How Companies Can Avoid a Midlife Crisis

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According to conventional wisdom, companies resemble organisms destined to pass through the stages of start-up, scaling, maturity and decline. In reality, business opportunities — and not firms — pass through these stages, and most organizations consist of multiple opportunities arrayed across the different stages of the life cycle. Executives who understand this crucial distinction can view their organization as a portfolio of opportunities that requires constant re-jiggering to balance the demands of the present with the promise of the future. The authors suggest that, when assessing any opportunity portfolio, executives should remain on the lookout for the following common pathologies: waiting too long to exit a declining business, failing to salvage usable pieces of a business that is shutdown, shunning promising new markets because of an overly conservative fiscal approach, trying to scale too many business opportunities so that none of them receives the necessary resources), applying the same management style to business opportunities at different life cycle stages, and erring on the side of loss aversion.

Donald N. Sull is an associate professor of management practice and Dominic Houlder is an adjunct professor of strategic and international management with the London Business School.

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