Having considered and reconsidered the content of this issue, this magazine's editor has become only more enthusiastic about the reading within. Rather than a blow-by-blow defense of every article that follows, this editorial suggests, in a different light, the relevance and inter-relatedness among them. The very notion of markets and competition brings mathematics and games to mind-mapping what was, estimating what might become. Having uncertainty coexist with a rich array of historical data speaks to persisting questions on the structure and the speculative nature of markets. One thing seems sure: the challenge of initiating new businesses and products is eclipsed by the difficulty and uncertainty in surviving product/market maturation. Offered here is one engineer's contemplations regarding markets and competition. Allow me first to express my appreciation to Paul LaBella, Jennifer Robbins, and Scott Willett for taking the time and making the effort to contemplate market growth my way-it was fun.
Increased competition also coincides with market saturation. Profit margins and cash flow are suddenly and severely pinched when supply exceeds demand. It is a time for maturity, efficiency, and effectiveness in the marketplace when shake-outs loom among producers. In short, it is time to be businesslike. Where markets go next is an important question because they can follow quite different paths. Common possibilities include collapse (hula hoops, LP records), demand stability (insulin, electric power generation), and growth resurgence (nylon). These dissimilarities imply changes in the structure of growth causality. Financially, such various possibilities could not be more different.
It is said that market growth follows an S-curve and that growth consists of the phases of initiation, acceleration, growth, and maturation (Figure 1). Life is, if not simple, a whole lot simpler during growth than afterwards-competition is unrefined and demand unsatiated. Trade gurus who speak of S-curves rarely discuss forcing functions in mathematical terms. Indeed, markets may be so hopelessly complex that they preclude simple structure (and simple discussion). As a matter of curiosity, I looked at three product-growth trajectories for comparison. From the perspectives of technology, utility, and cost, there is little common ground among the markets of automobiles, cassette tapes, and filter cigarettes. However, when overlaid (nondimensionalized with respect to volume and time) their respective trajectories were not wildly dissimilar (Figure 2). A cautionary note is in order; the examples selected happen to be the first three complete cycles encountered. Broad conclusions cannot follow; whatever coincidences arise do more to frame questions than to answer them. However, it is a basis for discussion and speculation.
But markets are all about speculation. One immediate question arises: "Do like trajectories denote similarity among their drivers and inhibitors of growth?" Two avenues exist for considering this. First, the data of our three samples, cleaned up, might yield patterns offering insight. Conversely, we can put the quantitative aside and, instead, contemplate the decision processes by which money is committed to growing markets. Increased capacity for automobile production, for example, is predicated upon the investment in more auto plants. What do people and companies think about before they commit that kind of money?
Following the first theme, the visual person in me sought a function that reasonably approximated the data of our three trajectories. A good one would be preferably continuous, good-looking, and in possession of derivatives that are not jerky. (It happened that a hyperbolic cosecant function offered a goof) start, and a sinusoidal multiplier tended to compensate for much of the remaining error.) The approximating function, seen in Figure 3, looks good enough through most of the growth cycle, although it crests more smoothly than any of the three example product markets did. Modeling a transition into maturity will remain problematic (at least for me) because of the unknown possibilities downstream.