each of which is followed by a crisis. Phase one, for example, focuses on creativity. During this period, the founders focus on developing their product and entering new markets. However, this phase can often result in a “leadership crisis.” This happens when more people join the company and more important decisions need to be made.
The Greiner Curve is designed to help you to negotiate these five crises as they happen. If you want to learn more about it, take a look at our infographic here.