Ants. They may seem like nuisances that intrude our picnics and attack our delicious foods, but they actually provide us with valuable business advice, especially on how businesses should deal with market saturation.
In his newly-released Breakpoint, our CEO Jeff Stibel paints a fascinating picture of the lifecycle of an ant colony. It all starts with one female winged ant setting off from her original colony and into the wild. Her journey ends when she finds a mate, sheds her wings, and digs a small nest in the dirt, establishing her own colony where she will reign as queen for the next 15 to 20 years laying eggs. In the first five years, the colony grows rapidly.
Likewise, in the business world, it all starts with one brilliant mind, one profound innovation. Take social media for example (a case Stibel discusses in depth): Tom Anderson found MySpace in 2003 and the network went into “hypergrowth”, going from zero to 100 million accounts in just three years. There’s also the case of smartphones, which everyone seems to own today. In just one year, from 2011 to 2012, Nielsen reported a 38 percent increase in smartphone users in the United States.
While ant colonies seem to be innately aware of their inevitable breakpoints (they’ve had millions of years to become familiar with it), finding the breakpoint for a market is far more difficult. Ant colonies stop growing after the fifth year and although the queen continues to lay eggs, the newborns solely replace the dying ants. Upon hitting equilibrium, the colony collectively matures and begins to focus on the quality of their colony, showing increasing signs of intelligence that rivals the most sophisticated brains. They even build natural air conditioning to keep the colony cool.
However, unaware of the breakpoint of its market, MySpace grew too much too quickly. Rather than accepting its equilibrium (focusing on the quality of its site over the quantity of its accounts), it expanded to the point of annihilation. Smartphone producers face the same challenges as ants and MySpace. With the speedy popularization of smartphones, the smartphone market is becoming saturated, or in other words, reaching its breakpoint. Mashable reports that the “big area for growth in the smartphone market isn’t happening with high-end devices…” Therefore, smartphone producers, such as HTC, Samsung, and Apple, must quickly recognize the forthcoming breakpoint and shift their focus from growing (in size in the hopes of dominating the market), to improving and assuring the high quality of their devices and services. Their market is moving toward equilibrium, away from smartphone adoption and more towards smartphone replacement.
The same is true for any market: at some point, it will be saturated. This holds true across all businesses no matter their size. The only successful way to survive seems to be to follow the example set by the ants: don’t dread your market shrinking to equilibrium because it can still grow – not in size, but rather in quality.
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Have an example of a business that reached market saturation and stabilized? Failed? Share in the comments!