Innovation Plus Curves Equals Magic

One of the best-selling books that talks about innovation, “that magic moment,” has been Malcolm Gladwell’s The Tipping Point. I applaud this book for its breakthrough insights and simplicity, and especially for how it addressed a simple insight I’ve had since the early 1980s…

An insight I’ve discussed in many of my books, including Our Power to Predict (1989), The Great Boom Ahead (1993), The Roaring 2000s (1998), The Great Depression Ahead (2008), The Great Crash Ahead (2011), and The Demographic Cliff (2014).

I’m talking about the S-Curve. It represents how real people react to, and ultimately adopt, new technological, social, cultural and political innovations.

Basically, it all starts with “outliers”…

The “outliers,” as Gladwell calls them, represent the very few people who focus on a new body of research or knowledge.

By “few” I mean the 0.01% to 1%. This minority masters their area of expertise over 10,000 hours of concentrated immersion and only then do they come up with breakthrough new insights.

My research shows that this is why that 1% of the population tends to dominate 30% to 50% of the wealth over time. They are the real entrepreneurs and innovators. And they are the ones who start new trends and S-Curves.

Once the innovators have sparked the S-Curve into life by introducing their breakthroughs, the product or technology begins to filter into niche markets where the top 10% are more open to change and quicker to react.

From there, the ones that prove worthy go viral, flooding the market until 90% of the population has adopted the innovation.

An interesting — and important — point to note is that, typically, saturation is reached in about the same amount of time as it took to reach the 10% tipping point.

It looks like this…

Put a different way, you get nine times the adoption in the same time it took to innovate.

This is an important fact because it means such trends are predictable and that it is critical to see this massive break-out after the tipping point is reached.

Cars, electricity, radios, TVs, mobile phones, the Internet, digital cameras… all are examples of innovations that predictably followed the S-Curve.

Smart phones and high-definition TVs are well past their 50% point and nearing saturation fast.

Global Positioning Systems only recently blew past the tipping point…

All of these technologies and innovations offer investors opportunities to make windfall gains as they go viral or as they continue their exponential march toward saturation.

Yet most businesses and investors miss such trends… and thus the opportunities. They assume that mass adoption is linear, not exponential… that it will take decades for a new innovation or technology to infiltrate the main stream.

Even companies as big as Firestone Tire miss it…

Back in 1979, when I still worked at Bain and Company as a consultant, radial tires had blown through an S-curve thanks to Michelin’s innovations in France. And U.S. companies just didn’t see it. It took seven years for radial tires to penetrate niche markets in the U.S. Once they did, it took just seven more years to hit the 90% saturation point.

If I hadn’t recognized the power of the S-Curve and had been consulting for another company, Firestone would have missed that boat.

It had projected that it would take seven years for radial tires to grab 20% of the market after taking 10% in the previous seven years – a linear projection. That’s 70% less than what actually happened.

That’s 70% market share Firestone would have missed out on because it didn’t see the predictable trend unfolding.

Luckily, we at Bain convinced the company to quickly close bias tire plants and to convert to radials. That conversion may be the only reason Firestone still exists today at all.

So do yourself, your investment portfolio and your business a favor. Don’t make the same mistake.

See your life, technologies and your company’s products and services as progressive and predictable: S-Curve cycles with exponential potential once they move past 10% penetration!

After all, everything in life is exponential, whether it’s moving up or down. Linear growth is an illusion we humans naturally favor, but it kills many businesses, investments and life strategies.

Don’t let that happen to you.


Harry

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Categories: Innovation

About Author

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.