Riding the Sigmoid Curve - Unlocking the Math of Performance Cycles

The metaphor of Sigmoid Curves provides a profound framework for understanding the performance cycles of diverse entities, encompassing businesses, growth trajectories, individuals, capabilities, and management systems. When performance parameters are plotted against time, they generate an asymmetrical shape known as the sigmoid curve, also called the S-curve. This pattern is characteristic of the life cycle of various entities and encapsulates the inherent phases of growth, maturity, and potential decline.

I first heard about the Sigmoid Curve metaphor used in a business context from Werner Geissler on multiple occasions in 2012 and onwards when he was the Vice Chairman of Procter & Gamble in charge of Global Operations, responsible for all country and manufacturing operations globally. Although I do not recall it becoming a big deal in P & G business as a revolutionary concept, knowing Werner's mathematical savvy and analytical approach to business engaged me and made me look deeper into it. And I found it mighty to put many aspects of business into perspective.

Then I read the books of Charles Handy (a management consultant and philosopher who taught at MIT and London Business Schools), who made the metaphor famous in the business cycles in his sequel books "The Age Of Unreason-1989", "The Age Of Paradox-1994", "The Second Curve-2015". I will go deeper into the teachings of these books in later articles. But they completely changed how I think and understand the business life cycles and the need to adjust strategy and leadership styles accordingly.

In the context of businesses, the Sigmoid Curve illustrates a company's growth trajectory, from its inception to its peak performance and into potential periods of stagnation or decline. Understanding this curve is essential for businesses to anticipate inflection points, strategize for reinvention, and proactively adapt to changing market dynamics.

How to read the points on a sigmoid curve and act accordingly:

Point A: Generally, this is the optimum time for a business reinvention. This is when you see the landscape has changed, i.e. you have fewer points of difference vs. competition; thus, price elasticity is increasing, and pressuring margins and possibly technological developments also indicate this will only accelerate. I have a slightly different perspective. A business should continuously think about the next Sigmoid curve since its inception. Yet the time and resources allocated might be smaller initially and can be increased as you approach Point A.

Point B: The business needs to improve at this late stage of inaction. Changes should have been made two, three or even five years ago. If your business is in this stage, you missed the train entirely. There is little left to do to salvage this business. It would be best if you had a complete rehaul of management to re-ignite the company, which will require a ton of investment with considerable risk, or think of divesting it to the highest bidder. Hope you will never come to this point reading this content and acting accordingly.

Point C: The current business model could continue to create value for years. The focus is on continually improving the model that it has now and making the growth phase as long as possible to have enough time to figure out the next curve with a disruptive innovation. In this phase, you make meaningful incremental innovations to penetrate more customers, make them buy you more often and spare a more significant share of their wallet for your products vs your competition (if any) while gradually increasing your resource investment for the next curve. This is also where you invest in your execution capabilities to make this curve steeper and longer. The more vertical and longer the current angle, the higher it gets and thus makes the base for the second higher in cumulative growth terms.

Point D: If you are good at point C and the landscape stays mostly the same, Point D comes much later. If it came, It's possible, even probable, that in the next three to five years, significant changes will need to be made to the business to sustain its success. The business operators may need to figure out what the signals for change will be. They find it difficult to imagine what G looks like, but they need to scan their environment more actively and be more alert to the signals for change. This is when you significantly increase the resources working behind figuring out the next curve to be ready for Point A when it is there. This may be allocating unique resources like an R&D team only working on disruptive innovations . This may be setting up a venture team and budget scouting start-up ecosystem. This may be making meaningful symbiotic alliances to determine the next curve that will benefit both sides.

Point E: There could be increasing anxiety among some people who may have thought about it but did not action change a year or so ago. They may be nervous about approaching a severe decline. However, only some people seem to notice, care or act. If you are at this point, It is obvious that the current leadership failed to understand the dynamics of the current curve, and the business is already too late to start the next turn. This is the time when significant leadership changes may be needed. This may be in the form of new leaders with a new sigmoid curve narrative or existing leaders adopting a different leadership style to re-credit themselves with a new narrative to energize the organization.

Point F: The business operators are trying to reinvent their business model. Only some things seem to work; some people are confused and anxious, and others want to return to the old model that has served them well. Others say we must persist with our new initiatives until we learn which ones are viable and how we can make them perform. This is the point you need to demonstrate all the mastery required for change management. I think you need to communicate the narrative behind this change overly. It would be best if you made your organization internalize the vision of this change for the better. It would be best if you managed the sentimental drawbacks of this paradox, i.e., driving a difference when there is still growth in perspective.

Point G: The business operators have bedded down the new business model – it works better each week. They are back to a position like C or D.

Point H: The business is experiencing some severe performance issues. If it continues like this, its future will be at significant risk. The owners must act to make the changes that will turn the business around. This is difficult because some of its best people have left, its reputation has been damaged by poor performance, and it needs more resources to direct at the renewal. Any change, assuming even successful, would be much more expensive and time-consuming with an organization that is demotivated and living the downward slope. The cumulative growth would be lower vs. starting the curve at point A. I hope you will never get to Point H reading this content. The sooner to begin your second curve as of Point A the better to reach the maximum growth in minimum time.

Point I: After much effort, the business operators have made significant changes to their business model that appear to have turned the business around. People are exhausted and yet more motivated to get back to a new point C. Time to learn from this and make the next curve more timely with needed investment planning, make the existing curve steeper with more meaningful incremental innovations and capability building to mitigate the opportunity loss of the lateness.

Understanding the math behind an entity's growth trajectory through the sigmoid curve metaphor is a powerful enabler of informed strategies and adopting the needed leadership styles for creating a sustainable growth continuum.

I will continue writing about the Sigmoid Curve metaphor with real-life business examples good and bad ones.

Please feel free to comment with your thoughts about the sigmoid curve metaphor or ask a question about the article.

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Cheers,

C.Firat Caliskan