What is Stage Four?

Sand Hill Partners defines Stage Four as the period in which a start-up company achieves sustained profitable growth while building the capabilities for true greatness. This requires a strong focus on process and systems execution coupled with a strategy for "changing the game" in the market. Stage Four is a period of celebrated company growth accompanied by a quiet internal tension as the company grows faster than its people. Successful Stage Four leadership requires enormous focus and effort on designing, developing, executing and improving the right processes and systems.

Today more than ever, a venture-backed startup must become a solid Stage Four company in order to achieve any type of investor exit into publicly traded stock. Thus the external expectations on the Stage Four business transition from a Stage Three private investor’s desire for pure growth and market share to a public market demand for sustained profits in a growing business.

Internally, the successful Stage Four company experiences enormous tension as it begins to wrestle with profitable growth in an environment where the organization is growing faster than its people. Sand Hill Partners shows companies how to leverage this tension to create world class processes for talent development and acquisition. Stage Four not only requires the “right people on the bus”, but also in the right seats, and perhaps most importantly, integration of new Leadership team members with the unique company culture and values critical to success. It takes deliberate planning and execution in a fast-paced environment best characterized by another one of Sand Hill Partners immutable laws:

There are always more opportunities than there are resources.

Stage Four success is built on a focus and belief that leadership talent (Leadership Brand) really can differentiate a company in its market place. This is where the internal challenge of pioneers versus settlers becomes most apparent. Because of the transition to honing ones processes and systems into a well-oiled machine requires different strengths than those of the early-stage business leader;, there is inevitable friction between the "pioneer leaders" who have been successful to date, and the essential “settler leaders” who have recently joined. Both skill sets and cultural attributes are important; however, unless each is appreciated for their time and unique contribution to the organization, they will create two opposing camps:

  • Pioneers - Those who built the company in Stages One, Two, or Three, but perhaps now talk about the way things used to be.
  • Settlers - Those who have recently joined the company with the mandate to create structure, order and efficient processes while riding a bullet train that seems increasingly out of control.

Perhaps the critical success factor above all others is to embrace and assimilate a new way of life around processes and systems essential for a substantial organization to grow profitably.

A primary purpose for the company stage model used at Sand Hill Partners is to provide clear context for what “the main thing” is at any given point. The focus for Stage Four is to create separation from your competitors in the target market through excellent execution.

It sounds straightforward, but start-ups often stumble here because they don’t put the discipline or hard work into execution and improvement of their processes and systems. The reason is it requires a fundamental shift in culture and new capabilities that often weren't needed until now. Speed and focus come more easilyin the earlier stages, but now, the winning Stage Four organization must successfully execute a full complement of business processes and systems nearly flawlessly as they expand into adjacent markets. It really is a whole new ball game.

Stage Four is very hard work. It requires new leadership competencies to scale and hone processes and systems to stay ahead of the growth curve. Simply turning up the heat in the existing kitchen won't cut it, there are simply too many mouths to feed now.

This Stage requires a change in focus within the leadership team, where some leaders focus on the new growth opportunities in adjacent markets (or perhaps changing the game in existing markets); while other leaders focus on ensuring that the processes, systems and infrastructure scale and grow profitably. This is the great divide for many companies thought to be on the fast track. If processes and systems including talent development, culture development and talent acquisition are not in place, the crashing and burning can be swift.

Critical Sucess Factors

The Critical Success Factors in Stage Four address the above challenges and prepare the business for Stage Five.

Adjacent Market Expansion

Are you lucky? Or are you good? Stage Four is when you find out.

A business has to become the market winner somewhere in order to even get to Stage Four. (That's what Stage Three is all about.) The successful Stage Four company must then demonstrate the organizational capabilities to win again in an adjacent market. This second win certifies you are good, and not just lucky. It means you have a true stand-alone company, and not just a technology, or a one-shot wonder. It means the company understands its competencies, is organized and focused around its competitive work, and has the process and system infrastructure to deliver profits wherever it goes. It means a lucrative return for employees and investors. Sand Hill Partners shows you the best ways to identify and prioritize adjacent market opportunities, and then streamline and integrate your organizations capabilities to go out and win big.

Market Intelligence

During Stage Four, the company gains enormous feedback and data points on the product, market, technology, and customers that no one else will have. Sand Hill Partners can work with you on how and where to capture the most important data, and then how to convert it into unique customer and product insights that will drive the product roadmap and build more barriers for eventual competitors. This becomes the engine driving true sustainable market leadership.

Leadership moves to General Management

In Stage four all companies run into one of Sand Hill Partners immutable laws:

Successful companies grow faster than people do.

