Understanding “S – Curves” and Avoiding Stall Points
In my last blog I introduced the concept of “S-Curves”, or the way in which businesses follow predictable cycles. I also discussed the danger of hitting a sales growth “stall point”, a concept discussed in detail by Matthew Olson and Derek Van Bever in their bestselling book Stall Points. To recap, businesses run the risk of moving through their business cycles in a fashion that ignores the inevitable slow down, or reversal of sales growth. The authors make the point that those companies that hit a “stall point” must recover sales growth quickly, or they may never recover. In fact, of the companies they studied only 7% were able to successfully return to growth. So, let’s look at what the authors tell is are the main reasons why companies it stall points and what must be done to “jump the S-Curve”.
As you might expect, the responsibility for successfully avoiding a stall point rests squarely on senior management’s shoulders. Admittedly, are hard to predict and are sometimes immediately preceded by major sales growth. But, keen market insight and awareness can provide clues as to when you need to re-engineer your value proposition. The authors identify four major pitfalls to avoid –
- “Premium Position Captivity”: During the most aggressive period of sales growth in the business cycle management can lose its focus on the marketplace and fail to respond to changing customer preferences or the emergence of new competitors.
- “Innovation Management Breakdown”: Even if management introduces new products and services, they may not provide sufficient attention or resources to guarantee success.
- “Premature Core Abandonment”: This includes a failure to effectively exploit additional opportunities in the existing core franchise. Or, fail to adjust their business model to meet new competitive requirements. Or, react by over-diversifying and spreading their resources too thin.
- “Talent Bench Shortfall”: The business lacks adequate leaders and staff with the required competence to move the enterprise forward.
The bottom line is that management must plan and execute effective actions to close the gap between their strategy and the market environment. Management should not fall prey to an “organizational group think” mentality where long-held beliefs are not challenged. Management must invest the required time and energy to improve their environmental scanning capability and engage outsiders (even customers) in the process to ensure that sufficient diversity exists to enable clear, unvarnished planning and execution.
If you would like to know more I would suggest you read Stall Points by Matthew Olson and Derek Van Bever, and Jumping the S-Curve by Paul Nunes and Tim Breene. Or invite me to present these concepts to your management team at your location. I’ll do it for a fraction of what they would charge.