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This article originally appeared

in the 2011, No. 1, issue of

The journal of
high-performance business

High-Performance Business

Jumping the S-curve


How to sustain long-term
performance?
By Paul F. Nunes and Tim Breene

S uccessful companies often manage growth to the curve of their financial


performance. But that isn’t enough. High performers also manage the
maturing of three other equally important elements of their enterprise
to make the jump from one market-leading business to the next.
Back in 2003, when Accenture began stall in its revenue growth—as Mat-
its program of High Performance thew Olson and Derek Van Bever
Business research, there was a lot of note in their book, Stall Points—it
talk about good companies becoming has less than a 10 percent chance of
great. A generation earlier, a similar ever fully recovering. Those aren’t
conversation had focused on the good odds, and they do much to
meaning of “excellence” in business. explain why two-thirds of stalled
companies are later acquired, taken
Yet our ongoing research, bolstered private or forced into bankruptcy.
by lessons from global client work
across dozens of industries, has There are many reasons offered
taught us that high performance for why businesses fail to avoid
isn’t just about achieving “greatness” a stall. Some companies simply don’t
or “excellence,” concepts that are see the end coming, preferring to
far too static. Nor is it just about view slowing revenue growth as the
ensuring long-term survival by result of a bad economy or an indus-
building a company that will last. try slowdown, not as a referendum
High performance is about outper- on their own products or services.
forming rivals again and again, Others don’t recognize how slim
even as the basis of competition in their chances for late-stage recovery
an industry or market changes. and change really are and thus fail to
muster the urgency needed to jump
Truly great companies show the to a new S-curve.
world that their first arrival at the top
was not an accident. To do this, they As we discovered when we wrote in
accomplished a difficult feat: They these pages about the role of the chief
jumped what Accenture calls the strategy officer, many companies
S-curve of business performance. hope they can pull off a reinvention
When we say S-curve, we mean late in the game by appointing a CSO
the pattern of revenue growth in or a chief innovation officer. But no
which a successful business starts matter how good the executives put
small with a few eager customers, into such positions are, they usually
grows rapidly as demand for the aren’t miracle workers.
new offering swells, and eventually
peaks and levels off as the market Still, companies see the problem
matures. High performers not only primarily as one of execution.
manage to successfully climb Observers after the fact often accuse
S-curves; as each business perfor- companies of sticking too close to
mance curve begins to flatten, they their core—or of moving too far from
jump to the start of the next curve. it. They fault a failure to commit to
a new business model, introducing
String of successes the wrong products and relying on
The ability to both climb and jump the achievement of massive scale as
S-curves is what separates high a strategy (or in place of a strategy).
performers from those that never The focus of such criticisms has typi-
manage to translate a brief period cally been on fixing what is clearly
of accomplishment with a single broken with a company. But at that
winning offering into a string of point, it’s almost always too late.
business successes.
As a result of our research, we
Making the jump again and again came to a very different conclusion
is crucial to sustained business about why companies fail to jump
success and outperformance of their S-curves. The secret, we
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Outlook 2011
industry competitors. Consider found, lies in understanding the
Number 1 that once a company hits a major hidden S-curves of performance.
We observed that too many com- process, they fail to manage to
panies invest most or all of their three much shorter but equally
energies managing to the growth important hidden S-curves (see
curve of their revenues. In the chart, below).

The hidden S-curves of high performance


Three key aspects of business mature and start to decline much faster than
the financial performance of a company.

Maturity

Financial
performance
S-curve

Hidden S-curves
Market relevance Distinctiveness Talent development
Ebbs as the basis of of capabilities Slows as companies
competition in the Lessens as competi- learn to do more with
industry shifts away tion intensifies and less and competition
from the dominant imitation occurs forces the lowering
model of costs

Time

Source: Accenture analysis

The hidden competition curve


Long before a successful business to network coverage to the value
hits its revenue peak, the basis of of services to design, branding and
competition on which it was founded applications. High performers see
expires. Consider cell phones. Com- the shift and create the next basis of
petition in that industry, for both competition in their industry even
manufacturers and service providers, as they exploit an existing business
has shifted several times, from price that has not yet peaked.

