How to Reach the Zone of Optimal Progress and Not End Up in the Twilight Zone

Why do some business systems succeed while others do not? The answer is difficult to find by comparing balance sheets or cash flows. In fact, many well-funded companies lose momentum and fail the test of competitiveness and business success. Companies that grow and thrive have something more than a strong financial position – they have quality and engaged people and appropriate operational structures. In development and growth, every organization, including any group of people striving for a common goal, goes through specific steps and must endure changes caused by growth. There is a clear sequence of relatively predictable steps that every company goes through. With the right people functioning within the appropriate structures, every company has the power to reach and remain in the zone of optimal progress – the zone in which the company predictably achieves its goals. To reach this zone, a company must progress through three growth zones and, to remain in the best one, it must avoid three zones of decline. The idea of the product or company life cycle is not new. However, the demands and specifics that each zone of the life cycle places on the organization are not universally known, especially not in practice. It would be ideal if companies could simply jump into the zone of optimal progress – however, this is not possible, just as a person cannot start running before learning to crawl and walk. Unlike humans, companies can return to one of the zones and, to put it in student terms, repeat the material. Similarly, unlike humans, who have a mortality date, companies can indefinitely survive in the zone of optimal progress. In other words, companies can regenerate and replicate success. Achieving and maintaining the zone of optimal progress is not a matter of size, age, culture, money, industry, or the way meetings are conducted. The requirements are a bit more complex, so in this zone, we talk about excellence in decision-making, goal setting, a sense of ownership and responsibility among employees, and, above all, the right measure between structure, processes, procedures, and rules on one side and creative freedom and innovative expression on the other. It is important to say that every company, business division, or project team has the power to reach and remain in the zone of optimal progress. The right measure, i.e., the best balance of these elements, enables long-term sustainability and the company’s continuous growth. Not all companies go through all zones of the life cycle. Some get stuck in one or more zones, while others reach a certain zone and fall back into a previous zone or zones. Some companies simply disappear in some zone. Let us examine the specifics of each zone and the demands they place on the company.

1. The Zone of Struggle This is the zone of survival struggle and usually lasts the first three years from the company’s founding. The company constantly lacks money and seeks sources of financing to continue operating while continuously validating the market for its products and services. The daily struggle for every customer is the ‘modus operandi’. The key importance is learning and integrating feedback from the market, as well as the willingness to modify the business model, strategy, and core values. Management structures are minimal as primarily the vision, faith, and enthusiasm of the company’s founders push the business forward. The mortality rate for companies in this zone is high – only about 20% of companies survive this zone – and these are usually the well-funded ones. A company that relatively successfully navigates this zone is the popular startup Pixhug – an online platform designed to raise awareness of humanitarian projects by leveraging the power of social networks and photo sharing.

2. The Amusement Park Zone In this zone, business grows rapidly, and the focus shifts from money to sales. The company has established the need and demand for its products and services and is now striving to satisfy customers. It grows and automatically raises its complexity. Responsibilities and functions of people change. This is a zone of great improvisation and flexibility, so the company operates in a zone of imprecision and uncertainty, without the comfort provided by process systematization. However, with growth come the first problems: slow communication, ineffective decision-making, new organizational levels, and the first dissatisfied customers. Therefore, new operational structures are needed, and the inevitable abandonment of the characteristics of a ‘super agile’ organization occurs. A company that exhibits many elements of this zone is Bellabeat, a successful Croatian technology startup that is rapidly growing in sales and setting the stage for entering the unicorn society.

3. The Rafting Zone The consequence of success in the amusement park zone is that companies naturally enter the rafting zone. The terrain of complexity becomes very unpredictable, and the company shifts its focus from sales to effectiveness and profitability. A larger base of customers and employees demands attention. ‘Knowledge and information silos’ emerge, as well as internal conflicts regarding who is responsible for what, particularly evident between the sales sector and the operations or production sector. Employees are under increased stress, and their turnover is often high while family culture and loyalty are put to a significant test. Consequently, the company has a need for clear processes and systematization, which many startups find difficult to accept. At this moment of dysfunction, the owner must decide whether to further develop the company and encourage it to grow while managing complexity or to limit its size and consciously return to the amusement park zone – which is a legitimate decision made by many successful family businesses. If the company decides to progress, it must part ways with old operational structures and become an efficient decision-making machine. Nanobit d.o.o. is a successful company specializing in the development and delivery of mobile games and applications, which is beginning to show characteristics of this zone.

