The Sigmoid Curve is a mathematical model that projects the lifecycle of any organism, product, business or organization. It can be applied to the success and failure of dynasties, nations, businesses, and even human life itself. In this article we will examine its use in the business cycle.
So, you woke up one morning after a restful nights sleep and decided to start your own business. You invested the appropriate amount of capital and experienced that initial incubation phase where money flowed out faster than it flowed in. After a short period of time (hopefully) activity began to rise and the business started to turn a profit. Over the next several years the business grew nicely every year and you thought it would last forever. Then one day you woke up after an unrestful nights sleep wondering why the business had flattened out in the past few years and was now in decline, alas all good things must come to an end – not necessarily.
The way to avoid the decline phase in the curve is to not get there. Every business owner should have their thumb on the pulse of their business’ growth cycle and realize when that phase may begin to plateau. The key to continued success is determining the optimal time to disrupt the growth phase and “reinvent” the business before it begins its decline, essentially starting a second Sigmoid Curve that will hit its growth phase as the original one begins its decline.
As everything in life, the key is timing. If you wait too long and the business has started its decline, you may not have the financial resources needed to make the transition to the new growth phase. Unless a business owner adapts or redefines her or his business at some point on the business journey, it will eventually decline.
The Sigmoid Curve illustrates that in order for businesses to survive their owners must at some point redefine and reinvent who they are, their strategies, their products and their leadership. Successful businesses redefine and reinvent while they are in a positive growth pattern. Unless business owners adapt or redefine their business at some point on their business journey, they will eventually decline. History is rife with failed business models that did not adjust: Eastman Kodak, Blockbuster Video, Xerox, Blackberry, Polaroid…the list goes on.
The paradox for business owners is that the optimal time to interrupt a growth curve is before it reaches its peak. You may find it counterintuitive to change something when it seems to be working perfectly fine, however the ability to anticipate change and make it happen before performance begins to drop off is the key to maintaining momentum.