Knowing Is One Thing – Understanding Is Another

I’ve been working on one of my high end workshops that I’ll be making available for 2014 and beyond.

As I was working on some rough drafts and possible slides I wanted to share with you one that could help many of you understand where either you, as well as others are in the business cycle. And to give you some insights why some are so successful, and others that were the leaders of their markets, are either now irrelevant or worse – insolvent. (As an aside: I believe the chart below is so instructive it’s become the base outline for one of my entire workshops where it cost anywhere from $750.00 to $1900.00 to attend.)

Below I have made a simple chart as to give you a visual representation. And yes, I used a variation on the quote attributed to Warren Buffett. I thought it worked perfectly to help express this process. (It’s also one of my favorites!)

Progression of Business Cycles_edited-2The first step with any business idea is of course the original “leap of faith.” Here is where the innovation cycle begins with either the originator or others within the same sector. (i.e., Think flat screen TV’s as one example.)

Then comes the first leg or hill of the cycle, aka The Innovation leg. Here you’re basically the leader or, in the lead group with little to no competition. Refinements and improvements are the hallmarks at this stage. Here the market is clamoring for your product and prices are highly profitable with a clearly visible growth demand.

Following this comes the Imitation cycle. Here is where everyone now believes you have a hit and decide they want a piece of this growing market. It seems everyone wants to now produce because, they see the demand and believe they can compete with you by undercutting you on price via efficiency in manufacturing. Prices still support robust profits, and demand still appears to be in a steady growth mode on the visible horizon.

Which brings us to the most dangerous part of the cycle when “the idiots” show up. Here is where everyone competes only on one thing – price. And, the quickest and easiest way to compete at this point in the cycle is cut profit margins – make it up on volume. Here is where the most (big or small) wont take the next leap moving onto the next innovation or marketplace leaving the idiots to compete amongst themselves and fall into the pit along with them. Many will never see a profitable day again while squandering any and all resources just trying to stay afloat or relevant.

The main differentiation that distinguishes companies, brands, as well as individuals is when or if they’ll make the next  important leap. This next leap is as important, and for some, it may even be harder than the original leap. Nevertheless, the leap needs to be made as to both have the resources to expend to actually get up the next hill leaving the market as well as the others to battle for scraps amongst themselves. Because – it’s here one will be both seen, as well as be, the leader of the next innovation cycle where the real profits are to be made.

The implications of knowing and understanding where, what, and why you should allocate resources is paramount for any and all entrepreneurs regardless of their market caps. From solo entrepreneur to the global CEO. The implications and application of the above applies.

If you think not put Kodak®, Microsoft®, Apple®, Sony®, Madonna, Boy Bands, Disco, Bob Dylan, breakfast cereals, VHS, DVD’s, or anyone or any product/company into it. See if you can see their leaps or their failures to make those leaps. I believe you’ll be surprised how quickly you can see business successes and failures near intuitively using this one graph as a framework for your thought process.

© 2013 Mark St.Cyr