Wednesday, March 27, 2013

Overcoming the myth of "S Curve"

According to economists, every successful product has a growth curve having similar to an “S” where period of growth is followed by period of stagnation.
The stagnation can be caused by multiple reasons –
  • Increased competition in the market
  • Change in customer preferences
  • Disruptive technologies

As an organization, you cannot afford a risk to reinvent yourself when need is obvious to everyone in the market (As described in HBR article "Reinvent Your Business Before It’s Too Late"). You need to pre-meditate and take action to out-innovate the competitors i.e. Steps needs to be taken when revenue is growing and customer base is increasing rather than waiting for growth to stop. This can be done through different approaches –

New Products/Versions
This is one of the traditionally most used strategy used by organization to retain the customer base. In case of Apple iPhone, they successfully fuelled the growth by planning the release of the newer versions of their phones (Source: Statista). The customer always wanted to upgrade to the new devices. Also, many organizations also phase out the support for the older version to force user to move to newer versions. According to WSJ, Microsoft adopted the same strategy when they launched Kinect which neutralized their decreasing desktop business market share.

Exploring New markets
Organizations like Subway, McDonald have expanded rigorously into newer markets such as India over past one decade. This is driven by saturation in the US and Europe markets. The entry of McDonald in India was highly strategic as they took care of the local supply chain management and launching a new product line to cater to new tastes. They also formed joint ventures with local food companies.

New business models
The introduction of Video on Demand for cable service provider such as Comcast has been very successful. The rationale behind the new business model is that it uses the same infrastructure as traditional cable tv but it opens a whole new revenue stream.

Companies with deep pockets such as Microsoft, Google, Apple, Intuit constantly looks for the strategic acquisitions which can support their existing business. For example – Google acquired android so that it can ship the Google services bundled in the mobile platform. This acquisition has worked very well and android is the most widely used operating system in the world. From these bundled Google services they can generate ad revenue on mobile devices.

Every company tries to find niche in the market and that defines the positioning of a company in a market. But Due to competition and disruptive technologies, the niche segment is always broken and hence companies need to make strategies based on above 4 remedies to stay in competition and remain profitable.


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