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Classifying Businesses

April 23, 2013

In geological terms, rivers are generally classified as:
‘Youthful’ – Steep banks resembling a V shape, they are much deeper than they are wide; and are fast moving with the ability to cut through the hardest rocks over time, often leaving telltale signs of their presence for centuries to come (think white water rafting).

‘Mature’ – As the landscape allows the river to widen, currents begin to slow, and banks become more gradual, forming a U shape, often with defined flood plains.

‘Old Age’ – With much flatter terrain, the river gets increasingly wider, slower, and muddier. Broad flood plains are often swampy making it sometimes difficult to identify solid ground. As they slow down, they deposit sediment and often create deltas that are very nutrient-rich.

The names have no correlation to the actual age of rivers, but what I find interesting is how similar these characteristics are to the world of business.

Both youthful businesses form deep relationships and are very focused on just a few targets, or have minimal products available. The nature of the products and relationships allow for customizations that result in large quantity orders. The power of a youthful business is its focus and speed; their innovations can move or cut through dense markets.

Mature businesses emerge when that rocky terrain begins to soften and smooth out. While remaining focused on deep channels, they begin to broaden in scope by either introducing new products or adding new (but related) markets to keep revenues growing. Like mature rivers begin to support more varieties of life, we see more layers in the organizational structure.

Diversification is the name of the game in Old Age businesses. They are often wider than they are deep, having multiple branches to cover diverging markets, and are known to be both well connected and respected with revenues that may come from nowhere – only to return there without much fanfare. Where the Youthful businesses are about innovating new paths; the Old Age businesses show their strength through endurance with a focus on managing and automation. Though they operate with their own flair, these businesses rely on traditional techniques.

What I find most fascinating is that even very old business can be reinvigorated or reinvented almost simply by behaving like a start-up – lean, energetic, chaotic, fast paced, and deeply focused.

Nature shows us that there is never one perfect way to do things. The key is to realize where you are in your evolution, and utilize the proper strategy for that moment. Perhaps the most common death to a business is diversifying before they built enough momentum. Though they may have left their mark; they are soon forgotten.

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