The Exponential Era. David Espindola
of “when.” Bringing an innovative idea to market too early can be just as fatal as being too late. Think about Apple and the Newton personal assistant device.2 Or Lady Florence Norman who introduced the motorized scooter circa 1916.3 These were all great ideas, as proven by Apple's eventual success with the iPhone, and the motorized scooter craze we see around the world these days – they were just timed incorrectly.
Not too long after our discussions, the company announced that it was committing a significant amount of dollars in technology investments over the next five years.
This announcement was a positive sign. It showed that the company understood the challenges ahead. The fact that the CEO was seeking answers to the question of “when” told us he had a significant level of awareness that time enriched decision making is of the essence. However, as we will see in future chapters, we have witnessed and studied several companies that, notwithstanding full awareness and willingness to invest, were unable to make timely decisions, change their culture, and stay apace with the disrupting forces they faced.
The key point in sharing our interaction with this Fortune 500 company is to emphasize that any company, no matter how big or successful, can be subject to the disruptive forces of the Exponential Era. Newly formed ecosystems, powered by easy access to converging technologies, can provide the fuel to rapidly dislocate stagnant or poorly managed companies and industries. Our first word of caution is: do not be deceived by your success.
In the Exponential Era, it is very easy to be caught off guard, because what may look like calm seas, can quickly turn unexpectedly. If you can't foresee a major storm coming and can't prepare for it, it may be fatal.
Elephants Dancing to a Faster Tempo
As we will explore throughout the book, technology investments alone are not sufficient to achieve a successful adaptation to the speed and scale of change. The most challenging aspect of getting companies ready for the fast changes that characterize the Exponential Era is transforming the culture.
As Lou Gerstner said in Who Says Elephants Can't Dance? “Successful institutions almost always develop strong cultures that reinforce those elements that make the institution great… When that environment shifts, it is very hard for the culture to change. In fact, it becomes an enormous impediment to the institution's ability to adapt.”4
Sometimes the only way to achieve a change in culture is by making a change at the CEO level, as was the case with the successful turn‐around experienced by Microsoft. Before Satya Nadella, Microsoft's culture was often characterized as internally competitive and hostile. It prized showing that you were smart, even at the cost of creating hostility and preventing teamwork.
Microsoft was unable to keep up with the fast beat to which it was expected to dance. The company's prospects were quite dire for a while. It lost the mobile operating system war and almost failed to get traction in the cloud. It took bringing in a CEO that understood and emphasized culture to completely turn the company around. “There is something only a CEO uniquely can do, which is set that tone, which can then capture the soul of the collective. And its culture,” said Nadella.5
Where Is My Crystal Ball?
“Predictions are hard, especially those that pertain to the future.” This comical proverb was allegedly first expressed in Danish, but the author remains unknown.
Given the difficulty in making predictions, how do you deal with the uncertainties of the Exponential Era? How do you stay on top of all the emerging trends and converging technology factors? How you do spot inflection points in business before they happen? Rita McGrath has written an excellent book titled Seeing Around Corners, that expands on this subject. In the book, she contends that inflection points, though they may seem sudden, are not.6 In an exponential curve, there is a long period of time in which the curve is basically flat, before the inflection point. Then it hits the elbow and goes straight up (see Figure I.1). It is during this flat period and the beginning of the elbow that, armed with the right perspectives and tools, smart leaders can anticipate changes and leverage them to create competitive advantages. Please note that we are using the exponential curve here for illustrative purposes only and not in its precise mathematical sense. For a more extensive discussion on this subject, please refer to the Appendix.
Figure I.1 Inflection point.
The key is to detect the signals of change and respond early enough, before it is too late. The challenge is always separating the signals from the noise which is often pervasive and distracting due to variations in the data. Startups have to be very good at detecting inflection points and making distinctions between signal and noise in order to survive. Most companies have a difficult time seeing inflection points and positioning themselves to take advantage of the opportunities these changes represent before they become threats. Technology startups tend to be nimbler, closer to the action, and demonstrably more willing to experiment and change directions than their more established counterparts. In the startup world it is very common to pivot to a different business model if the first one tried does not achieve the expected results. But for many legacy companies, it is a lot harder to pivot, partially because of their commitment to past investments, but in some cases also due to their intrinsic belief that what has worked in the past will also work in the future. Many legacy companies are focused on short‐term metrics derived from strategies that yielded results in the past, and their resources are allocated accordingly. However, allocating resources to conduct the necessary explorational experiments intrinsic to growth, but that requires taking some risk, is not common practice in these types of companies.
Trillion‐Dollar Platforms
As of this writing, according to CB Insights, there were more than 400 private companies valued above one billion dollars.7 They are part of the Global Unicorn Club. What is remarkable is that most of these companies are recently formed, technology‐based enterprises. They run the entire spectrum of technologies from Security to eCommerce, Internet Services, Artificial Intelligence, and so on. These are the companies that are able to take advantage of the huge opportunities converging technologies in the Exponential Era represent.
And we are just scratching the surface of what is coming. The economic opportunities to be generated by the creation, rapid adoption, and convergence of emerging technologies is truly extraordinary. According to the World Economic Forum there has been no historic precedent to this current phenomenon, which is also referred to as the 4th Industrial Revolution, in terms of its velocity, scope, and impact on everything in our lives.8 You would have to go back to the late 1800s and early 1900s to see just three significant innovation platforms come together over several decades: electricity, the telephone, and the internal combustion engine.
Today there are at least 10 of these platforms, depending on how you categorize them, that have surfaced in the last few decades: Biotechnology, Nanotechnology, Autonomous Vehicles, Robotics, 3D Printing, Artificial Intelligence, Blockchain Technology, Augmented and Virtual Reality, and the Next Generation Internet. The latter contains several sub‐components such as Mobile Payment, Internet of Things (IoT), Online‐to‐Offline (O2O), and 5G. We will discuss many of these platforms in detail in Chapter 2.
These platforms are generating entirely new ecosystems and multi‐trillion‐dollar economies. Their convergences are creating a combinatorial power that is spawning ever‐increasing innovation and economic opportunities and threats across the globe. For example, today we see China leapfrogging to modern technologies like O2O, machine learning, and mobile payment. The latter