It’s funny how ideas work. Two years ago, I started a draft of this blog about curve jumping. I wrote an opening paragraph and then stopped. It sat in the catacombs of the site, waiting to be dug up again or lost forever.
If you’re not familiar with the term curve jumping you should be. In any business there is an S-curve of revenue growth in which a business starts out slowly, grows rapidly until it approaches market saturation, and then levels off.
The secret of high performing companies however is that they learn how to jump the curve.
“By jumping these three-curves early, while the core business continues to thrive, companies lay the foundation for a successful leap to a new financial S-curve later – and for lasting greatness by executing a series of these moves.”
(If you want a quick and simple overview of this idea, check out Accenture’s take on it here)
A business has to be willing to abandon a business that is still in essence doing well and make the jump to a new one in order to continue their growth. That can be hard.
Part of the difficulty in jumping the curve is knowing where you are jumping to. You can’t stick the landing if you’re just spinning in a circle and leaping with your eyes closed. That ends in disaster. So how do you know where to jump?
Unfortunately, the way most businesses evolve is through small, incremental changes, usually made at a point where they are long overdue. A business experiences a pain point or a decrease in revenue, they “go back to basics” and “double down” trying to outwork the problem before finally coming to terms with the fact that change is necessary. The inertia of the past is often too great. “I’ve been doing it this way for 30 years” is a common mantra. That may mean the change is long overdue. Ever wonder why businesses do five year plans?
Given all this, most businesses grow through their S-Curve, level off and then either hit a decline or make just enough small changes to stay flat. Their business looks pretty much as it did when they started.
If you really want to jump the curve as a business owner you can’t operate this way. You have to ask yourself,
“If I were to go into business TODAY, what kind of business would I build?”
In doing so, you need to act as if you’re starting from scratch. You can’t let you current client base, business structure, pricing, etc. influence what your ideal business in today’s market would look like. Then once you have that ideal, you put it down on paper alongside your existing business and come up with a plan that allows you to move from one to the other.
Investments vs. Sunk Costs
Part of creating your transition plan is being able to differentiate between investments and sunk costs.
Think about your closet. Do you have a $100 pair of shows you never wear or an expensive suit that will most likely never fit you again? Odds are, the reason you hold on to that item is because you paid a substantial amount for it. In your head, it is worth that money. In reality, it is worth $0 to you, as there is no utility in it.
A sunk cost is the money you put into something that you no longer get any benefit from. On the other hand, an investment is something you’ve put money into that has future value.
When looking at the current business, it can be hard to let go of pieces of the business you have invested a lot of time and money in. The way to make decisions on what parts of the business stay and what parts go during this transition is to be brutally honest about their future value.
Of course the profits from the current business fuel the transition to the next jump. This is why it’s imperative to jump early. You need the profits from the growth stage of the first curve to finance the start of the next curve. If you wait too long, the business is struggling to stay flat and there is no longer a revenue engine to supply the needed fuel.
A great example of a company that has successfully navigated three S curves like this is Netflix. First it acquired a strong customer base with its DVD-by-mail rental business, utilizing the profits as that business grew to build out its streaming service and acquire digital rights to content. Then the company separated the rental by mail business from the streaming services by creating two different pay structures, allowing the rental business to fade as the streaming business continued to grow. Then it used the profits from their growing streaming business to fuel the studio business, creating original content that can populate Netflix’s library without having to negotiate fees and windows of digital content owned by others. It’s a shining example of how continuing to jump to the next curve keeps the business growing.
The good news is that we have some curve jumping happening in AV right now it would seem too.
One example that stands out to me is Origin Acoustics. At CEDIA this year, Origin released a new multi-channel Valet Amplifier that is designed specifically to turn an array of Amazon Echo Dots into a whole house audio system. A unique feature is the amplifier’s patent-pending voice override system that mutes zones to allow the Dots to hear voice commands. Origin also introduced an in-ceiling mount for the Dot to let it be integrated into the ceiling, mirroring the look of architectural speakers already in the space. If you didn’t get to CEDIA or see the press releases, you can take a look at it here.
The interesting thing about the Valet Amplifier is that it utilizes an RJ45 and a Cat5/6 to carry power to the Dot and also to carry line level signal from the Dot’s audio output back to the amplifier.
For those of you thinking that low voltage power and line level audio over Cat5/6 sounds familiar, it does. It’s essentially A-Bus.
Origin Acoustics took what could’ve been considered a sunk cost, experience in A-Bus technology, and turned it into an investment in creating new smart home accessory products.
The company timed the release of Valet perfectly, just as Amazon released the ability to sync multiple Dots together to create a multi-room audio system, which eliminates the need for a traditional multi-zone audio switcher. This allows users to get high fidelity audio through installed speakers, powered by a traditional amplifier, all while utilizing the UI that they already know, being Alexa.
One new product alone is not typically indicative of a curve jump, but in Origin’s case, if you look deeper you see the beginnings of one.
I asked Joe Whitaker, who designed the Valet Amp with Origin Acoustics CEO Jeremy Burkhardt, about their product and he confirmed that from the start, they designed the Valet Amplifier to be agnostic. The Valet Amplifier can really be used with any device that requires USB power and has a line level audio output, meaning that it could be the heart of an audio system driven by future iterations of Google Home, Josh AI, iPads, etc.
The Valet Amplifier and its unique voice override features can really be used across platforms. The only product actually specific to Echo Dot itself is the in-ceiling mount, and I have a feeling Origin will soon be creating in-wall and in-ceiling mounting systems for several other voice controlled, smart home products as well.
It’s a jump from the traditional world of multi-zone audio amplifiers with proprietary keypads for control, to the world of voice controlled, connected devices and mounting accessories that leverages investments and strengths in speaker technology and amplification as well as A-Bus to fuel the jump to the next curve.
The former AV trade association InfoComm also recently rebranded itself as AVIXA, a move that was accompanied by a strategic plan to jump the curve form a hardware driven AV association, to one focusing on greater collaboration with an extended network of professionals to create experiences. There was some criticism around the change, mostly citing that the InfoComm moniker was still strong… but maybe that means it was the right time to jump. My thoughts on that are here if you didn’t see them.
If you’re an AV company out there that is still experiencing strong growth in your market segment, you should already be looking at what the next growth curve will be. Once you decide that, determine the type of business that you would need to have to best capitalize on that curve. Then come up with a transition plan that allows you to utilize the profits from your growing business to make the jump to your next round of growth. If you time it right, you’re new business segment will be accelerating right as your previous one starts to decline. It’s an ongoing process that assures you’re always thinking of the next iteration and being proactive in creating a path to get there.
If not you may find yourself in a reactionary cycle of creating products or providing services in a “me too” fashion just to keep your head above water, which isn’t a winning recipe for anyone.