The Business Cycle

Stage 1: Entrepreneurs experiment and take risks to make things to satisfy customers.

Stage 2: When they discover something the consumer values — aka value proposition– the experiment turns into a going-concern, or a business, and the business becomes self-funding.

Stage 3: If that value proposition is strong enough, the going-concern grows and comes to generate a safe and steady income stream.

Stage 4: Eventually, the safe and steady income stream attracts bureaucrats who use it to satisfy their own desires to boss people around and self-importance.

The focus of the going concern shifts from satisfying consumers to satisfying bureaucrats.

Stage 5: And not just the bureaucrats that take residence in the corporate offices. Outside bureaucrats will come seeking to hook up their bureaucratic organizations to the safe and steady business streams generated by those successful customer value propositions.  These bureaucrats will come from government at all levels, non-profits, foundations, consulting groups, lobbying groups, industry associations, employer organizations, unions, education, self-governing bodies, franchise owners and regulatory agencies.

Stage 6: Fortunately, competition is there to continue to find ways to satisfy customers. And when they do so, they have an advantage to the organizations that are satisfying bureaucracies. Remember, a start-up need only satisfy customers. Big, successful businesses must satisfy its bureaucracies, often which is a higher priority to satisfying the customer, no matter what the bureaucrats in-charge pay lip service to the customer.

Stage 4: But, if competition is successful, it too will attract bureaucrats.

A company that has suffered deterioration in its attention to value proposition, sometimes is able to attract turnaround entrepreneurs and refocus on the customer. However, many of the outside bureaucracies will stay interested and impede progress as long as the business has the resources to help them, which usually causes further deterioration and continues to give advantage to start-ups.

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