I’ve noticed that I very regularly get people visiting my blog through a Google search for the term ‘Strategic Inflection Point’. Since that term has some very direct connections to other concepts I’ve been learning about, I thought I’d give some detail on Strategic Inflection Points, and their relation to the Lean Startup ideas of Pivots and Pirate Metrics.
I once reported on a presentation by Mary Poppendieck at the Lean and Kanban conference in Antwerp of 2010, where she mentions Andy Grove’s book ‘Only the paranoid survive’. This 1999 book deals with the way Grove ran Intel, and includes the concept of the Strategic Inflection Point, also described by Grove in his 1998 speech at the Academy of Management.
Grove describes the Inflection Point:
A Strategic Inflection Point is that which causes you to make a fundamental change in business strategy.
For anyone who’s been keeping up with the discussion on the Lean Start-up will see the similarity with Eric Ries' concept of the Pivot:
“A structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth."; - Eric Ries, The Lean Startup
The language is a bit different, of course, but there are obvious places of overlap. Grove’s Inflection Point has a main emphasis on external factors changing, necessitating change from the side of the company.
A major change due to introduction of new technologies. A major change due to the introduction of a different regulatory environment. The major change can be simply a change in the customers' values, a change in what customers prefer.
A Pivot can be seen as a reaction to encountering a Strategic Inflection Point. Pivots also happen in search of the correct strategy, product of market fit, which makes them more active and Ries' structured approach to identifying the need for a pivot seems to be exactly what Grove is looking for.
The biggest difficulty with Strategic Inflection Points is telling one from the many changes that impinge on you in the business. How do you know if a change is just a garden variety change or qualified to be this monumental, catastrophic change category that we call an Inflection Point? I could never come up with a particularly satisfactory answer to that question. And I’m quite sure that if I could, I wouldn’t be talking about them. A set of principles along those lines would be extremely helpful as a competitive weapon because we deal with changes every day.
Ries' innovation accounting provides the tools necessary to identify that Inflection Point. Pirate Metrics, as coined by Dave McClure, can provide an early warning that the strategy for a product is not, or no longer, working. And there are some different variants possible for different market situations.
Innovation accounting is the structured approach of doing cohort testing to determine the viability of a product’s engine of growth. This is not specific to a start-up. You can track Acquisition, Activation, Retention, Referral and Revenue for any product, whether in a small start-up trying to find the right product and sales model or an existing company that needs to track the health of existing products and models.
So if you’re worried about running into a Strategic Inflection Point for your business, this is what you do: start keeping (actionable) metrics on how your products are doing, what the growth rates are for their engines of growth, make those numbers clear and visible for everyone in your company, from the C-suite to the janitors, and if you do see a need to pivot, do so with clearly defined hypotheses, and check the results.