THE BLOG
09/12/2013 02:36 pm ET Updated Nov 12, 2013

The Circle of (Business) Life: Understanding the Five Levels of Business Success and What They Mean for You and Your Company

Remember that song "The Circle of Life" from The Lion King? It reminds us that everyone is born, grows up, gets older, and eventually passes away. While you might not need a biology class to understand all of that, you might need a business lesson to teach you how much that life cycle applies to organizations of all shapes and sizes, and that as an executive, your knowledge of this life cycle could mean the difference between your company's failure and success.

The fact is, you must lead and manage an organization differently depending on where it is in its life cycle. In other words, leading and managing a company is far different when the company is beginning to grow or just starting out than it is when an organization is mature and has many successful years to fall back on. Trying to be a successful leader at an organization without understanding this concept is like playing baseball without knowing what inning you're in, if you're winning or losing, or how far into the season you are.

If you understand the successful business life cycle, you put yourself in an optimal position to accurately pinpoint where your organization is now, determine appropriate goals, plan and strategize to reach them, measure your team's efforts, and make adjustments as necessary. To learn more about the five levels of the business life cycle, take a look at the following explanations:

Level 1: Ownership and Opportunity.
"Risk vs. reward" is the order of the day. You must determine where opportunities exist or could be created. Then, you must consider if the opportunity is attractive based on its potential profit, how much cash and/or credit the company will need, your own criteria for success, and the tolerance for risk. As an executive and leader at your organization, you'll continue to return to Level 1 to make sure everyone is focused on the right market opportunities.

Level 2: Creating Your Company's DNA.
Here you map out how, exactly, your organization will operate on a daily, weekly, and monthly basis. Be sure procedures and processes are in place to help the organization realize the results forecasted at Level 1. This can range from how customers are handled to how and when employees will be trained to how they will interact with each other, and how you will oversee this activity so the company will operate like a "well-oiled" machine. This level also requires quite a bit of vision, because you need to look into the future and determine how things will need to work before they actually start working.

I refer to Levels 1 and 2 as the Preparation Levels, and they are as important to those who are just starting a new business or taking over a new department as they are to those who are operating and running successful businesses. Because the reality is, whether you're starting a new business or keeping up with the ever-changing market, it's the Preparation Levels -- and how well you make use of them -- that create the initial success and keep the business or department successful for years to come.

Levels 3, 4, and 5 then become the Action Levels, and how much success you achieve depends on your personal skills and talents backed up by how well you've prepared yourself and your organization for the marketplace, your customers, and your competitors.

Level 3: From Survival to Success. Now you have to be relentless in putting all planning and preparation into effect, every day. Keep your finger on the company's pulse by measuring results to make sure everyone is accomplishing what was expected. This sounds simple, but the reality is, many organizations begin to wither at this level because knowing what has to be and implementing it takes every bit of energy and focus executives have. As you move through this level, develop as many leaders as possible among your employees, and make sure to focus on motivating, communicating with, and educating them.

Level 4: Maintaining Success. If you suspected that Level 4 is similar to Level 3, you're correct -- your company must do everything you did then, but with more intensity and skill because your company's success has made you a target for your more aggressive competitors. In other words, your business has to keep improving in order to remain successful because the "wolves" are at your door -- just like you were at theirs -- when you were creating success in your organization.

However, there is a cruel trap at this level, which is why this level exists -- success does not always breed success; meaning success brings its own set of problems, including (in some cases) eventual failure. For example, success creates apathy, and apathy is like the measles: they both are contagious, even among senior executives. Apathy can lead to stagnation, loss of market share, and worse. Being successful brings another unexpected situation: What to do next? This is a bigger issue than most believe because the goal has always been to achieve your objectives and goals, and very little is written or said about what to do next. Getting this answer right is what separates the great organizations from those that are just average or fade from memory.

Level 5: Moving On When It's Time to Go. It may be hard to imagine now, but eventually, you will have to think about exiting your organization, whether you retire, move to another company, or leave for other reasons. Although this is typically an emotional issue for executives, it must be treated just like any other important career decision you have made -- well thought out and based on facts. When you fail to think seriously about when to exit and what your next step is, you will leave it to fate, or for others to decide for you, which is never a good thing -- especially when it's your career on the line.

© 2013 Bill McBean, author of The Facts of Business Life: What Every Successful Business Owner Knows that You Don't