Renewal, Innovation and the Sigmoid Curve

My recent posts have explored the theme of how organizations develop and, inevitably, decline. Almost all organizations end up closing their doors – some do this in a planned and graceful manner, some do it through managed mergers and acquisitions, and some do it abruptly and without much notice.

While the end of an organization is inevitable, the time and place when this happens is not. Organizations have opportunities to renew themselves, to innovate their services and products, to change their business model, and to gain a new lease on life. Rather than the lifespan of an organization looking like a bell curve, this renewal brings about renewed growth and performance – this creates the shape of an S curve, known to mathematicians as a Sigmoid Curve.

Source unknown

One of the best descriptions of this is provided by Charles Handy in his classic book “The Age of Paradox” (also known under its British title as “The Empty Raincoat"). He views the essential paradox of this renewal and innovation in this way:

"the secret to constant growth is to start a new sigmoid curve before the first one peters out. The right place to start the second curve is at point A where there is the time, as well as the resources and the energy, to get the new curve through its initial explorations and flounderings before the first curve begins to dip downward."

This is a key dilemma for leaders in organizations – how do you assess when your current business model, your current "theory of success", has run its course? How do you judge when the very approach that led to your growth and success will now be the cause of your decline and close?

Part of the response to this dilemma is that you can never know when that tipping point is reached, until well after the fact. This is why leaders need to be questioning their assumptions about what is making them successful, and what will continue to drive success in the future.

Leaders also need to be able to hold the paradox of embracing their business model (or strategic plan), being fully committed to implementing it in all its details, while at the same time questioning whether this model needs to be replaced by a new focus.  (The text of Handy's chapter on the Sigmoid Curve can be viewed online)

One way of holding this paradox (as I'm not sure it can actually be "managed") is to promote innovation and experimentation across the organization. Encouraging people to be dissatisfied with the way things are today gives them permission to push the boundaries and develop new ways of working – whether this is improving and making more efficient work processes or developing disruptive products and services.

Either way, an organization’s lifecycle is typically shaped like a sigmoid curve. The question is how many curves will be evident in it before the organization comes to its inevitable close?

Source:http://www.cognitive-edge.com/blogs/dave/Sigmoid%20curves.png

Dave Snowden, writing in his always provocative and thoughtful Cognitive Edge blog, has sketched out 3 sigmoid curves over the history of management, starting with Taylor's Scientific Management.  This diagram illustrates how management thinking and practice has evolved over time, as the changes in technology and markets meant that older modes of management would have resulted in the decline and close of the original companies. 

In a similar fashion, companies have the possibility and the opportunity to launch new growth curves - but they have to do so before they reach the tipping point that leads to decline.  The risk of waiting too long to introduce a new approach, and to scale down and abandon an old approach, is that resources (whether of money or energy) are reduced on the decline.  You may also face increasing resistance - in the form of active resistance or of apathy - that disrupt your efforts to introduce needed changes.

So how do you promote - and model - dissatisfaction with the status quo and a quest for innovation and improvement?