In the past month, a surprising amount of my consulting discussions have focused on something called the sigmoid curve. This is unusual because the sigmoid is actually a mathematical principle, an area that is not my specialty! However, this math concept provides organizations with some rich insights about what they can expect on their organizational journey.
The term sigmoid means ‘S-shaped’. It is derived from the Greek alphabet letter sigma which is in a shape that is similar to an ‘S’. The illustration on the right reveals what a basic sigmoid curve looks like. While this model has strong math applications, it has evolved in its use in many other areas of life. Specifically, my recent discussions have focused on how sigmoid ‘S’ shape reveals business insights about the life-cycle of organizations.
The core lesson from the sigmoid curve is that all good things end. For example, the chart on the right applies the sigmoid to business development. It reminds us that our organizations go through various phases. It begins with relatively flat progress when a company is launched (the inception stage). However, over time, a well-run organization will eventually reach a period where growth occurs. This will continue as organizations reach maturity in their processes. However, at some point, organizational decline is inevitable.
Successful organizations learn to launch a second sigmoid curve when the company is in the maturity stage. Adding a new product, acquiring a competitor or shifting strategy are some common ways that this occurs. The chart on the right demonstrates what launching a second sigmoid looks like. In fact, successful organizations will launch several sigmoid curves over their lifetime.
For example, Kodak was once heralded as the global leader in photography. However, in 2011 they filed for bankruptcy after 123 years of operation. The key to their demise was an inability to adapt to digital photography. Their business model had quietly matured to a point of decline that could not be halted. Their inability to launch a new sigmoid curve during their mature stage led them to a point of no return. In contrast, their competitors learned how to launch another sigmoid curve before they hit the decline stage.
Once you are aware of this concept, you will find that our business world is full organizations that are launching sigmoid curves. Facebook has invested heavily in virtual reality as they believe that this will be a key to their future success. As I ordered my morning coffee at Starbucks a sign invited me to come back for a glass of wine and an appetizer after dinner – another sigmoid curve is being launched. In the 2008 election, President-elect Obama used social media to redefine the political campaign process and created a sigmoid that is still being replicated.
Sometimes sigmoid curves work (the Carl’s Jr. hamburger franchise began by purchasing a hot dog cart) and sometimes they do not (anyone remember McPizza’s?). However, you can be confident that your organizational plans will decline at some point. The key to avoiding the decline stage is planning change when things are going well. Unfortunately, the maturity stage often creates a false sense of security and an unwillingness to change. But as Kodak reminds us, not changing is even more costly than the pain of change.
Jeff Suderman is a futurist, consultant, and professor who works in the field of organizational development. He partners with clients to improve culture, leadership, teamwork, organizational alignment, strategy and organizational future-readiness. He resides in Palm Desert, California. Twitter: @jlsuderman Email: firstname.lastname@example.org