4. The Zone of Optimal Progress The transition to this zone is the result of introducing the right amount of procedures, processes, and systems while maintaining the entrepreneurial spirit, creativity, innovation, and risk-taking that brought the company to this zone. The company here resembles a skier who relatively easily conquers a slope full of ‘bumps’. The company’s systems and decision-making function harmoniously, like a well-oiled machine, keeping growth and profitability in balance; the entire company intuitively understands how to move forward. Employees understand why the company is successful and how to maintain success in the future. Of course, the company cannot now go to a summer house and start celebrating its good karma. On the contrary, it must manage the latent tension of contradictions: the rigidity of systems, procedures, and processes on one side and the creative, entrepreneurial chaos on the other. If employees start to rely too much on various systems, the company will slip out of the zone of optimal progress. Likewise, if it focuses solely on creativity, it will fall back into the rafting zone. If the company exhibits elements of this zone, it is now tasked with finely honing its internal capacities to maintain balance and upgrade the corporate culture of optimal progress.

5. The Routine Zone This is a dangerous and frustrating zone for any company because it is challenging to avoid. Too many systems and a concentration on them, controlling, budgeting, processes, and procedures that detail ‘how’, while losing focus on ‘what’. Innovation suffers, growth slows down, and the company resembles a hamster running on a wheel and going nowhere. A huge collective effort is wasted on implementing decisions, analyses, and statistics, losing flexibility and agility, and the company is instead occupied with itself rather than customers and the market. Systems become an end in themselves, and the company becomes their slave. Looking at its winning strategy in the past, the company falls into the trap of thinking and acting that more systematization will bring success and a return to the zone of optimal progress. As appropriate as it was for the company in the rafting zone, it is equally inappropriate for a company in the routine zone. It is easy to slip into this zone, but it is possible to overcome it if the company is capable of self-diagnosis, so a return to the zone of optimal progress is still possible. In this sense, a new pair of eyes is needed to record the brutal facts. People who speak the truth throughout the company, including at the management level, are needed. In other words, directors and company leaders must actively integrate into the work of all employees, descend to the front line, and be in contact with the organization to avoid its slow ossification.

6. The Quagmire Zone The company falls into the quagmire zone after being in the routine zone for an extended period. The company’s management becomes complacent, managing the company for personal comfort while ceasing to view customers as the fundamental reason for its existence. Key employees begin to leave the company, and creativity, risk-taking, and entrepreneurship are not supported. Decision-making is burdened by formal bureaucratic procedures and is extremely lengthy. Innovative ideas struggle to find their way and mainly what is already proven is accepted. Frequent causes of such a state are found in monopolistic systems, companies with large cash reserves, top management that is disproportionately rewarded, or family businesses that lack vision and insist on family heritage. Consequently, the inevitable disappearance of such companies can take time. Since the company no longer has the capacity for self-diagnosis, exiting the zone is only possible through external influence, e.g., acquisition of the company, and is equivalent to a slap needed to bring a hysterical person back to reality. Without such interventions, the next step is a journey into an abyss of no return.

7. The Abyss Zone This is the zone where return is no longer possible. The company has exhausted all resources and has no more money to create new sales. The technology has become outdated and has become a huge burden in achieving competitiveness. The customer base no longer needs the company’s products and services. The ultimate result of this zone takes the form of liquidation in the form of bankruptcy or asset sale. A company that has unfortunately experienced this zone is Magma d.d., which was once a major player in the children’s toys and clothing market. As we can conclude, maintaining a company in the zone of optimal progress in the context of constant market changes, technology, and regulation is a delicate task. Theoretically, as long as management is flexible and maintains a balance between processes and systems on one side and creativity, entrepreneurial spirit, and risk-taking on the other, the company can indefinitely remain in this zone. As already established, survival in this zone depends on a developed sense of ownership and self-responsibility throughout the company. Therefore, involved and empowered teams and individuals who consider themselves responsible for achieving real results and who are structurally creative, innovative, and take risks in achieving the company’s goals are the foundation for reaching the zone of optimal progress and remaining in it.

Author: Teo Rakočević, consultant for strategic development and innovation