What is an Inflection Point?

Inflection refers to a point in a graph showing the change of a curve from concave to convex. It is the point at which the curvature of the concavity of a curve changes. An inflection point occurs when the curve goes form concave downward to concave upward and vice versa. In business, an inflection point refers to a point where a company, economy, industry or sector experiences a significant change resulting from certain events. The change can either be positive or negative depending on the underlying events. The vital points to know about an inflection point are;

• An inflection point is a point on a graph that shows the change of a curve from concavity to convexity.
• An inflection point also refers to the turning point in the progress of a company, industry, sector or economy in which a significant change occurs.
• The significant change could give positive or negative results depending on the situation. Inflection points are crucial to a company, industry or sector more than the daily progress recorded.

Why are Inflection Points Important?

Significant changes are bound to occur in a company, industry, sector or economy at a given point in time, this is so due to the dynamic nature of these enterprises. Every company, industry or economy experiences a turning point during their progress cycle, this turning point could either be positive or negative. Inflection points are vital in tracking the progress of a company or industry, in fact, some businesses give more regard to the inflection points over the day-to-day developments in their operations. Inflection Point is used as a charting model to show the direction or turning point of a curve in response to an event. Before an inflection point can occur, a shift, change or turning point of the curve must be noticeable. An inflection point could be a shift in the gross domestic product (GDP) of a country, a shift in the output and performance of a company and many others.

Special Considerations

Generally, an inflection point could be a result of an action taken by a company or actions by entities in an industry or sector that affects the entire sector. However, there are instances where a company, industry, sector or economy will experience an inflection point due to the action of an external party of unforeseen circumstances such as natural disasters, wars, and global crises. Actions that lead to a significant change or shift in a company are sometimes unintentional or unplanned, an example is the financial crisis of 2008. In other cases, regulatory policies could lead to an inflection point for a company, for instance, if a company is under certain penalties or tax implications due to non-compliance, it could lead to a shift in the company. Advancement in technology is another special consideration for inflection points, such as the digitalization of the world, the advent of computers and others.

Example of an Inflection Point

When a company, sector or industry notices an inflection point, it is a pointer that specific fundamental changes must be made in order to ensure the continuity of the business, industry or sector. The same is applicable to a country or economy, for instance, the financial crisis of 2008 necessitated certain adjustments in the fiscal policies in the United States. In the case of a company or industry, an infection point could mean that they adapt to the new market conditions or make changes to their strategies.