Yesterday we introduced the concept of the “Red Queen Race” which was based upon Lewis Carrol’s passage from “Through The Looking Glass” where Alice along with the Red Queen make a mad dash in the land of the fantasy land. However after her sprint, and ending up out of breath, Alice actually finds herself in basically the same spot where she started gaining very little ground for the effort yielded. This is in essence the “knee curve” of the power law world.
However after writing the post, it struck me just how much I had used various forms of the power law in my professional life and the fact it has a duality. While mathematically, the “power law” formulation is binomial, ok don’t start glazing over on me as we will keep it high level. As “binomial” simply means that the formula can account for two changing variables at the same time which means the results can move in a nonlinear fashion, or in other words the answer is a curve and not a straight line. So as discussed in the Red Queen Race, the more you do something the better you get at doing it, so the faster you do that task. However there is a point of diminishing returns which forms the “race” if you will.
So what’s the big deal then out of all of this you ask, well being binomial in nature the result can have a duality as mentioned above meaning the more you do something the faster you do it, however at the same time the more you do that “same thing” the greater level of saturation of product or services is created to form a “balancing loop” in system think speak. As here each [action] at a given point starts to cancel one another out thus creating a Zero Sum loop if you will.
This in turn drives stagnation in business as what the “duality” gives it also takes much like a spring which is pulled will return to its original shape once the forces applied to it are equalized. This is an important factor as most people especially consultants will focus on one or the other as many times as product or services begin to wain, they are called in by the company to state the obvious as most firms are far to myopic to see this for themselves. As everyone loves the ride up, however once the point of the Red Queen Race is achieved, it’s all but the flatlands from there on out.
In looking at the enlarged version of the graphic one can see these attributes come together in the graph along with the “zero sum point” where yield starts to diminish the requests and it’s the result of this duality in the Red Queen Race whereas the business cannot become more efficient (in a cost effective manor) and the market has reached a point of saturation therefore cannot consume more which in turn will affect a company’s earnings ratio. As in the end this is how “rock star” companies like Google ™ become “boring stalwarts” like Microsoft. So the important lesson here is to understand that “the knife cuts both ways”…