Small Business Thoughts

Here is an uncomfortable truth: in time, everything in your life, as you know it, will perish. This is true of your relationships, your jobs, and, perhaps especially so, your business. In mathematics, it’s referred to as the S-curve. Essentially, the S-curve describes the predictable pattern of anything that develops over time: You’re born, you grow (first gradually and then more quickly), you slow down as you mature, and then you fade out. This trajectory is true for people, organizations, cities, countries, and civilizations. Every single one of us is somewhere within the bounds of our own unique S-curve.

To see the whole world from this perspective means accepting from the outset that you and your company will come to your respective ends someday. Now lets apply this fact to help you critically think about your company’s life. The S-curve technology can be categorized into four segments when you consider your business. The segments include the innovation, ascent, maturity and decline phases. Business choices are centered on the four phases of the S-curve.

The S-Curve of Business allows a company to determine where it is on a typical growth life cycle, and adjust its strategies accordingly. The S-Curve of business life cycle consists of two inflection points. The second is the most critical, as it signifies that a business has reached a growth ceiling. Where the S stands for sigmoid. If you strip its definition down to its most basic level, the S Curve of most things is a mathematical model (also known as the logistic curve) which describes the growth of one variable in terms of another variable over time. If you enjoy math, check out below the final chart of this post.

Naturally, we have a vested interest in delaying the arrival of that day for as long as possible…to forestall the inevitable decline…not by prolonging your current S-curve, but rather, when the time comes, by jumping to another one. Why jump? Why not keep extending your current S-curve indefinitely? To do so might have been possible a decade or two ago, but no longer. The creed of our millennium will be carved into the remnants of obsolete technology like Neolithic cave paintings: Innovate or die. Our digital landscape is changing so rapidly that your assumptions about yesterday’s market will likely be outdated by the time you trade in your cellphone.

Think of your current S-curve as something worth prolonging for as long as it’s beneficial and then no more. Your aim will be not to perpetuate your existing business model but to buy time — time to build up the capabilities and resources you need to make the leap to the next S-curve intelligently, such as money, brand, and reputation. A reprieve also allows you to acquire valuable assets like production facilities, natural resources, knowledge, skills, culture, and customers.

To prolong the life of your S-curve, you’ll need to employ incremental innovation, which is all about improving current products or services, enhancing their features, or lowering operating costs. The idea is to use creativity to revivify old ideas in a new, more appealing form, so that they can be recycled again and again. Popular incremental methods include lean manufacturing, Six Sigma, Kaizen, Scrum, and design thinking. These are all continuous re-engineering initiatives. The improvements they bring will increase profit margins — incrementally.

Sounds like the safe and steady path, right? Wrong! When you do finally need to jump ship, there will be nothing incremental about it. The safest way to ditch your current S-curve and hitch a ride on an entirely new one is through innovation or using “inflection testing” (See my previous posts SWOT: The Outside Environment Un-controllable and Time to Test Outside Threats). Businesses that adopt this way of thinking become, by necessity, more structured and procedurally efficient at capturing, testing, and piloting clusters of ideas — which, incidentally, helps them become better incremental innovators, too.

Innovation through infection testing creates new markets and renders existing products, business models, and services obsolete. Innovators bring about this transformation by introducing groundbreaking new products or services. Organizational choices for innovation could be product, process, structure, and market. Early adoption of a product can only describe the speed of the innovation. However, each phase of the S-curve determines the innovation process. The innovation process determines the best strategy to growth. For example, Apple Corporation started with desktops in 2000. By 2003, the company added laptops to its products. The performance of the innovation created products such as iPod, iTunes, iPhone, and iPad.

Inflection testing innovations improve a single S-curve, which market forces will eventually destroy, taking the company with it. Prioritizing gradual improvement can leave you vulnerable to sudden, unexpected shifts in the market. The new S-curves generated by inflection testing innovation opens a path to business continuity through an endlessly adaptive transformation process. That’s not to say you’ll never fail — you will. But even failure can help you.

Now, we must be careful when talking about failure. The wrong kind of failure can be devastating. Jumping into innovations without being sure that the new direction is right for your business is like rolling the dice on your future. So it’s irresponsible to advise business leaders, as so many have, to “go ahead and fail…you have nothing to fear.” Successful companies learn how to fail the right way by using inflection testing. They contain and channel experiments that fail so they can learn from them without damaging the company’s future. A well-known example of beneficial failure is when 3M chemist Spencer Silver tried to develop a super-strong adhesive. Instead, he accidentally created the opposite: a fixative that was reusable, pressure-sensitive, and bonded only lightly. But because of 3M’s culture of perseverance, his group searched persistently for a new application, and years later, their discovery led to Post-it Notes.

It’s important to remember that when you arrive on your next S-curve, this new sweet spot is not a destination. It is only another living, breathing thing that will grow, level off, and eventually fade away. That is why your long-term strategy must include a plan to continually search for and nurture new S-curves, both in the areas where you excel today and in markets you might not even know about now. The future depends on your ability to adapt to changing tides. This adventure can be an uncomfortable and daunting one, but it’s also the answer to our somewhat gloomy introduction. Your survival begins when you get out of your cave, where all is known and under control, and start experimenting with innovative ideas and business models using the inflection testing model.

Copyright ©John Trenary 2021