Riding the cycles: The crucial things they never tell you

This story has significance for readers across Kenya and beyond.

“Knowledge tells you what to do. It does nothing about whether you actually do it. And the gap between the two is where almost everything happens” --Nisha Shah.

On the Kenyan business scene, and in your organisation, does everything move in cycles, or in a straight line? Is there really a way to get ahead – to master evolution – on the business performance curve? What can one of the world’s most astute investors teach us about big picture patterns and cycles?

Ray Dalio built his roughly $20 billion fortune by founding and scaling Bridgewater Associates into the world’s largest hedge fund.

Performance varies significantly by year, generally in the range of a 11 to 12 percent annual return, with a record-breaking 33 percent gain in 2025. Starting the firm from his two-bedroom apartment in 1975, he grew it by pioneering systematic global macro investing, a unique corporate culture, and risk-managed strategies -- paying attention to cycles.

Principles for Dealing with the Changing World Order is Dalio’s 2021 book that examines history’s most turbulent economic and political periods to reveal why the times ahead will likely be radically different from those we’ve experienced in our lifetimes.

Dalio studied recent major empires, the Dutch, British, US and China —putting into perspective the ‘big cycle’ that has driven the successes and failures of all the world’s major countries throughout history.

Cycles define us

Everything in our universe moves in cycles. Planets orbit stars, stars orbit in galaxies, and time itself flows forward while repeating patterns like seasons and day-night cycles that define our reality. Moving from the universe and the macro of national economies, to the micro of the firm, it helps to notice cycles.

A S-curve is a useful way to think about the life cycle of a company, or development partner. You will notice your organisation rarely grows at a constant rate. It moves through phases where growth accelerates, but eventually slows as it approaches limits, and eventually declines, unless it creates a new source of growth. Just about every enterprise goes through four points on an S curve.

S Curve: experimentation

First stage is experimentation when product-market fit is uncertain and growth is slow. Second, often comes rapid growth where customers, revenues and capabilities compound. Maturity is the third phase with growth slowing and the market becoming saturated, with senior management assuming that past success will continue. Last, is decline, defending the old business, instead of reinventing it.

Key insight is that in stage 3 can look deceptively successful. Revenue may still be rising, profits may still be good and the company may have a strong brand. But the underlying growth engine is weakening.

Take Red Tree Design, a successful furniture manufacturer that develops an efficient factory, producing its established product range.

Initially, more production, with quantities of scale mean lower unit costs and higher profits. But eventually, with ‘more of same’ products flooding the market, it becomes saturated, competitors copy the product, customers' tastes change, machinery becomes outdated and the company's fixed-cost structure becomes a burden. In essence: the company's capacity has grown faster than its ability to create new value.

Temptation is the ask: “How can we improve the existing business?” But the smart manager, when approaching the top of its S-curve should instead ask: “What business should we create before the current business starts declining?” Ideal is that you don't wait until the old business is collapsing. You deliberately build the next S-curve while the existing S-curve is still healthy.

Instead of the old S-curve -- innovation - growth - maturity then decline. Consider a new S-curve - experiment - discover - growth - then maturity

It’s a tough call, but the smart company begins investing in the second curve before the first one peaks. The astute aim isn't simply to extend the life of the old curve. It is to transfer the organization from one curve to another.

Diagnosis -- ask five questions

For some quick diagnosis, ask these five questions

1. Where are we on the current S-curve? Are we accelerating, plateauing or declining?

2. What is producing our growth? Is it new customers, existing customers, pricing, market expansion, or new products?

3. Are returns on additional investment falling? If doubling marketing, people, branches or equipment produces progressively less growth, one may be approaching the ceiling.

4. What assumptions made our current business successful? Are those assumptions now becoming liabilities? 5. Where is our next S-curve? What new customer, problem, technology, business model or market could create the next wave?

The counter-intuitive lesson is that the most dangerous moment for a company may not be when it is losing money. It may be when everything is going well, but growth is becoming increasingly difficult. Risk is that a company that waits for obvious decline has usually waited too long.

Don't manage the company to maximize the current S-curve. Manage it to create the next one -- the next evolution -- before the current one peaks.

“The reason people typically miss the big moments of evolution coming at them in life is because they experience only tiny pieces of what’s happening. We are like ants preoccupied with our jobs of carrying crumbs in our very brief lifetimes instead of having a broader perspective of the big-picture patterns and cycles, the important interrelated things driving them, where we are within the cycles, and what’s likely to transpire” advises Dalio.

David J. Abbott is a director at aCatalyst Consulting. [email protected]

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Reporting originally appeared via Business Daily. Read the full source for additional context.