Lifecycle
When is the best time to build a brand?
Building a brand during a market upswing is most lucrative, as it can establish dominance in one fell swoop. Conversely, during market saturation, brand-building becomes costly with diminishing returns.
Building a brand in the long tail phase essentially amounts to wasting money.
Industries typically undergo three phases in their lifecycle:
- Boom Phase: During this time, whoever builds a brand reaps substantial profits, with staggering margins. However, these glory days are fleeting. Think of Nokia in the 20th century and Apple in the 21st.
- Saturation Phase: As profits soar, more intelligent individuals are attracted, leading to intensified competition and dwindling profits over the years. This phase sees the demise of many enterprises due to fierce competition, as witnessed in the beauty industry.
- Long Tail Phase: Once the smart money exits, the battle concludes. Founders attain financial freedom, losing the impetus for further struggle. Enterprises operate on autopilot, and the primary task for professional managers is to avoid mistakes and maintain stability. At this point, creativity takes a backseat to security.
For a business model to hold value, it must align with the economic development level and prevailing ideologies of the time. If a business model fails to do so, it is doomed to fail. Recognizing the boom phase requires keen insights into the industry, distinguishing top entrepreneurs from the rest.
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