Tuesday, October 12, 2010

Buytendijk, Dealing with Dilemmas, part 2: the “eye of ambiguity”

When do we jump on the next trend? Buytendijk sets out the dilemma. “If you analyze too long, the window of opportunity closes; you have suffered from analysis paralysis. If you jump on a new opportunity immediately—“shoot first, ask questions later”—your fail rate is most likely to be higher than others as well.” (pp. 93-94)

Yes, I know this sounds terribly familiar, but Buytendijk puts a slightly different spin on it, so it’s worth reading further. He uses the S-curve to depict the rise and fall of trends.

“A trend starts hopefully; with a lot of passion, a small group of people pioneer a technology, test a new business model, or bring a new product to market. This is usually followed by a phase of disappointment. The new development turns out to be something less than a miracle. Reality kicks in. At some point, best practices emerge and a phase of evolution follows. Product functionality improves, market adoption grows, and the profitability increases. Then something else is introduced, usually by someone else. … This replacement then goes through the same steps.” (p. 95)

“The best place to jump to the next S-curve to secure sustained growth is obviously at the beginning of the ‘eye of ambiguity.’ While the current cash-cow business is still profitable and growing, the next wave can be adopted, preparing for future profitability. Both the now and the later are considered in an ambidextrous way. The cash-cow business can fund the new investment. The new trend has not broken through yet, so there is time to experiment in a safe way. Experimentation leads to additional insight on how to capitalize on this new trend, which decreases the risk of failure and moves you toward the optimal decision point.” (p. 95)

“Yet, paradoxically, the least likely point to jump to the next S-curve is at that exact same point. …the eye of ambiguity is a source of great confusion. Experts disagree on the impact of the new trend and the benefits are more of a promise than a proven reality. And in difficult times we tend to rely on what we know and what has proven to work best. As a result, most likely nothing will happen until the new trend has overtaken the old one, and it is too late.” (p. 96)

We don’t know, of course, in the eye of ambiguity whether the new trend is real or a mirage. There is an art to distinguishing between the two and to finding the optimal decision point. Sometimes, Buytendijk suggests, it makes sense to give up the first-mover advantage in favor of a fast-follower strategy. The latter “limits the risks while keeping chances of success relatively high.” (p. 98) Or you can dip a toe in the water as you continue to assess the ambiguity.

It would be unwise to extrapolate too literally from Buytendijk’s S-curve to market trends. But I think the imaginative reader might be able to devise some position management hypotheses worthy of testing based on the marvelously mixed metaphor of the cash cow and the eye of ambiguity.

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