S-Curve

Description of the S-Curve by Richard D. Foster ('85). Explanation.

What is the S-Curve? Description

S-Curves are a phenomenon showing the typical path of product performance in relation to investment in R&D. At first, performance rises fast and from then on, once a decline in the slope occurs the productivity is unlikely to increase much by heavy R&D expenses. More likely, a technological discontinuity will occur where an innovative technology is introduced and rapidly creates massive gains in productivity. At the start of the curve, a significant effort is needed to get an achievement, but once this basic learning has been done, productivity can advance significantly with little marginal effort. After a few years further advances get more and more fractional. As technology generations change, few incumbents survive because of a lack of adapting to the new technology.

Origin of the S-Curve. History

The method was introduced as a result of several studies on technologies and firms performances.

Usage of the S-Curve. Applications

Technology life cycle assessment.
Industry maturity.
Assignment of the necessity of strategic refocusing.

Steps in the S-Curve Process

Analyze technology expenditures (both financial and economic) and the achieved gains in productivity.
Observe the development of this relation over time and prepare for strategic realignment when the process slows down from rapid growth.

Rules of thumb for detection:

Feeling among management the R&D productivity is declining.
More and more missed R&D deadlines.
Sales-growth shifts to minor segments.
Trend of small firms in industry to invest in radically new technology.
Overall loss of productivity in industry.

Strengths of the S-Curve. Benefits

Allows for an assessment of different stages of technology.
Indicates the necessity to watch out for technological discongruities.
Indicates the necessity for strategic alignment when productivity gains decline.
Creates clear incentives for first-mover behavior.

Limitations of the S-Curve. Disadvantages

The model does not give any clear hints to managers on how to act/react in the face of technological discontinuity
It cannot be inferred from the model, how big the gains will be from new technologies.
The model does not imply when to invest in new technologies and abolish the current one.
The model does not imply how a new technology will look like and by whom it will be introduced.
The model is a generalization of observed technology paths. In reality, the size and structure of the S can vary

Book: Richard N. Foster - Innovation: The Attacker's Advantage -

S-Curves Forum (2)

Technological Discontinuities: Jumping the S-curve
"I find S-Curves useful in explaining technological discontinuities.
Consider two S-Curves along a timeline, the existing one that has been in operation for sometime and a new one that is just beginning to emerge. The zone of interest is the "bubble" formed where the existing curve is on its downward slope and meets the new curve rising up.
Scrutinizing is watching the existing in decline and reading/hearing/observing what is emerging to take its place.
A recent example is the decline of the DVD industry due to the popularity of online movie streaming. The disruptive force here is technology, essentially the ability to move broadband data across the Internet. Netflix read the change and responded; Blockbuster Video didn't and died.
The key is knowing what should be on your "radar screen" and then tuning in the weak signals. Scrutinizing will lead to new mental models. We call this process: Jumping the S-curve."