“There is a tide in the affairs of men Which, taken at the flood, leads on to fortune…,” noted William Shakespeare in his play Julius Caesar.

Nature and life are cyclical — the seasons of the year, life and death, the phases of the moon, the tides. Caught up in daily details, we easily forget that the business world has cycles, too. We are all familiar with the economic business cycle of expansion, contraction, and recovery. However, other cyclical phenomena affect business and create a need for prolonged creativity and innovation.

The product life cycle

During its lifetime, a product passes through several phases: development, introduction, growth, maturity and decline. Developing a new product requires investment. The product is then launched, requiring further expenditures for marketing, which leads to the first revenues. The product then moves into the growth phase where revenues exceed costs and the product becomes profitable. Once the profits peak, the product becomes mature, and the subsequent decline in profits eventually leads to its discontinuation.

What can you do to counter the decline? One option is to revitalize the product through rebranding or improvements in the product or marketing. But it’s even better to have a pipeline of new products to replace the dying product.

The company life cycle

Companies have life cycles, too. In his book Your Life, Your Legacy, Roger Hamilton says that successful new ventures evolve in these stages:

• One or more entrepreneurs launch a venture based on a new product or service, and create an appealing brand around it.
• Once the venture and its product have been established, sales increase and the company enters into partnerships to increase profits.
• The company creates financial structures to make it easy to attract investors, or to go public, to fund further growth and development.
• Finally, as a mature company, the focus shifts to ongoing operations: efficiency, licensing, franchising, and subsidiaries.

These stages echo the four seasons: creation of a new product and brand (spring), boosting sales (summer), raising capital for further expansion (autumn), and ensuring ongoing operations (winter). Through these phases, the main activity changes from creation to sales to growth, and finally to institution, and management focus shifts from creativity to efficiency.

Once it has gone through these stages, a company is likely to be important in its industry for some time. However, in the long run most companies decline in importance and may even die. For example, according to Creative Destruction, by Richard Foster and Sarah Kaplan, of the Fortune 100 companies in 1917, only 39 were still operating in 1987, and of those only 18 were still in the Fortune 100. Even more telling, only two, General Electric and Kodak, managed to outperform the market.

Why do companies decline? Many lose their creative drive as they move into autumn and winter, become inward-looking, and rest on past success as they mature. More importantly, they fail to notice or embrace disruptive ideas and technologies.

The technology life cycle

Technologies emerging out of scientific breakthroughs become game-changing products that can create new industries and destroy old ones. These technologies drive economic progress in long cycles that typically peak 4–6 decades after introduction. These technologies also have cycles of development, introduction, growth, maturity and decline.

Like the product and company life cycles to which they are linked, technology life cycles follow cyclical patterns, rising and then falling as they are replaced by newer technologies. In his Trends Timeline 1750–2100, futurist Craig Rispin showed the cyclical flow of technology, starting with steam engines (1764–1820), steamships (1785–1843), textiles (1790–1900), railroads (1802–1860), electricity (1831–1898), telegraph (1838–1898), steel (1840–1959), telephone (1876–1935), automobiles (1885–1945), petroleum (1890–2000), aviation (1900–1960), radio (1902–1962), television (1931–1990), space and computers (both 1944–2004), and the Internet (1970–2030). Most futurists believe that biotechnology, nanotechnology and, eventually, nuclear fusion will be the next entries in this list.

Using the life cycles

Whether at the product, company or technology level, every cycle starts with an idea that becomes innovation. Our job as business leaders is to ensure that, as one cycle finishes, new innovation is available to start the next cycle. So never stop innovating, and thus make sure that when the next cycle starts, you are a part of it.

© Dr. Detlef Reis 2011. This article was published in parallel in the Bangkok Post under the title “Grow with the flow of cycles” on 10 November 2011.