Tag Archives: S curve of economies

Knowing where you’re at

Most of us are familiar with the traditional “S” curve used to describe markets.

In the beginning, the market grows very slowly. Then it begins to take off and climbs in size rapidly.

Those beginning phases see different organizations try to shape the market. When the climb starts there’s a growing convergence about what the market looks like, so some of the early players end up falling off (their “shape” is too out of line with the market that actually emerges).

New “me, too” entrants flood to take advantage of the demand, and everyone grows for a while. Many of these enter by acquiring pioneers, reshaping the product, and using pre-existing sales capabilities to make up for lost time.

Eventually, the curve starts to flatten again: the market is coming closer to saturation. At this point, size matters, as players unable to compete to take each other’s share are squeezed out. This is the era of mergers and acquisitions to take share.

At the end of the “S” curve, one of two things happens: either the cycle repeats, with a new market forming (cell phones being replaced by smart phones, for instance), or consolidation continues until (typically) two remain: the primary legacy vendor, and their alternate (for organizations who want competitive purchases).

Boeing and Airbus for large aircraft. GE and GM for diesel locomotives. It’s a common pattern.

Each of us has a place in the “S” curve where we are naturally a good fit, and thus will be successful.

An industry at the end of an “S” curve isn’t stagnant: new products must still be introduced. But they are evolutionary, and built with a keen eye to cost (because it’s not a growth market any longer). Compare that to the challenge of the beginning of the curve, where finding the new product definition requires (often) revolution — or the mid-market as the curve climbs higher, where the ability to manufacture more readily takes precedence over features.

Often, of course, buried in middle management, our jobs look similar to any other middle manager’s. But the context is everything.

Economies, too, follow this curve.

Our economy, for instance, is well at the end of an “S” curve that began with the industrial revolution. (Offshoring to Asia from North America or Europe isn’t innovation, it’s the quest to increase profits by cutting costs. That some materials science innovations are now available there and able to put to use in new products doesn’t change the underlying broad dynamics.)

Financialization of the industrial economy was the signal that the “S” curve had topped. As with merchantilism and mediaeval guilds/trade fairs before it, it’s run its day and a new way of looking at production, trade and consumption needs to be found and made broadly manifest for wide-spread growth to resume.

Perhaps that’ll be in sustainable processes, linked to custom design. Perhaps it’ll be rooted in nanotechnologies. Perhaps we’ll drift along for decades without establishing it.

While new innovations and companies can take root wherever the economy is on its “S” curve, broad sweeping success is a matter of fundamental, societal change.

Knowing yourself — and being willing to accurately judge the world around you, without dreams and without illusions — is key to finding success in the years ahead.