The S curve is a strategic concept that describes how the old ways mature and are superceded by new ways.
In the early days of a new technology, it takes a long time to improve performance. People are working out the technology, what are the applications, ironing out the flaws and building the ecosystem. Slowly over time, performance accelerates.
After a certain time, the rate of improvement hits a peak and then starts to slow down. Easy wins have all been made and the learning curve has been fully ridden for continuous improvement. Some of the fundamental barriers of the technology are reached. Eventually, the improvement tapers off and a plateau with this technology is reached. This is the “S” shaped curve.
The breakthrough comes when you see a series of S curves. While your existing technology is maturing, there is another technology that is not good enough yet, because it has not been developed, but it has the potential to surpass the ceiling you have reached in your current technology.
The trick for companies is to recognise this, and invest in the “worse” emerging technology early enough that they do not get left behind when it accelerates past their current ceiling.
When is it useful?
Every business should see its critical S-curve, so that they know where they are on it. Should they be investing in continuous improvement to ride the acceleration., or should they be jumping to the next big thing? Jumping to a new S curve is an inflection point for the company.
“Technology” is defined broadly in the context of the S curve. It could mean jumping to a new product technology, process technology, a new business model, a new customer need or a new basis of competition.
Jumping to a new S curve requires leadership. They whole momentum of the company is invested in the existing technology and they don’t believe the technology is plateauing, and they can prove the new technology is not good enough. Their team have to believe in them and take a jump into the dark.
Facebook provided a great example of navigating the S-Curve. They were initially conceived as a website for PC/Laptop – they rode this S-curve to rapid growth and maturity. Then a new S-Curve emerged – mobile – which the initial Facebook site did not handle very well. New competitors, deisigned for mobile, like Instagram and Whatsapp threatened to capture the new S-curve.
Mark Zuckerberg turned the company just in time. It took a huge effort, redirecting it to mobile with the help of acquisitions of the new competitors.