The Perils of Great Success

Most of the time, bringing an innovation to life doesn’t work out. But sometimes, in a magical moment, product-market fit is achieved, the market responds and there is a glorious period of success. But the thing we don’t talk about much is that this very period of success contains within it the seeds of future disappointment and even irrelevance.

The relationship between success and failure

Jeff Severts, a corporate veteran and now innovator at the University of Chicago has an interesting stage model for the evolution of companies. In a business pamphlet (because he claims he hates business books), he suggests that companies go through four predictable stages as they evolve. His foundational model looks like this:

Here’s the problem as he identifies it: we think that performance is steady over the life cycle of a company. But in reality, there is a fascinating period where a company can let its performance slip, but due to a number of factors — momentum, inertia, the time required for competitors to copy and others — it can underperform but still keep its market dominance.

As Severts says, “… the minimum performance required to keep a company growing at a healthy pace varies as the company grows. When a company is small, it needs a very strong proposition to thrive. The same is true again…