Foster’s S-Curve Model of Innovation

Introduction

Foster’s S-Curve Model of Innovation explains how technologies and innovations evolve over time in terms of performance improvement. Proposed by Richard N. Foster, the model suggests that technological progress follows an S-shaped curve, rather than a linear path. The model is widely used to understand why established technologies eventually stagnate and why firms must shift to new technologies to sustain long-term growth and competitiveness.

Concept of the S-Curve

In the S-Curve model, the vertical axis represents technological performance (such as efficiency, speed, or quality), while the horizontal axis represents time or cumulative effort and investment. The curve shows three distinct phases: slow initial progress, rapid improvement, and eventual maturity or saturation.

Phase 1: Emergence (Early Stage)

At the initial stage, a new technology shows slow performance improvement despite significant effort and investment. This is because the technology is immature, and organizations are still learning how to use and refine it. For example, early 3D printing technology had limited materials, low precision, and high costs, making it suitable only for prototyping rather than large-scale production.

Phase 2: Rapid Growth (Acceleration Stage)

Once the technology stabilizes, performance improvements accelerate rapidly. Knowledge accumulates, processes improve, and costs decline. During this phase, innovation yields high returns. For instance, renewable energy technologies, particularly solar panels, experienced rapid efficiency gains and cost reductions once manufacturing processes became standardized.

Phase 3: Maturity and Saturation

In the final phase, performance gains slow down even with increased investment. The technology approaches its natural or physical limits, and further improvements become costly and marginal. For example, traditional internal combustion engines have reached high efficiency levels, but further improvements are incremental and expensive due to physical constraints.

Technological Substitution and New S-Curves

A key insight of Foster’s model is that when one S-curve flattens, firms must invest in a new S-curve to maintain competitiveness. Electric powertrains in automobiles represent a new S-curve replacing conventional engines. Foster’s S-Curve Model highlights the importance of recognizing technological limits and strategically shifting to emerging technologies at the right time. It helps managers and policymakers decide when to continue investing in existing technologies and when to transition to new innovations.

Caselet: Foster’s S-Curve Model at IBM

IBM offers a compelling global case to explain Foster’s S-Curve Model of Innovation. In its early years, IBM’s growth was driven by mainframe computing systems. Initially, performance improvements in processing power and reliability were slow due to technological complexity and high development costs, representing the emergence phase of the S-curve.

As computing demand increased, mainframe technology entered the rapid growth phase. IBM achieved significant improvements in speed, storage capacity, and system stability, becoming the global leader in enterprise computing. During this period, investments yielded high returns, and mainframes dominated large organizations worldwide.

Over time, mainframe technology reached maturity and saturation. Further enhancements became costly and delivered diminishing performance gains, while customers began demanding more flexible and cost-effective solutions. This flattening of the S-curve signaled the limits of traditional mainframe innovation.

Recognizing this, IBM strategically invested in a new S-curve—first through enterprise software and IT services, and later through cloud computing and artificial intelligence (Watson). These technologies initially faced adoption challenges and modest performance outcomes. However, as digital transformation accelerated globally, cloud-based services and AI-driven solutions experienced rapid growth and scalability.

IBM’s ability to shift from a maturing hardware-based S-curve to new technology-driven S-curves demonstrates the practical relevance of Foster’s model in sustaining competitiveness within a global technology firm.