When I sit down with a director, CEO or founder to discuss their growth plans or strategy, they often have some frustrations or concerns about why it hasn’t eventuated to date. If they’ve called me in, they likely recognize there may be an issue with the execution of that strategy that is somehow tied to their people, but still they struggle to put their finger on why.
At some point in that conversation, I ask them if they’ve heard of the ‘valley of death’. Before they answer their face tells me everything I need to know. Either they go slightly pale, look fearful and say no. Or they look slightly confused and mumble something about that having only to do with tech startups.
According to Harvard Business Review, the valley of death curve represents the crucial early phase of new ventures. It is frequently associated with tech startups, and most of the published articles online seem to provide advice on how to get through the early negative cashflow stages before revenue comes in.
However, those challenging stages can hit at different points in any business. That Harvard Business Review article recognizes four distinct phases a business might enter a valley of death, based on the organization’s growth ambitions and whether the business model matches those ambitions.
Between each plateau there is a significant need to change the way you do business to make the next level.
The theory is originally based on the work of Verne Harnish in his book Scaling Up, in which he shows that, based on 28 million United States firms, there are different valleys of death at different revenue levels, with 96 percent of firms being below US$1 million, four percent above US$1 million, only 0.4 percent being above US$10 million and of the 28 million firms, only 17,000 of them are over US$50 million in revenue.
Between each plateau there is a significant need to change the way you do business to make the next level – essentially, it’s like being at that crucial phase of a new venture all over again. As Harnish says so eloquently, at each phase you have to adapt or die.
The strategy–people disconnect
For example, at 25 employees an organization reaches its second valley of death. It has survived its first one, which hit at circa 10 employees. Now it is at a point where to hit its growth plans, it needs to implement a layer of middle management and policies and procedures to ensure some consistency across a larger number of people.
This will fundamentally change the culture of the organization, which until this point will likely have hinged on the personality of the founder(s) or leader(s).
Team members typically want the career advancement opportunities that come with growth, but they also want to maintain a personal relationship with the founder or CEO. This is a tension that needs resolving. The change process may cause a fear response among the staff, which can affect culture.
Middle managers may be less experienced and less able to deal with this response, and process and policy can seem a less personal way to resolve conflict than the organization has traditionally used. However, now at a bigger size, it is simply impractical for it all to sit on the shoulders of the original founder(s) or leader(s) or they will burn out.
Welcome to the valley of death.
If some of this is ringing true for you, it may be that you have a strategy–people disconnect. That is, a divide between your strategy and your people’s needs, capabilities and motivations.
Strategy cannot be executed effectively if your people are not engaged and performing to their potential.
Strategy cannot be executed effectively if your people are not engaged and performing to their potential. As Peter Drucker famously said, “culture eats strategy for breakfast”, but that was in 2006 and we have come a long way since then. Research by Beaumont People into meaningful work found that culture was but one subset of one of the four factors of meaningful work.
When you and your team members are in meaningful work, you will have higher engagement levels, less sick leave and be less likely to leave your organization. Your people will have a higher commitment to the business and your overall organizational performance will improve – even improving performance during times of downturns or downsizing, therefore also improving the happiness of leaders.
These higher levels of performance and engagement mean they are more likely to execute your strategy.
Slow down to accelerate achievement
Do not make the mistake of treating the symptom with a quick-fix solution. Instead, take the time to find and cure the underlying illness. The immediate need for results, caused by the pressure of your board, a reporting cycle or internal or external stakeholders, often means we don’t take the time that such important matters deserve.
As executives, we feel pressure to turn issues around quickly. However, a McKinsey & Company report shows that slowing down does indeed speed up the results.
I recommend these steps:
1. Observe – internally and externally. What is working and what could be improved?
2. Assess – your strategic current state against your desired state.
3. Review – discuss with the executive leadership team to come to a judgment.
4. Consult – consider seeking external advice.
Taking these actions will help you determine whether you have a strategy–people disconnect and will save you a significant amount of time, money and stress – helping you achieve better results, and ensuring you are much more likely to adapt and take the necessary steps to get you through the valley of death to the next plateau.
