Things grow in surprisingly similar ways.

The growth of bacteria in a culture, volume expansion of a balloon, weight increase of a child, growth of a tumour, mobile subscriber growth, the number of users of iTunes all follow a similar growth trend – the S curve.

 

In business, ‘straight line’ growth can be an optical illusion – a small segment of a S-curve, at any stage, looks suspiciously like a straight line !

The S curve describes the growth of brands, products, services, distribution, information flow, word of mouth, propagation of messages through social networks and a host of other things.

An understanding of this curve can help define business strategy and planning.

Businesses often use complex STM (simulated test market) modellers to project how big a new initiative will become over 3-5 years, and how to optimise the product and support plan make it bigger. Most of these methodologies miss the point – the value creation is in the later periods – which are not projected at all !

One way to understand how brands grow is to look at similarities with bacterial growth in a culture. (http://microbeonline.com/typical-growth-curve-of-bacterial-population-in-enclosed-vessel-batch-culture/)

There are 4 phases of growth in the S-curve – for both bacteria and business:

1. The lag/incubation phase : Growth begins after a lag. The length of this phase depends  on the conditions, the quality of the bacteria and compatibility with the medium. In business, this is a period of capability building. It depends on the macro environment, strength of the idea and organisation, and compatibility with targeted buyers.

2. The growth/exponential phase : Conditions are optimum and given sufficient food supply (awareness and availability in business), the bacteria (business) will multiply exponentially. This is when penetration explodes. Positive word of mouth and generation of ‘pull’ distribution adds on top of deep penetration in each of the organisation’s sales channels who know ‘how to sell’ an ‘accepted product’.

3. The stationary phase : Exponential growth can not continue indefinitely because essential nutrients in the culture are consumed (In business, penetration, awareness and availability max out). The birth and death of bacterium (new consumers entering vs existing consumers leaving the franchise) in the culture starts balancing out, and at the end of this phase, the bacteria may have filled all space available to it and start running out of food. The organisation gets hit by increasing complexity and bureaucracy, and attached by disruptive new competition who is riding its own growth phase. The business reaches its peak penetration and drops thereafter.

4. The death phase : Dying bacteria outnumber newborn bacteria, and there is an exponential decay – though much slower than the growth phase.

Managing the S-Curve

Understanding the S curve can help us generate explosive growth. To turbocharge growth :

1. Shorten the ‘lag phase’ : ensure that the idea is strong, resonates with the target buyers and  is supported by a strong organisation. Use STM methodologies to fine-tune the initiative and maximise the chances of success.
2. Time-shift the growth phase : Time-shift the growth phase : Fast growing businesses grow on the S-curve at a monthly/weekly/daily rate while slow businesses grow on the same curve at an annual rate. Driving increasing monthly CAGRs drives (you guessed it!) annual CAGRs upwards along an S-curve ! Over a 5 year horizon, 1% monthly CAGR leads to 13% annual CAGR, 3% monthly leads to 43% annually , 7% leads to 125%, 30% monthly leads to 2230% annually !
3. Disrupt your idea yourself to get the business onto another growth phase before it reaches the stationary phase.

After an initiative has entered the growth phase, maximise investment to drive awareness and availability with a sense of urgency. Awareness and availability maximise the size of the initiative. Urgency drives how fast it can get there.

For awareness and availability, a +2 mindset during this phase can help the initiative outperform its potential. A +2 mindset means putting in resources and infrastructure NOW, which you think are needed 2 periods later.

Awareness should be driven both through communication (advertising, PR, search etc.) and through engineering product/content/events to be ‘WOM worthy’. Social networks (online and real-world) can be key at this stage.

Speed and a sense of urgency (expecting a monthly CAGR and investing to drive it) can differentiate between massive modest successes. The key driver of urgency is management expectation – if you do not expect speed, you will not get it.

Lastly, remember that urgency in driving awareness & availability is key to drive the business to the upper part of the growth phase as soon as possible, so it can stay there for the longest period and maximise total value.

Consider data from KPCB on global smartphone growth (which also follows the S-curve)

In just one quarter – Q4 ’13, global smartphone sales exceeded sales in six quarters from Q1’09 till Q2’10. The next few succeeding quarters will see exponential growth which is even stronger.

The mid-upper part of the growth stage is where value creation is maximised, and businesses should aim to :

1. Get there fast
2. Stay there long

Core behaviours to maximise your S-curve :

1. Be patient and ‘Nail it’ during the incubation phase – fix the business model
2. Show urgency and ‘Scale it’ during the growth phase – invest for success
3. Be paranoid and disrupt yourself before you reach the stationary phase

Where does your business sit on the S curve ?

Do you have the patience to incubate your business ? Do you display enough urgency in driving awareness and availability while your business is growing ? Or are you at the point where you should disrupt yourself before someone else disrupts you ?

References :

http://en.wikipedia.org/wiki/Gompertz_curve, http://en.wikipedia.org/wiki/Growth_curve, http://www.encyclopedia.com/topic/S-shaped_growth_curve.aspx, http://mysite.science.uottawa.ca/iabde083/ch01.pdf, http://www.encyclopedia.com/doc/1O8-densitydependence.html, http://en.wikipedia.org/wiki/Bacterial_growth, http://www.csklsc.edu.hk/biology/Interactive_MC/english/18Growth/1.htm, http://www.wikinvest.com/concept/IPhone, http://www.nailthenscale.com,

photo credit : http://oneinabillionblog.files.wordpress.com/2013/05/