The reality is the different stages of company growth require different skill sets for success. The different skills are equally valuable – what is important is applying them at the right time. This truth is most apparent at the leadership level, and unfortunately is also where it can be most challenging to manage. Rare are the Bill Gates of the world, executives who can start as employee #1, and successfully lead a company through all five stages of growth.

While visionary skills are essential in the early-stages; Stage Four requires more general management leadership skills with strong process and systems expertise. Sand Hill Partners provides embedded guidance and know-how for process leadership and general management skills. We work with Stage Four start-ups around factors such as:

  • The role of leadership brand as a source of competitive advantage
  • Process ownership responsibilities amongst the leadership team
  • Clear executive team roles and responsibilities
  • CEO and leadership team focused on the strategic work (i.e. moving from technical and operations to managing the competitive work and the external environment)
  • Building general management capabilities

Properly navigating these transition points in Stage Four is an essential element in utilizing leadership as a source of competitive advantage and sets the stage for the processes and systems required for large-scale growth.

Scaling Processes and Systems through improvement and renewal

Picture your company featured in the next bestseller about truly great businesses. That successful journey starts right here - Stage Four means instilling improvement and renewal into the organization's business processes as a way of life. Unfortunately it never happens casually. It takes laser focus and huge effort towards honing the organizations processes so they become a source of competitive advantage. The steps sound deceptively simple:

  • Define your competitive work processes and organize around them.
  • Drive them to create separation from the competition.
  • Task the other processes to drive for efficiency.

But as any CEO will tell you, implementing these steps is pretty hard. Doing it right means you join the rarified air of the truly great companies. Sand Hill Partners knows what it takes, and knows how to get you there. Contact us today to get started.

Feeling the Love

Stage Four presents new levels of challenge for the company trying to build successful business results and a great place to work. The secret is in scaling the business the right way. As the company begins to experience growing pains, Sand Hill Partners provides sound medicine by implementing the right structures for smart-scaling:

  • How to organize around core and enabling business processes
  • Creating strong business process ownership and performance metrics
  • Identification and focus on “competitive work”
  • Tying together the organization into a high-performance system
  • Building improvement and renewal systems for each of the processes

The successful Stage Four business will have strong processes and systems in place, which are scaled and improved for competitive advantage.

Capable and Aligned Talent

Shared Mindset

Stage Four is the time to solidify the company’s competitive advantage in it market through a shared mindset and capable talent. As the company continues to grow profitably soon the number of new Stage Four employees will exceed the Stage Three headcount, and it is assured there will be differences in how employees perceive the vision, strategy, reward systems and even their role in contributing to it all. One of Sand Hill Partners immutable laws is:

Organizations are perfectly designed to get the results that they get.

This means it’s important to intentionally choose and implement the cultural attributes and intangibles which will differentiate the organization. An overwhelming rush of new people into the Stage Four company makes this an especially time-sensitive success factor. Sand Hill Partners can show you how to consciously design and plan activities to reinforce the culture and distinctive competence needed by the organization to continually grow profitably throughout Stage Four.

Capable Talent

The essential employee growth in Stage Four means knowing how to quickly get the right people in the right seats. Regardless of the methods used to find good candidates, the high-performing start-up needs to be fast about selecting and ramping capable talent. Sand Hill Partners makes this happen with a streamlined process based on two key building blocks:

Performance Models

A performance model is a detailed description of the performance required for success in a specific position; it is a description of how a job should be performed. The truly great companies in this world use performance models for selecting and developing key execs because the wrong person in a key position can kill an organization. A Stage Four company can capture the pole position for the journey to Stage Five with well-planned performance models for key leaders. Sand Hill Partners offers expertise in the steps for making performance models drive profitable growth in Stage Four:

  • Structure and design the role as it needs to be performed.
  • Identify selection criteria that feeds into the Stage Four Selection Process (discussed below)
  • Clarify critical performance results and best practices to all involved.
  • Assure appraisal and reward systems (e.g. comp plans) are aligned and encourage target performance.
  • Determine actions that will remove work environment barriers to high performance.

Stage Four Selection Process

Culled from time-tested principles and best practices learned and applied in the selection of thousands of employees for new organizations (and many key executives in large companies), Sand Hill Partner’s ’Stage Four Selection Process assures the company attracts and selects the best people. It further brings manageability, consistency and fairness to a desperate Stage Four appetite for new people. Sand Hill Partners shows its clients how to balance the need for speed and simplicity with proven methods for determining what someone will really do on the job.

Contact us to schedule a more detailed discussion of how Sand Hill Partners can help you create a successful start-up and a great company.

© 2008 Sand Hill Partners. All Rights Reserved.