Last time we introduced an organization’s firmographics and discussed ownership and legal structure. This time, we’ll highlight two additional firmographic categories: industry and life stage. Remember, an organization’s firmographics can be regarded as the sum total of employed strategies and resulting outcomes that a firm has experienced. In a way, a living history of the organization.
An organization selects an industry when it defines its offerings (the goods and services it elects to create and sell). According to the North American Industry Classification System, there are 19 industry categories ranging from health care to information to manufacturing to agriculture. Each industry serves different target customers in different ways through different channels. Some industries, such as information, are heavily reliant on labor whereas others, such as textiles, are highly dependent on the prices of raw materials like cotton. While companies within an industry will tend to have similar dynamic strategy map configurations, strong strategy is often dependent on the innovation which springs from other industries. Organizations focusing exclusively on benchmarking their industry leader will be lucky to be 2nd best. They will not lead.
Just as organizations within an industry are likely to share similar dynamic strategy map configurations, organizations in the same life stage will also share similar configurations. While start-ups ought be aware of their successful counterparts, they may also learn from emerging and mature companies as well as even companies in decline. A company should build towards what it wants to be in the medium and long-term rather than simply what it can or must be in the short-term. Organizations begin as start-ups before emerging, reaching maturity, declining, and on rare occasions reemerging.
The start-up stage is the most precarious in an organizations’ life cycle because variable costs across all these functions are the highest they will ever be while sales are at zero. If, through ingenuity and hard work, an organization realizes strong sales and customer base growth it has emerged. For emerging firms quality control and the establishment of efficient systems and processes are critical success factors. Organizations that are able to effectively scale are mature. Successful mature organizations have strong profitability and a recognized brand. To maintain their position they must continuously stave off competition by innovating and realizing operational efficiencies. Most organizations decline sooner rather than later. To reemerge after a decline has begun takes very deft leadership able to extract valuable core competencies and resources from an ineffective business model and to reallocate them such that they are put to more productive use.
Next time, we’ll continue to look at the remaining firmographic dimensions: business type, culture, size, and structure. Until then, I encourage you to thoroughly enjoy our scarcest of all precious resources, life. And I’d be remiss if I did not also encourage you to start the deep work of strategy online in 3 minutes with a Quick Map.