The hidden capabilities curve


In creating the offerings that will Xerox, two iconic companies whose
enable them to climb the financial names were once synonymous with
S-curve, high performers invariably their offerings and the distinctive
create new capabilities. If they are capabilities they possessed. For Xerox,
successful, these capabilities become the renewal of capabilities, including
distinctive. But distinctiveness is new skills in office services and
fleeting. As with the basis of compe- software, came in time. But for Pola-
tition, the end of the capabilities roid, the next round of distinctive
curve may not be apparent to ex- capabilities failed to materialize
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Outlook 2011
ecutives until time to develop new before the company was forced to file
Number 1 ones has run out. Take Polaroid and for bankruptcy protection in 2001.
The hidden talent curve
While companies are in some senses Jumping the S-Curve: How to Beat
always on the lookout for the best the Growth Cycle, Get on Top and
talent, they often lose focus on Stay There (Harvard Business Review
retaining in quantity what we call Press, 2011), which presents the
serious talent—people with both the latest findings from our ongoing
capability and the will to drive High Performance Business research.
business growth.
We will return to these and other
When the business is successfully topics in future issues of Outlook
chugging along but has not yet as we continue to report on new
peaked, executives feel that opera- insights drawn from our ongoing
tions can be leaner—they’ve moved research. In this issue, we introduce
far down the learning curve by one of three essential business prac-
then—and meaner, since they are tices a company must employ to
under pressure to boost margins. successfully climb the S-curve of
They will then reduce both head- business performance.
count and investments in talent, and
will increasingly focus on talent that In the following article, we examine
can best execute the existing busi- the practice of being “worthy of
ness model. This has the perverse serious talent.” It is critical to attract
effect of driving away the very peo- and retain the right talent for the right
ple—the entrepreneurial risk takers reasons, something that is at the core
and business builder types—best able of the performance anatomy we have
to help them reinvent the business. previously described as necessary for
high performance.
As a result of managing to these
hidden curves—and, it must be The article makes clear how high
emphasized, in addition to keeping performers turn the war for talent
focused on the revenue growth on its head. Rather than battle for
S-curve—the high performers in high-priced stars, they focus on
our study had typically started the creating a corporate environment
reinvention process well before their and culture that attracts and retains
current businesses had even begun employees who have both superior
to slow. In essence, they had the fore- skills and a strong desire to thrive
sight and wherewithal to begin to fix in a demanding environment with
what didn’t yet appear to be broken. equally skilled colleagues.

If, in fact, this should be manage- Jumping in a downturn


ment’s real agenda, how do high It may be argued that the recent
performers create an organization severe downturn has made it impos-
that manages to all four curves sible to think about reinventing the
simultaneously? business—that mere survival was an
accomplishment during the past two
They do so by engaging in three or three years, and may even con-
distinct management practices: tinue to be so in the near future.
creating strategy in a way that is But such reasoning is flawed.
“edge-centric;” changing the top
team well before it appears neces- Many managers believe that a reces-
sary; and ensuring that they have sion is primarily a time for retrench-
more talent than seems required ment, belt-tightening and a redoubled
by becoming hothouses of talent. focus on selling. But economic slow-
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Outlook 2011
These and other important insights downs also call for greater attention
Number 1 gave rise to Accenture’s new book, to innovation and increased prepara-
For further reading tion to jump an S-curve. One reason Another reason: As a downturn
for this urgency: Reduced sales and bottoms out, the S-curve does
“A team you can count on,” Outlook increased discounting tend to flatten not regain its original shape; thus
2011, No. 1 the revenue growth S-curve, which companies do not regain time to
“The talent to grow,” Outlook 2011, No. 1 can limit available funding for new recoup their losses. Here are four
initiatives over time. why this is so.
“Rise of the chief strategy officer,”
Outlook, January 2008
“Marks of distinction,” Outlook, June 2005
“In search of performance anatomy,”
Intellectual property continues to lose
Outlook, October 2004 protection as patents expire
The patent office doesn’t put years generic drugs aimed at exploiting
For these and other articles, please back on the clock just because a the recent rash of blockbuster
visit accenture.com/Outlook company’s sales have tapered off patent expirations known in the
in a bad economy. Such an unfor- industry as the “patent cliff.”
tunate fact of corporate life can
have a devastating effect on some With the patent clock ticking,
businesses. In pharmaceuticals, for companies must be prepared for
example, patented drugs are under the ill effects of a downturn at
continual assault from the relent- some point during their period
less tide of approved generics. In of protected rights.
2009, the FDA approved 112 new

