Understanding Your S-Curve

by
Sarina Sorrenti
April 15, 2010

Written by Sarina Sorrenti, April 2010

I recently read Jim Collins book – ‘How The Mighty Fall’ which was a suspiciously thin book compared to his previous classics. It was an interesting reminder of what goes wrong when companies capitulate into decline. I have worked in two organisations that experienced significant decline. I remember seeing the significant changes in technology, government support and new emerging client needs. I also remember the blindness of those companies in addressing these changes and leading indicators.

Collins highlights 5 stages of Decline:

1. Huburis Born of Success – here you are at your peak, arrogance emerges

2. Undisciplined Pursuit of More – greed

3. Denial of Risk Peril – blinkers are on and excuses emerge

4. Grasping of Salvation – clear that the business model has fundamental flaws

5. Capitulation to Irrelevance – death of the business

Collins makes an interesting observation that you do not know when you will decline, everything on the outside looks good but there is a disease forming on the inside.

Things to avoid:

-People with too much vested interest in the old ways of doing things

-Poor succession planning, leaders forget to build the capabilities of the future

- Arrogance

- Not believing in luck

-Stop learning

-Stop focusing on core strengths and capabilities

- Working in isolation to market trends

- Believing your own ‘BS’

I do believe organisations can extend their S curve lifecycles if they keep humble, open to their market, competitors and substitutes, deal with uncertainty in a constructive manner, keep learning and benchmarking their performance and develop future scenarios and contingencies. Organisations need to be prepared to stop investing in dying businesses and reinvest in future business opportunities. Keeping an active business and client portfolio is a key success factor for extending growth – companies such as Wesfarmers, Siemens, GE practice this very well.

In our own strategic planning process we religiously review external forces that impact our success and the success of our clients, suppliers and partners. The Leading Indicators that we monitor include changes to government legislation, new technologies particularly around web/social networking and connectivity, tax reforms, unemployment, % of companies experiencing bankruptcies, ageing population and implementation of carbon taxes.

In our own scenario planning we see the ageing population, energy transition/environmental impacts and healthcare needs as key areas that will impact growth and create new opportunities for us and our clients. We also anticipate X factors – things that just happen like Volcanoes, 9/11 and other natural or man-made traumas. We just don’t know what the X factors will be and in preparing for these we know we should have a cash flow base to ride us through these events.

It is OK not to know about the future, but it is not OK not to be open to it and prepared.

The reality is there is a lot of luck associated with reinventing and extending your business life. Being open and aware helps you attract and realise these opportunities.

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