Sea changes and growth curves


Not many will deny that success in business more and more depends nowadays on the ability to anticipate the leading changes in the environment – and to exploit them. But this is no easy thing: changes are now more than often sea changes and yet while managers keep an eye on them and prepare themselves to face them, they also must also not lose sight of the present.

A metaphor which gains a growing ground in theoretical and practical management is that of the radar or better of a system of radars which help decision makers in business to single out the changing trends in several areas at the same time. As it is widely known, a radar is a device placed on an aerial, e.g. on a ship or on an airplane, which broadcasts bundles of microwaves. Whenever these meet an object on their path they send echoes which the source receives in turn. However the radar by no means replaces the other tools of navigation: the rudder, the propellers and the eyes of the pilot themselves remain at their places and continue to work normally. The radar just allows them to be prepared in promptly avoiding the obstacles which they have not spotted in adavance.

Karl Albrecht, an American guru of consulting, argues that a system of company radars is made up by various sensors each of them concentrating on one facet of the environment: the clients, the competitors, the global economy, politics, society and regulations. For example, the radar for clients employs tools such as the population pyramid (exhibiting its structure according to characteristics such as age, gender, education and income) . It is thus possible to understand how clients change in their structure, in their preferences and in their expectations, as well as to perceive how to anticipate them.

The use of another tool, the curve of the product life cycle, is also recommended. That this model really mimics reality is admitted as one of the few generally accepted paradigms of business strategy, a discipline from many points of view still in its infancy. The curve is divided into several phases, birth, development, maturity and decline, of course with almost infinite variations. But the point is that it is now necessary to go beyond the curve. In fact it is only a first curve, the one on which a product is at the moment. Underneath it a second curve invariably emerges, albeit with a (constantly shrinking) time gap This second curve is led by three fundamental forces, the new technologies, the new clients and the new geographical frontiers of markets.

A decisive factor stresses the importance of the company radar: the difficulty of choosing the moment when to move from the first to the second curve. If the passage is too early, one risks losing a lot of money, as in the cases of Chase Manhattan and City Bank with their premature experiments with home banking in the Eighties. But if one waits too long, the risk is to miss the bus, to be late and therefore unable to move and again to lose a lot of money. Western Union used to lead the telegraph industry, but they missed the opportunity to timely enter into other lucrative industries, such as radio, TV and computers. On the contrary, after the inability exhibited in the Eighties to understand that the future was with personal computers, IBM learnt the lesson and regained the ground lost with their platform provided with an axis and installed by Microsoft / Intel. So companies should especially avoid a common trap when phenomena of change are concerned: overestimating their effects at short term and underestimating them in the long run.

Benetton, the Italian giant of the apparel industry, set a standard for operating on both curves at the same time and at short term with their innovative system for adapting just – in – time to the variable fads of young people in clothing. This in – built competence allowed them to grow by leaps and bounds in the Eighties and early Nineties as well as to diversify later into attractive industries such as communication, advanced branches of manufacturing and even motorways. Nestlè owes its staggering growth to the ability in entering second curves, or even to create second curves in the whole world by means of a careful monitoring of how and when the new complex hierarchies emerge of the needs of their customers. The times of the actual choosing may be different, but the curve is similar in all countries. In China, the new gigantic emerging market, the Swiss company (which makes less then 2% of its total sales on the domestic market) began with condensed milk to move then to soluble coffee and to coffee cream, as well as to frozen foods. A few years ago Nestlè began to export from China.

Building and employing a company radar to the maximum of its power should be part of the strategy adopted by an effective management. The results of the explorations carried out by means of this tool should then be synthesized at least twice a year in a paper describing “what is going on”. This task should be accomplished by the top managers themselves, as the process of transforming the data transmitted by the radar into insights endowed with potential growth is an integrating part of the intellectual leadership they must ensure.