The Business Lifecycle & The 5 Phases of Leadership

Businesses rise and fall through distinct phases, commonly known as the business lifecycle. During this lifecycle, different leadership characteristics are required for the business to be successful.

The Business Lifecycle & The 5 Phases of Leadership

Where does your company fit within the five phases of leadership? Are you lacking certain leadership traits, or are you are your teams On Purpose? Let’s explore each phase and discuss the business focus, leadership qualities and the ultimate role the leader plays in each phase.

Keep reading to find out which stage your company is currently in and how to increase success through On Purpose leadership.

Phase 1: Innovation

It all begins with the creative spark for a new business venture. At this stage, there are no rules. Structure is low, creativity is high, and process and procedure are virtually non-existent. The business lives and dies on the power, persuasion and persistence of the leader.

Business focus: To establish the business, primarily working with pioneering leaders, teams and early-adopter customers who buy and prove the viability of the business model.

Leadership qualities: The leader must be highly knowledgeable in the product or service they are innovating, and access their expertise to achieve escape velocity for their venture.

Leader’s role: To leverage their visionary qualities and source proof-of-concept customers who are prepared to endorse the innovation.

On Purpose Observations
During the startup phase, the leader is very single-minded and highly driven. Their enthusiasm and energy alone is enough to inspire others to shared greatness. The ideal leader is highly On Purpose, driven and dynamic. Some leaders get distracted by their own creativity and lose sight of the overall business objectives; On Purpose consultation will help them stay On Focus… before they steer the whole company in the wrong direction.


Phase 2: Entrepreneurial

The business is enjoying rapid growth. During this phase, some rudimentary processes, procedures and systems are required to manage the emerging affairs of the business.

Business focus: To invest in increasing market share while enjoying the overall growth of the market. Significant resources are traditionally invested in sales and marketing.

Leadership qualities: Transitions from one of product/service visionary to sales expert. In many cases, the entrepreneurial leader is the typical “alpha” driver who overshadows their team and is the brightest star.

Leader’s role: Brand evangelist dedicated to converting as many prospects as possible into customers. They must also be able to recruit and lead a team that can promote and deliver the product or service to a much wider audience.

On Purpose Observations
Due to limited resources and a lack of deeper understanding, entrepreneurial leaders tend to surround themselves with followers and, sometimes, subservient players who are not necessarily leaders. A “my way or the highway” attitude could lead the business down the wrong road. Team Works can help bring out the best in an On Purpose leader’s qualities while helping engage team members to perform at their highest level.


Phase 3: Managerial

The business is starting to reach maturity. To continue on this path, the management levels below the entrepreneurial leader need to be empowered. The leadership style needs to evolve from a “doing” culture to a “leading/managing” culture. Here, we see significant processes and procedures put in place to manage the growing number of people, products/services and infrastructure while still managing the day-to-day business activities.

Business focus: To drive new growth with existing and new customers, as the marketing, sales and offerings evolve towards maturity.

Leadership qualities: The leader must now adopt a very different mindset. They must become an enabler, coach, mentor and strategist who recruits a team of manager-leaders who are empowered to lead others.

Leader’s role: A new leadership style is required: a managerial leader who shares power, manages people and not growth. The managerial leader looks to enable those below in the organization, and provide guidance and wisdom.

On Purpose Observations
The transition from entrepreneur to manager is very challenging. The entrepreneur tends to be a high energy, powerful, dominant, controlling leader. The entrepreneur also dislikes process and procedure. If we don’t transition to a managerial leader, the business will have a ceiling on its growth and potential. New team leaders may put ideas into play that don’t mesh with the original company vision. Getting On Purpose will ensure the business is not sacrificing passion for process, while ensuring a fluid transition of vision to the leadership team.


Phase 4: Administrative

This phase is generally the longest and most profitable for successful businesses and products. Competition in the marketplace is intense. Roles, responsibilities and organizational structure become fixed and rigid as the company seeks to maximize profit. R&D is usually restricted to product/service modification and improvement.

Business focus: Companies fight to maintain market share. Marketing and finance functions become more powerful.

Leadership qualities: Leadership transitions from managerial to administrative. The size of the team stabilizes, maybe even declines as operational and systems efficiencies are developed and implemented.

Leader’s role: To manage people, regularly occurring activities, various product/service innovations (typically minor). Refine existing systems and processes, and strive to maximize efficiency and profit.

On-Purpose Observations
While the administrative phase is generally successful from a business perspective, the success is unsustainable because the company can loose the On Purpose vision. Leadership must be vigilant and strive to allow innovation while constantly resisting the devolution/transition into the “Bureaucratic Phase”.

Phase 5: Bureaucratic

Business is now in decline. If in terminal decline, the company may be sold, closed or forced into bankruptcy.

Business focus: Continuous pressure to reduce production costs or sell the company’s products/services to other, cheaper markets. Focus needs to be on transforming the culture to re-inject energy, spirit and passion.

Leadership qualities: When the company was healthy, staff members got promoted to leadership roles because they’re great at administrative, but they’re not built to lead. The overall organizational health of the business typically declines because the team isn’t built to adapt to market changes.

Leader’s role: Resist the power of process and procedure.

On Purpose Observations
Unchecked, politics and bureaucracy become the accepted cultural norm, with a culture that operates on rules and guidelines. Strong, determined change through On Purpose coaching strategies can re-vitalize leadership, empower the team and bring the company back into the entrepreneurial, maturity or administrative phase.


Do you have the right leadership qualities and skills needed for your organization to be successful at its current stage? On Purpose leadership begins with the leader themselves knowing their purpose. For help uncovering your purpose, check out our “How to Lead with Purpose & Inspire New Levels of Success” post, or better yet, get in touch with us and let’s chat about how we can help.



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