15.2 Growth problems  (Page 2/4)

If growth is achieved by increasing sales volume, start-ups can defer the adjustment of the original organizational structure until decision deficits, such as delays in decision-making, begin to surface. In growing companies, maintaining the same team structures and management generally leads to a loss of coordination. It also postpones the creation of a clear corporate structure. If the distribution of responsibility in the start-up is unclear, or if the same team management has been continued despite growth, problems will arise due to a lack of coordination. Therefore, the distribution of competences and responsibility must be achieved, depending on the strategies the start-up pursues. If team structures impede this because they are too slow, they must be replaced by hierarchical structures.

Different strategies may be necessary if the company pursues diversification strategies by expanding into new markets, or bringing out new products by expanding the value chain, or into new networks. However, this requires a good knowledge of the industry or industries in which the start-up wishes to diversify. In this case, a more decentralized organizational structure with different, relatively autonomous departments is advisable. However, department decentralization makes coordination essential. Some of the classic mistakes made by young firms are either to wait too long before decentralizing, decentralizing too soon, and/or failing to coordinate the new departments. Each of these mistakes, or a combination, can have a restricting effect on the growth of a firm, and in the worst case can even increase the risk of a young firm’s going bankrupt.

Inadequate or incorrect marketing, cooperation, finance, or hr strategies

Growth is also at risk if start-ups fail to develop strategic planning, marketing, financing, risk management, HR management, organization, or policies for internationalization. Growth mistakes made in regard to marketing, financing, and HR management are particularly serious. Many of the following issues have been introduced in previous chapters.

The first group of flawed growth strategies is marketing strategies. Start-ups are particularly susceptible to concentrating on developing a technical or scientific product further and developing new products, but not paying enough attention to marketing. Marketing plans and their extrapolation are a prerequisite for avoiding growth mistakes. If a firm does not conduct market research, identify customer preferences, generate new customer wishes, or segment or capture the market, it will not grow. Start-ups can only find out whether or not they can achieve or have already achieved a dominant position in the market by conducting systematic market research. If they already have a dominant position, they could try to push competitors out of the market or prevent them from entering it in the first place. Depending on the financial resources available, e.g. after a successful IPO, it could even make sense to buy out competitors and grow in this fashion.