STL Partners’ forecast for Open Radio Access Network investments--whether one agrees with the projections or not--does illustrate one principle: adoption of successful new technologies or products tends to follow theS curve growth model.
The S curve has proven to be among the most-significant analytical concepts I have encountered over the years. It describes product life cycles, suggests how business strategy changes depending on where on any single S curve a product happens to be, and has implications for innovation and start-up strategy as well.
Some say S curves explain overall market development, customer adoption, product usage by individual customers, sales productivity, developer productivity and sometimes investor interest. It often is used to describe adoption rates of new services and technologies, including the notion of non-linear change rates and inflection points in the adoption of consumer products and technologies.
In mathematics, the S curve is a sigmoid function. It is the basis for the Gompertz function which can be used to predict new technology adoption and is related to the Bass Model.
I’ve seen Gompertz used to describe the adoption of internet access, fiber to the home or mobile phone usage. It is often used in economic modeling and management consulting as well.
The following graph illustrates the normal S curve curve of consumer or business adoption of virtually any successful product, as well as the need to create the next generation of product before the legacy product reaches its peak and then begins its decline.
The graph shows the maturation of older mobile generations (2G, 3G) in red, with adoption of 4G in blue. What one sees is the maturing products are the top of the S curve (maturation and decline) while 4G represents the lower part of the S curve, when a product is gaining traction.
The curves show that 4G is created and then is commercialized before 3G reaches its peak, and then declines, as the new product displaces demand for the old.
Another key principle is that, successive S curves are the pattern. A firm or an industry has to begin work on the next generation of products while existing products are still near peak levels.
It also can take decades before a successful innovation actually reaches commercialization. The next big thing will have first been talked about roughly 30 years ago, says technologist Greg Satell. IBM coined the term machine learning in 1959, for example.
The S curve describes the way new technologies are adopted. It is related to the product life cycle. Many times, reaping the full benefits of a major new technology can take 20 to 30 years. Alexander Fleming discovered penicillin in 1928, it didn’t arrive on the market until 1945, nearly 20 years later.
Electricity did not have a measurable impact on the economy until the early 1920s, 40 years after Edison’s plant, it can be argued.
It wasn’t until the late 1990’s, or about 30 years after 1968, that computers had a measurable effect on the US economy, many would note.
The point is that the next big thing will turn out to be an idea first broached decades ago, even if it has not been possible to commercialize that idea.
The even-bigger idea is that all firms and industries must work to create the next generation of products before the existing products reach saturation. That is why work already has begun on 6G, even as 5G is just being commercialized. Generally, the next-generation mobile network is introduced every decade.
There are other useful predictions one can make when using S curves. Suppliers in new markets often want to know “when” an innovation will “cross the chasm” and be adopted by the mass market. The S curve helps there as well.
Innovations reach an adoption inflection point at around 10 percent. For those of you familiar with the notion of “crossing the chasm,” the inflection point happens when “early adopters” drive the market.
It is worth noting that not every innovation succeeds. Perhaps most innovations and products aimed at consumers fail, in which case there is no S curve, only a decline curve.
The consumer product adoption curve and the S curve also are related to the point at which early adopters are buyers, but before the mass market adoption starts.
Also, keep in mind that S curves apply only to successful innovations. Most new products simply fail. In such cases there is no S curve. The “bathtub curve” was developed to illustrate failure rates of equipment, but it applies to new product adoption as well. Only successful products make it to “userful life” (the ascending part of the S curve) and then “wearout” (the maturing top of the S curve before decline occurs).
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