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Part I
A Framework for Developing Successful Organizations
Chapter 1
Transitions Required to Build Sustainably Successful Organizations®
Organizational Success, Decline, and Failure

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Why are some companies able to continue to manage growth successfully over the longer term (at least 10 years) while others are not? Why are some company founders and leaders like Howard Schultz at Starbucks and Richard Branson of Virgin Group able to continue to grow with their companies, while other founders and leaders such as Donald Burr, who founded People Express (and who had an MBA from Harvard!) or Adam Osborne, who founded Osborne Computer, fail to make the required transitions as their businesses increase in size and complexity? What do successful companies and their leaders do differently compared with those that are less successful or even those that have failed? Is it simply chance or something that can be learned and managed?

Through rigorous research and analysis of organizations and their leaders over the past four decades,3 we have answered these questions and have developed practical tools that can help leaders of companies at all sizes increase their probability of long-term success. Why, for example, did Starbucks Coffee (originally founded as a local roaster with stores in 1971 and later reconceived in 1986–1987 as a “specialty retail/café” hybrid) become a global brand and industry leader,4 while Diedrich Coffee (which was similarly founded in 1972 and later redefined like Starbucks as a cafe in 1983) has been broken into pieces (company stores and franchised stores) and sold to competitors including Starbucks?5 How did Starbucks become the global leader in its space even though other companies like Coffee Bean and Tea Leaf (founded 1963) and Peet's (founded 1966) existed before Starbucks was ever purchased and refocused? As we will see in the next chapter, Starbucks' success is not an accident, nor is it unique. The keys to Starbucks' success were some critical transitions made both by its founder and CEO, Howard Schultz, and by the organization itself. Starbucks developed and followed a plan, not just a classic strategic plan but one that focused upon organizational development as well.

We shall describe this in some detail and distill the lessons for other company founders and their organizations.

Lessons like these are not only important for the founders of entrepreneurial companies like Howard Schultz, Steve Jobs (Apple Computer), or John Paul DeJoria (Paul Mitchell hair products and Patron Spirits Company), they are important for venture capital and private equity investors, boards of directors, banks that lend to such companies, managers of such companies, and students of management who aspire to either start their own business or work in a company going through such transitions over time. They are also of importance to society as a whole. Companies create jobs. Successful companies create more and more jobs, while failing companies destroy jobs. For example, successful companies such as Starbucks, Google, and Apple are job-creating machines! However, when companies like Borders (retailer of books), Woolworths (specialty department store), People Express (airline) and Osborne Computer (computer manufacturer) fail, they destroy jobs and people's livelihood, and negatively impact lives.

Government programs to stimulate companies' growth have been established in countries such as Canada and Poland for just this reason. Canada created the Build in Canada Innovation Program (BCIP) to kick-start businesses and get their innovative products from the lab to the marketplace. The government of Poland has created the Polish Agency for Enterprise Development. It is a tragedy when a company fails after a promising entrepreneurial start because the entrepreneurs do not understand how to build the organization.

3

We have published many articles presenting our models, testing them empirically. We have also published case application articles showing how our frameworks and tools have actually been used.

4

Starbucks was originally founded by a three-man group in Seattle as a “local roaster,” not a café. Howard Schultz who had worked at Starbucks left to found Il Giornale Coffee in 1986, and then purchased Starbucks and rebranded his company as Starbucks in 1987.

5

Diedrich Coffee was founded in 1983 by Martin Diedrich. It was an outgrowth of an earlier family business begun as a coffee plantation and then a local roasting store that opened in 1972. Diedrich Coffee went public in 1996. In September 2006, Diedrich Coffee announced its plans to close its company-owned retail stores, 40 of which were sold to Starbucks and reopened under that brand. Diedrich's franchisee-owned stores remained unchanged. The company continued as a roaster and wholesaler of coffee beans, with a few independently owned and operated Diedrich stores that remained open in California and Texas. On November 3, 2009, Peet's announced that it was buying Diedrich, but its offer was exceeded by Green Mountain Roasters, Inc., which currently owns the company.

Growing Pains

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