The Four Phase Model

October 29th, 2009 by admin

So far, I’ve talked about how to Fire, Fire, Fire, Aim and when to switch to Aim, Aim, Aim, Fire. But is that all there is? Stopping after Aim, Aim, Aim, Fire is like shooting rabbit after rabbit without ever pausing for dinner; eventually, you pass out from hunger with nothing to show for your efforts. Like Ron said in his preface, you want to build a business. You don’t just want to play with testing the market. To do that, you need to realize that your business goes through four phases of growth that range from brainstorming to stabilization. Being able to recognize which phase you are in not only helps you fire and aim, it also helps you know what action is required to best build and grow your business.

Each successful business goes through four phases. This is my Four Phase Model:

Phase One: Brainstorm
Phase Two: Examine
Phase Three: Optimize
Phase Four: Protect

Phase One: Brainstorm

Yes, yes, yes! That idea sounds great! That one, too! This is Fire, Fire, Fire, Aim. You can identify this phase by the number of “yes” responses you give: yes, that idea is viable; yes, that does sound fun; yes, that idea takes advantage of a wave; yes, that opportunity is transactional. As long as your imagination is liberated, you are in phase one. Capture all the crazy things you’ve ever thought might work. Write them on a whiteboard or in an idea document. The idea is to brainstorm lots of ideas and see what sticks out.

Not everyone does this as well as some. You probably know people who are walking idea farms—I mentioned one earlier who was so good that he couldn’t get out of the “a rabbit, a rabbit, a rabbit” mindset. If you aren’t that way, reread chapter 2, “Juice to the Light Bulb,” for ideas on getting ideas. If you are, though, realize that lots of phase-one people have a hard time transitioning to later phases. Just when you find something that works, you want to run with something else. Most people who excel at phase one have lost steam long before they get to phase four. If that describes you (and if you have the entrepreneurial spirit, it might), take steps to counteract your natural tendencies and hone your strengths. For me, I have pretty good ideas, but my real strength lies in phase two.

Phase Two: Examine

Yes—yes! No! When you have a whole stack of ideas, you need to learn to start saying “no.” Now you start to apply the principles from Aim, Aim, Aim, Fire. Sit down, have a close look at your ideas, and select the most viable. Most front-end people who see rabbits in every bush have a tough time saying “no” at this point. The transition might be tough, but realize that you should settle on only two or three viable ideas at most. Don’t throw out the others—you might need them later—but you can’t afford to jump around when you get here. Keep those ideas in the “parking lot” list. Go gas up one of your top two or three and take it for a drive!

I love working in this stage. Nothing is more fun to me than taking a raw idea and slapping a business together with baling wire and duct tape. Shoot the moon with your $5,000; if you miss, you can pick another of your top two or three ideas and make that one work. It validates all of the hard work when you see one of your ideas suddenly become viable. Your first duct-tape attempt may be crude, but when you get it functional, stand back, and say, “Yes!”—as long as you say “no” enough to make time for building your business.

Phase Three: Optimize

Yes—but no. No. There is a time to chase and a time to optimize. During the optimization phase, you will say “no” more than you say “yes.” You can’t keep second guessing which ideas are the juiciest. As well, just because your phase-two idea is able to stand on its own, you can’t leave it to start another. Now, you must move forward with your idea and develop, improve, and optimize it.

Take time to look at the processes and procedures related to your business. Can you tighten some connections? Can you sand and buff some rough edges? Can you tweak the gears to get more torque? Optimization is a great phase to be in. The infrastructure is in place and you are generating a nice profit. With a little tightening, tweaking, sanding, and buffing here and there, you increase your margin. Nice work!

Ron is great at this. I can hand him a taped-together load of wire and turn around to see a shiny, well-oiled business running in his hands. At the same time, he is my reality check. During this phase, you may discover that certain ideas just can’t be optimized. Don’t be afraid to abandon some of the main ideas or side initiatives you said “yes” to during the first two phases. Ron helps me stay on track with this, optimizing our best ideas and pointing out our weak ones. Ultimately, we head toward success because we are able to change course to maintain our optimal output.

In fact, many entrepreneurs I have collaborated with relate that they don’t always end up doing what they started out to do. This occurs for many reasons. Maybe the initial opportunity was not as quick to cash as it needed to be. Perhaps related opportunities worked out better. Maybe it hit a financial, time, or marketing wall and could not scale or optimize. We’ve been down those roads. Usually, we knew going in that we would allow our initial business to recede into the background as we developed and optimized something better suited to our long-term qualifications.

Phase Four: Protect

No. No. No. We can’t do that. We can’t make that change. We can’t jeopardize what we have. Our policies forbid us from considering that. You will find this attitude prevalent in many large corporations and government agencies. Once businesses are optimized, owners have the tendency to start thinking, “Don’t screw this up!” They develop the “play not to lose” mentality. This is good. Some things do need to be protected. Where would your technology business be without your algorithm? Or your restaurant without your special sauce? However, if you get into the “play not to lose” mentality and stay in it, it will be to your detriment.

Protecting your business from unwarranted idea chasing once you hit full optimization is important, but you might be able to snag a few rabbits without derailing your ultimate goal. Part of protecting your business is building it to the point where you can have teams that help the good things keep running while other teams can go out on exploratory development projects. If you don’t like this phase of business, that is completely fine. I don’t like it either.

Figure out which phase feels most comfortable to you. Hire others, find a partner, or develop skills that help you succeed in the other phases. Branching out to other people is especially important in phases one, two, and three—by the time phase four hits, though, you might need to consider an exit. Entrepreneurs seem to excel at the first two but often begin to lose interest by the third and fourth, when they have to say “no” more often. It is our experience that many small businesses never endure all phases for this very reason. You don’t have to be one of those many small businesses, though, if you go in knowing what you want and how to leave. Say “yes” when you can, “no” when you must, and always start with Fire, Fire, Fire, Aim as you take your business through the four phases to success.

Porter’s Points – The Four Phase Model

  • Cognitively assess what phase of business you are in and act accordingly.
  • “Whate’er thou art, act well thy part.”
  • Are you an idea person? Do you love the details? Do you thrive on stability? Match your personality type and skills with the phase of business you are in.
  • As you transition between the four phases, surround yourself with partners and employees who augment areas you are weak in.

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