Inflection points—they really do happen

Posted: 02.16.12

Andy Grove is credited with applying the term inflection point to business. In his book Only the Paranoid Survive, Grove said that Inflection Points provide huge strategic advantages to the companies capable of moving on them. Intel has continued to embrace the strategy and everyone else would like to. Today, everyone uses the term inflection point as if they invented it. Most of the time when you hear some marketing or PR flak toss out the “I” word you roll your eyes up and think, oh boy here we go again—stop the revolution, I want to get off.

And anytime a inflection point is identified or pointed out, various pundits, arm-chair historians, and wannabe quoted bloggers remind us that an earlier version or attempt was made .... back in the day (and while I’m ranting, why did we adopt this incredibly silly cliché?).

So saying that when Steve Jobs stood up and announced the iPad was an inflection point, inevitably invites historians to point out that we’ve had “tablets” since the late 1990s. Well that’s just fine, but it doesn’t change the reality that Jobs did create an inflection point. He certainly did as we are all aware.

Tablets, especially the iPad, changed the usage model, just as the iPhone did. The drive for lighter notebooks begat the Air, and Utlrabook, and now the UltraThin from AMD. And the iPad and its imitators have taken a whack out of the notebook market, most notably the netbook segment.

Likewise, Ultrabooks and Thins are taking a whack out of notebooks and the net result is the whole damn market, especially the mobile market will never be the same.

Now if you happen to be in a company that can’t adapt to this change, then go peacefully into the night Mr. Dinosaur and begin the process of becoming an oil pool. Lots of companies will be in that situation, component suppliers, whitebox suppliers, and laggard PC suppliers.

The other undeniable inflection point is the rate of growth in PC and mobile device consumption by the BRIC (Brazil, Russia, India, and China) countries. These counties have large populations that have a rapidly developing middle class (something the US used to have) and aspirational appetites for new things.

Ironically, the companies that don’t have bragging rights in the tablet or smartphone market are using the growth in the BRIC countries to brag about. But, what if BRIC started buying tablets? OMG! Well then the spin doctors would have to find something else—the cloud maybe—oops another inflection point that cloud thing is, isn’t it? The cloud threatens to put the game console companies out of business, but then so do the tablet suppliers.

So the winning company, the company to invest in now is the one that talks about tablets, BRIC, and cloud. No, not just talking, all the companies even remotely connected to the market are talking about those things in one combination or another. The companies to invest in would be the ones that are actually shipping tablets to the BRIC countries for use with the cloud. Oh wait—there aren’t very many.

But there are some, and there will be more very soon, and since we can’t give any forward looking statements we can’t disclose who they are, but as the dodge-ball-playing marketing types like to say, stay tuned (another despised cliché).

The bottom line here is that we are at a couple of inflection points. And when there is such a situation there will be chaos. And when there is chaos fortunes are made (and lost).

AN INFLECTION point is a point on a curve a which the curvature or concavity changes sign. In other words the squiggle changes direction and if you're lucky you're there with your products to make the turn.

The other thing to keep in mind is the cost of entry is not small. You don’t just suddenly wake up one day and decide you are going to market and sell in to BRIC, or that you are going to build a tablet, or develop a cloud strategy or solution. Therefore, if you come across a company that has just discovered an inflection point that others have been talking about and planning for, short the newbee. The chances of them catching up and doing something novel (other than price cutting) is slight and probably their exit scenario.

And even though Apple and Microsoft be late into some markets, it wasn’t because they weren’t studying them. They watched what everyone else had done wrong and they did it differently—they have made their fortunes by being the latebees – latebees who started planning when the inflection point was first sensed.