What Are Inflection Points And How To Recognize Them?

inflection point

Maybe it is just me, but everywhere I turn, I hear someone talk about inflection points. That should not be surprising, given all the upheaval we are experiencing every day. Some of these changes could be inflection points, which brings up two questions. What are inflection points, and how can we recognize them?

The best place to get those questions answered is Rita McGrath's book, Seeing Around Corners: How to Spot Inflection Points in Business Before They Happen. I learned about this book from McGrath's wonderful Friday Fire Chats that she hosts online on most Fridays. You are guaranteed to learn something new from her discussions with her fascinating guests.

Coming back to inflection points, the term "strategic inflection point" was first introduced by Andy Grove, former CEO of Intel. An inflection point is a dramatic change in the business environment that impacts the operations of an organization, upending the assumptions on which business was built. Sometimes, an inflection point is called a 10X change. While a change of this magnitude can be seen as a devastating destroyer of past success, inflection points can also create tremendous opportunities with strategic advantages.

Inflection points do not occur instantaneously. Just the opposite – they take a long time to develop. The typical triggers for an inflection point are changes in technology, politics, regulations, demographics, and social behaviors. McGrath provides examples of companies that navigated inflections points successfully, companies that recognized the change too late, and companies that never recognized or acted on the changes brought on by an inflection point.

  • Successful shift: Adobe, Aetna, Amazon, Cognizant, Fujifilm
  • Recognized inflection points too late: A&P, Dell, Hewlett-Packard, IBM
  • Never recognized or acted on and became irrelevant or went bankrupt: Blockbuster, RadioShack, Toys "R" Us

McGrath illustrates four stages in the development of inflection points: hype, dismissive, emergent, and maturity.

  • Hype stage – As the name implies, some individuals, at this point, start to proclaim that a major change is coming that will overturn the entire world order. Bubbles often result from the hype, usually leading to disaster when believers invest too much too soon.
  • Dismissive stage – Only a few entrants usually survive the shakeout after the bubble bursts. The naysayers come out to say, "I told you so. It was never going to happen." However, this is a mistake. The dismissive stage is where the opportunities lie to set the foundation for significant growth.
  • Emergent stage – At this stage, the existence of an inflection point becomes apparent to more people. The best thing to do in the emergent stage is to generate a lot of options to position yourself for success regardless of which business model eventually succeeds.
  • Maturity stage – Everyone now knows that the world is changing. Those who did not prepare will have a hard time surviving (ex. Blockbuster).

In order to learn to recognize inflection points, we need to speak with people who have diverse points of view, as well as the individuals whose life experiences are different from ours. McGrath says, "Identify the places where you could go to talk to representatives of the future." What she means by that is if you want to know what the twenty-year-olds will want ten years from now, go and speak with the ten-year-olds today.

As Amy Webb illustrates in her book, The Signals Are Talking: Why Today's Fringe Is Tomorrow's Mainstream, we need to learn to spot the changes at the edges or the periphery so that we are not surprised by inflection points. When inflection points are at the edges, they are not yet complete. However, if we pay attention, we can start seeing the implications of their trajectory and how they might impact the future. We can start to design our strategy to deal with the emerging shift even though inflection points take a long time to fully develop. Bill Gates, in his 1995 book, The Road Ahead, observed:

"We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction."

On the flip side, it is a mistake to invest too heavily in the early stages of an inflection point. The potential of the change is not fully complete. Early on, only parts of the system are impacted by the change. This is why Jeff Bezos noted that key trends are usually not hard to identify. The difficult part is knowing when to take action.

The organization's goal is not to predict the outcomes from the inflection point, but to open everyone's mind to what might happen in the future and to generate as many possibilities as there can be so that as the inflection point unfolds, an organization can react appropriately. Imagining future scenarios based on the early signs of an emerging shift is not easy, which is why organizations often ask for help. For example, Intel hires futurists, science fiction writers, and students to use their imagination and produce creative works of the possible emerging scenarios.

Ultimately, the key to recognizing inflection points is to be open to new ideas and not to be too comfortable or set in our ways.

"Very few people see inflection points as the opportunities they often are: catalysts for changing their lives; moments when a person can modify the trajectory he or she is on and redirect it in a more desirable direction." - Howard Stevenson, Harvard Business School

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