The Enterprise Business Cycle and How to Avoid the Decline Stage

Whether a company began as a startup and grew into a full fledged enterprise, or a larger company was acquired and split into smaller subsidiary companies, companies constantly evolve and go through business cycles.

For a startup, this business cycle often consists of the journey from conception to a potential acquisition or IPO. However, for an enterprise, the business cycle becomes much more convoluted as superiority in the competitive market as well as pressure to penetrate new markets increases.

To our readers in the enterprise world: It is important to understand the business cycle stages that enterprises undergo and recognize what stage you are in, in order to prepare for anything that could happen (and avoid the stages you never want to reach).

Enterprise Life Cycle

While the business cycle of an enterprise can be broken down infinitely based on the type of industry, the target audience, the projects undertaken, and more, there are a few inevitable phases a company will always go through:

1. This first stage, which is usually around the time a company goes public or receives a large investment, typically occurs when income is steady, customer on boarding numbers are increasing and overall cash-flow improves alongside profit. During this time, enterprises must be able to properly manage their increasing revenue in a way that enough gets allocated to continual research and development of their platform or infrastructure, or other growth-strategy actions.
2. Following the initial growth, enterprises enter the expansion stage during which the routine operation is stabilized, income is dependable, and the company seeks to open new revenue channels. Often considered “the survival cycle,” the focus of this stage is establishing growth. This is most often done by entering new markets or creating complementary or improved product lines. The reason this stage is so critical is simply because without the constant drive forward, your enterprise risks falling back.
3. Once new markets are penetrated and survival is no longer a question of “will they,” enterprises reach the mature operation stage. During this stage, the enterprise has a stronger organizational structure and likely enjoys a steady stream of revenue, positive cash flow and increased profitability. While these all sound like great things, they could potentially breed comfort and stagnation and therefore lead to the last and final stage of the enterprise cycle – decline.
4. When consumers tire of an enterprise’s product and the enterprise has not created new solutions or offered their product to new markets, they begin the long and slow decline process. The decline, or death of an enterprise, can also be due to internal issues, such as individuals losing sight of the bigger picture, or stagnation becoming too normal.

Avoid the Decline

The first thing companies can do in order to ensure that they avoid the decline phase for as long as possible, is ensure that they are constantly going back to the expansion cycle. After mature operation is achieved in one vertical or with one market, it’s time to go back and ‘shake things up again.’ By continually seeking new verticals and offering new products or services, a company continually grows, staying as far away from death as possible.

Continuous growth is easier said than done, however there are a few ways to speed up the process, namely through collaboration. When enterprises collaborate, particularly with startups, they are able to quickly scale new solutions while affirming their dominance in the market and their ability to continually stay ahead of the game. Of course enterprises that use prooV to discover and connect with startups have an easier time integrating new technologies into their existing ecosystem, but any collaboration can help an enterprise with growth and expansion.

In addition to testing out solutions by collaborating with startups on proofs-of-concept (PoCs), enterprises looking to avoid the decline stage of the business cycle can also refresh their corporate structure and approach to corporate innovation. How so? By reviving the management team and organization and shifting the style of the company. There are various ways in which organizations are set up, and often what leads to stagnation of an enterprise is an existing organizational structure which no longer suits the needs and/ or goals of the company.

Always remember that everything has a life cycle. Enterprises that are aware of this, will know how to navigate through the ups and downs when they come, and ensure that they never reach the dreaded ‘enterprise death.’

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