Technologies continue to evolve rapidly


Economic downturns can slow the large-screen plasma TVs have a
introduction of new technologies. hard time competing with the
But they don’t hold them back improving quality of LCD and
for long. Disruptive technologies LED televisions. The intense price
continue to advance even as com- competition at the lower end and
panies struggle in lean times to reduced potential for sales at the
recoup their investments in older high end, along with other factors
technologies. Witness the fate of like LCDs showing better in a store
plasma television. setting, have caused Vizio, once
a leading maker, to exit the plasma
The recent downturn has pushed sector, and the former top plasma
consumers to seek smaller televi- maker, Pioneer, to exit the televi-
sions at lower price points. Expensive sion market altogether.

Competitors continue to enter industries


and press advantages
During a downturn, the competi- and Redbox (which offers DVD
tion can become even fiercer. Com- rentals through kiosks for $1 to
panies may be able to grow sales $2 per night) gained market share
only by seizing market share from and enjoyed surging revenues.
competitors, and already weakened A variety of new channels for
businesses face possible extinction obtaining movies drove the final
with further slips. In 2010, both nails into the coffin of brick-and-
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Outlook 2011
Hollywood Video and Blockbuster mortar outlets constructed by the
Number 1 filed for bankruptcy, while Netflix titans of the VHS rental.
Consumer tastes and preferences continue to change
Novelty wears off with time, sudden changes beyond their control.
regardless of the strength of the Witness the automakers that intro-
economy. Therefore, products duced new pickup trucks targeted
introduced in a downturn often at American construction workers . . .
fail to capture their full potential. just as the housing market crashed.
Consumer tastes advance, and lost
sales can never be reclaimed. Bottom line: A strategy focused
mainly on retrenchment during
Even during the current downturn, tough economic times is a strategy for
for example, consumers accustomed continued trouble during the recovery.
to the idea of “fast fashion” will not The logic of the S-curve demands
be interested in last year’s styles. early innovation and preparation for
And innovators have to prepare for the jump, regardless of GDP growth.

For companies that want to be high performers, the lessons that result from
these insights may sound counterintuitive. But what matters most to long-term
performance is not so much what you do to reach the top—though that is
certainly important—but what you do to cross over to the bottom of the next
S-curve and begin the climb again. Similarly, the secret to successfully
jumping the S-curve is not about what you do at or near the top of the
curve, but what you do to prepare for the next jump on the way up.

About the authors


Paul F. Nunes is the executive director of research at the Accenture Institute for
Outlook is published by Accenture. High Performance. His work has appeared regularly in Harvard Business Review and
© 2011 Accenture. in numerous other publications, including the Wall Street Journal. He is also the
All rights reserved. coauthor of Mass Affluence: 7 New Rules of Marketing to Today’s Consumers (Harvard
Business School Press, 2004). In addition, Mr. Nunes is the senior contributing editor
The views and opinions in this article for Outlook. He is based in Boston.
should not be viewed as professional
advice with respect to your business.
paul.f.nunes@accenture.com
Accenture, its logo, and
High Performance Delivered Tim Breene is the senior managing director of Accenture Strategic Initiatives and
are trademarks of Accenture. the CEO of Accenture Interactive. Since joining the company in 1995, Mr. Breene
has held a number of senior positions, including Accenture’s chief strategy and
The use herein of trademarks that may corporate development officer, group chief executive of Accenture Business Consulting
be owned by others is not an assertion and managing partner of Accenture Strategic Services. Mr. Breene is based in Boston.
of ownership of such trademarks by
Accenture nor intended to imply an
association between Accenture and the tim.breene@accenture.com
lawful owners of such trademarks.

For more information about Accenture,


please visit www.accenture.com

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Outlook 2011
Number 1

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