The 4 phases of a company: What is stopping your company from growing and innovating?

So, you want to take your company to the next level, but you consistently seem to get stuck, feeling overwhelmed and frustrated at the little progress you are making. Do you find that as your organization aims to innovate or grow that it really struggles to execute, and the status quo is hard to overcome?  If this sounds all too familiar, you are in the right place, about to glean some insight on how to identify your underlying problem in order to progress as a business. Any sort of growth or innovation in a company is a journey of many steps, and, without understanding one’s current organizational structure and the challenges that accompany it, that process becomes much slower and more difficult.


What impacts a company as it grows and innovates?

Every company strives for more customers, revenues, improved offering, along with ambitious staff looking to be recognized and rewarded for their contribution to the organization.

When a business undergoes changes for the better, they are most often accompanied by new staff, roles, responsibilities, policies, and organizational structure. As a company grows, it transitions through a series of very common phases that can be recognized by their organizational structure. Each phase comes with its own unique set of strengths and weaknesses, which impact how decisions are made within an organization. So, what are the factors that push an organization through these phases?  Growth depends on many different influences, but there are two very common ones that can cause structural complications within an organization:

  1. Changes in roles & responsibilities (ie. Additional staff, new technology)

  2. Changes in customers, revenues and product offerings

Where are you and your organization? What is holding your organization back from succeeding more quickly and efficiently? To help answer these questions, we have outlined the four phases of any organization, their common characteristics, and the leadership qualities that need to be present in order to overcome the barriers for growth and innovation.  

(Reference: Joe Sherren, who is credited with this business ecosystem model and each phase title)


Phase 1 - Entrepreneurial

You know you are in this phase if your company has less than 10 staff members. Some key characteristics of entrepreneurial organizations include:

  • Less people
  • A fun, close-knit team
  • Great communication
  • Generally excellent customer service
  • Can act on ideas and execute rapidly on small scale solutions
  • Ability to work quickly and collaboratively as a team

Unfortunately, such a small team can easily be overcome with despair and stressors while lacking resources as they face much larger and established organizations. Often, an entrepreneurial group is looking to be recognized as a new and upcoming company that will succeed in the future. If you are in this phase, your struggles likely revolve around a lack of accountability due to too much responsibility put on each staff member, as newly-blooming companies need to drive revenue, even as staff have multiple roles with “all hands on deck.”  If you are the leader of this type of organization, it is safe to say you manage to maintain creative enthusiasm, and inspire your team to overcome hurdles, and persevere.

Keys for success:

AVOID: Staff burnout

AFFIRM: A leadership of inspiration to persevere


Phase 2 - Bureaucratic

As a company grows out of the Entrepreneurial Phase, the team size expands to approximately 11-50 staff members. With a larger team, more clearly defined roles and responsibilities are in place, organization charts are created, and policies are slowly standardized. This size of organization is beginning to implement a reporting structure, with personal organizational charts. Oftentimes, the Bureaucratic organization is focused on scaling and growth.


Unfortunately, with a more organized structure, there are often limits on the team’s flexibility and creativity. Accompanying a more structured approach is heightened potential for frustration among team members in the midst of their specific job descriptions and taking on projects. As a result, staff may not feel as though they are being recognized, as they have been pigeon-holed into a specific role that may not be to their liking. This can cause stagnation, and result in reduced enthusiasm that was once carried the original staff during the Entrepreneurial Phase of the organization. The probable reduction of creativity and innovation due to increased structure is important to be aware of. In addition, a potential loss of key product or technical knowledge exists with departing staff. If this sounds like your organization, you are surely undergoing multiple changes, and it is important for leadership to ensure stability. The management in the company must keep staff members motivated, excited, and connected.

Keys for success:

AVOID: Squashing creativity and enthusiasm

AFFIRM: Structure and stability to keep team motivated!


Phase 3 - Silo

Again, as your organization grows, there are specialized needs within the organization. Often a Silo organization is made up of more than 50 staff members. Unique organizational structures have been implemented, creating functional units to manage products and services.  As a result, there are distinct departments with organizational structure who manage very specific areas such as the financial department, human resources department, customer service, etc. The benefit of a Silo structure is that scaling has already occurred, and each organizational department is focused, with very specific levels of accountability.


On the flip side, managers at this stage are more likely to compete with other departments for limited resources and attention, and poor customer service may be a result of such competition. There tends to be conflict between departments, and jockeying of which department gets to hire, invest in innovation, or acquire resources to develop department-specific tools or technologies. At this phase, leadership needs to focus on the external customer, not allowing the focus to be on internal needs.  Providing excellent customer service needs to be prioritized— conflict will be minimized through clarity of customer outcomes.

Keys for success:

AVOID: Conflicts between departments

AFFIRM: Customer outcomes


Phase 4 - Matrix

A company at the Matrix phase is a often a larger organization than the Silo organization. The Matrix company has encountered the importance of serving the customer across many different departments in a unified manner.  As a result, there is a matrix of meetings on specific topics across departments, thus creating a common goal amongst all teams. The focus is on customer outcomes, and having efficient communication in these meetings.


A common problem faced by a Matrix company, however, is that too many staff members have input, and too many meetings take place in which differing viewpoints are discussed without resolution. It is easy to become complacent with the chaos in a company like this, resolving that “nothing can be done” as the company is just too large. The leadership should then challenge its staff members with direction and short-term goals to achieve a more purposeful system.

Keys to Success:

AVOID: Allowing all staff members to have input at every meeting

AFFIRM: Short term outcomes to avoid complacency


To move your organization to the next level, YOU and your leading talents are the missing pieces. You are a leader, and anytime you want to enhance your organization and implement new technologies, your leadership skills are required. However, leadership approaches are not “one-size-fits-all” across all companies. It can be said that businesses are a reflection of their people, and people are a reflection of their leadership. This is exactly why leadership is at the heart of success within an organization. In my own opinion, servant leadership is the best approach, because it best reflects the needs and changes the people in your business require. Thus, you as the leader are evolving your own take-charge abilities as your organization grows, and your staff encounter new situations and overcome obstacles. If you need assistance in making some positive changes within your organization, the LeadManaging team loves contributing to the success of others and would be happy to point your organization to some outstanding consultants who are known for making big differences in companies of all sizes. Don’t be afraid to ask for help, and use this ecosystem model as a reference.


Want a quick overview of the highlights above?

Check out the summary below of the different phases of a company, and the type of leadership required.