The Coming Inflection Point: Part 1

Andy Grove, Intel’s co-founder, described a strategic inflection point as “an event that changes the way we think and act.”

The business dictionary defines it as “the time of transition of a company’s competitive position that requires the company change the current path and adapt to the new situation or risk declining profits.” Investopedia explains the concept of an Inflection Point suggesting that there are … “critical points in the history of an industry or an individual company that signal permanent and enduring change. When a company faces an Inflection Point, its future might literally be at stake - the proper response leads to sustained growth, while inappropriate reactions often lead to obsolescence.”

Failure to recognize or respond appropriately to changes in consumer behaviour, market conditions or opportunities has often spelled disaster for food retailers in markets around the world, and for a long list of technology companies. Successful companies appear to consistently and accurately anticipate or create new market trends, while those less successful either fail to react to market conditions or make the wrong choices. The following diagram illustrates this Strategic Inflection Point.

Inflection points can be a result of action taken by a company, or through actions taken by another entity, that has a direct impact on the company. If a company successfully adjusts and takes the right path during this transformation period it can lead to a new level of growth and success. In contrast, those companies that continue on the same path - the ‘status quo’ - during this period of transformation, will inevitably see their business decline and they will most often be forced to exit the market. The factors that can lead to an inflection point include:

• Regulatory changes that negatively or positively impact an industry
• Technology changes that can transform an industry (e.g. Internet, smart phones, cloud computing, etc)
• Political changes.
• Competitive changes where a business can now be done in a different way.

When an industry reaches its inflection point it consistently results in massive transformation of that industry. The transformation of the computing industry is a good example of how dramatic this kind of transformation can be.

In the 80s, computing was ruled by vertically-integrated behemoths like DEC, Wang and Sperry/Univac. These companies did everything themselves, top to bottom. Their entire line was proprietary: they designed their own unique chips, built their own unique computers around those chips, with their own unique operating systems and applications software; which their own salespeople sold as complete packages. In essence, everything was proprietary: it was not possible to mix and match or move bits easily between, say, Wang and Sperry.

A few years later, the picture had changed completely and utterly. Before, if you had been working with, say, DEC, then switching to Wang was a painful proposition: you would have to replace and relearn everything. Today, you can easily switch from Dell to Acer (or mix and match components from either) without it being big deal.

Likewise, switching from MS Office to OpenOffice or LibreOffice, is not a big deal either, compared with the situation of the 80s. Today, who even remembers DEC, Wang or Sperry/Univac anymore? In the computing industry, technology changes, competition and supply/demand drove more choice, and resulted in a complete shift from vertical to horizontal integration. This was a major change, and the ones who never saw it coming, or refused to change, soon saw their businesses decline and ultimately disappear.

The bottom line is that technology and competitive changes created more choices, resulting in changing demands in the computing industry. Customers that in the 80s ‘hooked their cart to the wrong horse’ often got trapped in the turmoil and ‘shakeout’ of the industry and became extinct. In contrast, those that flourished and grew to new levels were the ones that broke away from the ‘status quo’ - they recognized the changes and capitalized on the opportunity with the right technology partners.

Key Takeaway:

What is the key message behind these decades of learnings? Don’t be complacent! The reality is that many of those who were unable or unwilling to see the inflection, are simply no longer around.

Watch for [our next Blog Post] in approximately one week: In our next post (part 2) we will review the upcoming inflection point in the on-hold and in-store music industry. What does the industry look like today? What will it look like in the very near future? And, as a provider or music supplier, what steps can you take to to flourish in this new environment? In an upcoming post, we will also present research from other business researchers, that show the inevitability of this same kind of change happening in the on-hold and in-store industry.

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