What is a Growth Curve

A growth curve is a graphical representation of how a particular quantity increases over time. Growth curves are used in statistics to determine the type of growth pattern of the quantity — be it linear, exponential or cubic. Once the type of growth is determined a business can create a mathematical model to predict future sales. An example of a growth curve is a country's population over time.

BREAKING DOWN Growth Curve

The shape of the growth curve can make a big difference when businesses determine whether to launch a new product or enter a new market. Slow growth markets are less likely to be appealing because there is less room for profit, while exponential growth could mean that the market could see a lot of competitors enter the market.

Growth curves began in the physical sciences such as biology; today, they're a common component to social sciences as well. Advancements in digital technologies and business models now require analysts to account for growth patterns unique to the modern economy. For example, the winner-take-all phenomenon is a fairly recent development brought on by the likes of Amazon, Google, and Apple. Researchers are scrambling to make sense of growth curves unique to their business models and platforms.

Future shifts in demographics (aging), the nature of work, and artificial intelligence will further strain conventional ways of analyzing growth curves or trends.

The expression growth curve might be considered more reserved for scientific approaches to what the layman may simply describe as growth trends. Definition aside, growth curves play an essential role in determining the future success of products, markets, and societies, both at the micro and macro levels.