The Myth of S-Curves

By Ashish Sood and Gerard J. Tellis 

January 2010

While many marketers believe that market segmentation is the “be all, end all” of growth, technological change is perhaps growth’s greatest catalyst. Numerous examples can be cited from the industry to support this claim. First, technological change enabled the growth of Microsoft from a fledgling company to the colossus of the computer industry. Second, emergence of Internet-enabled products (e.g., Walkman, washers, etc.) suggests that technology creates new growth markets. Third, the meteoric rise of Amazon and Dell demonstrates how technological change propels small outsiders into market leaders.

Currently, the topic of technological evolution has been studied primarily in technology management literature. The central premise in this literature is that performance of a new technology starts below that of an existing technology, crosses the performance of the older technology once and ends up at a higher plateau, in the process tracing a single S-shaped curve. There is scattered empirical support for the premise and limited theoretical support for various aspects of the S-shape curve (e.g., Foster, 1986; Utterback, 1994a; Christensen, 1997). Nevertheless, belief in this premise is so strong that it has become a law in the strategy literature. Numerous authors have derived strong managerial implications about this premise (e.g., Foster, 1986; Christensen, 1997). They have warned that even though managers might be able to squeeze out improvement in performance from a mature technology, the improvement is typically costly, short-lived and small. Thus, the primary recommendation is that managers quit a maturing technology and embrace a new one to stay competitive.

However, firms cannot gain from technological change if they do not understand it well. A central practical problem that faces managers is when to shift investments from the old to the new technology. If the S-curve is indeed valid, then the appropriate time would be the inflection point of the S-curve. After this point, performance improves at a decreasing rate until maturity.

New product development and major investments in research depend upon a proper understanding of technological evolution in general and of the S-shaped curve in particular. It is also important to know the dimensions of competition between technologies, the process of transition between old and new and the source of innovations.

Currently, the main sources of answers to all these questions are limited findings in technology management literature (e.g., Foster, 1986; Utterback, 1994; Christensen, 1997). These sources promote a theory commonly known as “the theory of S-curve.” Our study tests this commonly accepted model of technological evolution.

Prevailing Theory

The technology literature has coalesced around two aspects of the evolution of technologies: A strong consensus has developed about the phenomenon itself, while a consensus is emerging about the major explanation or theory for this phenomenon. Regarding the phenomenon, prior research suggests that technologies evolve through an initial period of slow growth, followed by one of fast growth culminating in a plateau (Foster, 1986; Sahal, 1981; Utterback, 1994a). When plotted against time, the performance resembles an S-curve (see Figure 1).