Why companies should strive for the next growth curve
We are slowly on the way back, which is one of the long haul. Many organizations will have to change to survive this time. However, we wonder why there must be a way back? Instead of organizations adapting to go back to normal, the focus should be on change towards the next growth curve. Under the heading of Performance Management, our advisors often look at (long-term) plans and how organizations can achieve this by using performance management.
At some point, every company will run into the fact that the products and services it offers are reaching the limits of its potential for growth. Growth slows and before you know it, products and services become obsolete, leaving you behind. For some companies, a change is gaining momentum, for example in the catering industry that had to close from one day to the next and saw turnover fall to the lowest point. Innovation needs to be done in no time to prevent the company from falling into a nosedive. How do you prevent your organization from disappearing into the background and starting the way up again? The S-curve model for growth can help you with this.
S-curve model for growth
An S-curve is a graph that shows a general growth pattern plotted over time, mathematically speaking this is also called logistic growth. It has its origins in biology where the number of bacteria and organisms was measured over time, but is used for many growth curves such as the product life cycle. You grow every time until you enter a completely new phase, for example the innovations radio, TV and internet. The S-curve has four recognizable phases:
- Introduction phase: when your organization has just (re)developed something or your company has just started, it is in the introduction phase. In this phase it takes a long time before growth is visible, sometimes this is even accompanied by a decrease in growth. This phase is characterized by the high costs it entails due to relatively little growth/turnover versus growing costs;
- Growth phase: after the introduction phase comes a phase characterized by extreme growth. In this phase you gain a growing market share and the organization cautiously turns green figures;
- maturity phase: when growth reaches its maximum, the organization enters the maturity phase. This phase is characterized by a lot of sales and a lot of profit. This is also the most crucial phase for a company, if it does not innovate in this phase it will end up in the decline phase;
- decline phase: After a while without innovation, the organization will be overtaken by too much competition or an outdated product. At this point, it is important to prolong the downturn as long as possible to get the most out of a product or service. This phase can be prevented by previous phases already make a plan how to get to the next phase.
To the next S-curve
“So, in short, the master plan is: Build sports car, use that money to build an affordable car, use that money to build an even more affordable car, while doing above, also provide zero emission electric power generation options. Don't tell anyone” Elon Musk (2006)
Don't tell anyone, but secretly this is the textbook example of innovating during the maturity phase and then starting a new growth curve before you hit a downturn. Good change management is essential in this respect, in this way you prepare the organization for sustainable growth and you do not give the competition time to eat away part of your market share. NS used to be a real train company, but now you see many transporters looking at mobility from a much broader perspective with services such as bicycles and cars to make door-to-door journeys possible. The crux is to have a plan for achieving continuous growth. Planning and looking beyond the current S-curve is essential in this regard.
This also means that strategy formation must become part of the daily business, what is the next step for the organization? So take a critical look at your objectives and annual plans that were made at the beginning of the year. Are these aimed at achieving continuous growth? One of the ways we use within Performance Management to achieve a clear annual plan on 1 page to come is the OGSM method. With the OGSM method, we help organizations to think about objectives for the next three to five years, the relationship between them and how they can prepare for them. If the organization is mainly in the introduction and growth phase of its current S-curve, the focus is mainly on exploiting this S-curve. If the organization is mainly in the maturity phase, the organization will mainly focus on innovation in order to achieve the next S-curve.
The starting point of the OGSM method is the 'O' of objective: a qualitative objective that results from your mission and strategy. This objective in particular lends itself to making it clear to your environment where your organization is going. An example of an organization that has included the following S-curve in its mission is NS. The Nederlandse Spoorwegen changed its mission from connecting travelers to “the Netherlands sustainably accessible, for everyone”. So ask yourself whether the current 'objective' challenges the organization enough to start thinking about the next step, just when the business is in the growth and maturity phase.
'Changing the business' during COVID-19
Unfortunately, almost everyone has been caught off guard by COVID-19 and hardly anyone has been able to prepare for a crisis of this magnitude. Our advice: make that change now that may have been on your list for so long. When does 'changing the business' have the least impact on your running business? Right, when everything stands still! So especially now, encourage your employees and colleagues to take a critical look at your processes and come up with innovative new products and/or markets. Like you, they may have ideas about how to proceed, but they don't get around to it because of their day-to-day business. It should of course be noted that this requires cash flow.
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