The Exponential Age


Technology has become part of our lives – impacting business, culture, and our personal lives. Look around and see how wired we are. Virtually anything we desire can be delivered to our door in a matter of days. Through our phones, we can trade stocks, make purchases, file taxes, pay bills, call for transportation, have food delivered, and even find a life partner.

But as much as technology has profoundly changed our personal lives, the business community is being disrupted almost beyond recognition. As technology continues to evolve, there are a few key principles to keep in mind in evaluating the pace of change for your business.

Principle 1: People change incrementally – technology improves exponentially.

We used to operate in an economy where value was created by transforming matter and energy. Now, value is often created by design through information driven technology. This means that exponential rates of progress and disruption will become the norm.

A case in point – not 20 years ago (1998 in fact), Kodak had 170,000 employees and sold 85% of all photo paper worldwide. Within just a few years, their business model had completely disappeared. Yet most people didn’t see the change coming. Digital cameras were invented in 1975, but followed Moore’s law of exponential growth – becoming less expensive and more powerful each year. So as with all exponential technologies, digital cameras were initially a disappointment and were dismissed by industry leaders as a fad – before they became mainstream and an expected appliance on the average smartphone.

Principle 2: Scale advantages have diminished.

Historically, businesses situated in large buildings radiated size and power. Scale (measured by size) meant safety. That was then – this is now. We are now in an era where technology powered businesses spring up out of virtually nowhere, becoming significant disruptors overnight. That is the essence of the new economy. Upstarts can get access to resources that used to be available only to large players. Today, very few industries still have significant barriers to entry.

Software will disrupt most traditional industries in the next 5-10 years. Uber is just a software tool, they don’t own any cars, and are now the biggest taxi company in the world. Airbnb is now the biggest hotel company in the world, although they don’t own any properties.

Principle 3: Business models deteriorate quickly.

We have existed in a world where a company’s business model didn’t change much. Management was mostly focused on execution. Simply put, if you buy for a dollar and sell for two, if you could move men or material, or if you could develop a recognized brand, you’d be successful. That is no longer true.

The process of change is accelerating. The only sure path to failure is to simply keep doing what has worked in the past. As technology cycles compress, the advantages of size and scale disappear. The real innovators rarely survive in a big-box company (innovation is the enemy of “just good enough”) so they leave to bring the market a newer version that is better, faster or cheaper.

Computers become exponentially better in understanding the world. Here’s a few thoughts for your consideration:

Legal: Imagine a world where we get legal advice within seconds, with 90% accuracy compared with 70% accuracy when done by humans.

Transportation: As self-driving cars become mainstream, we may not want to own a car. We will call a car with our phone, it will show up at our location and drive us to our destination. We will not need to park it and we only pay for the driven distance and can be productive while driving.
Education: The cheapest smart phones are already at $10. Within 5 years, 70% of all humans will own a smart phone. Imagine a world where everyone has the same access to world a class education via their phone.

Power: Solar production has been on an exponential curve for 30 years. Last year, more solar energy was installed worldwide than fossil. The price for solar will drop so much that all coal companies will likely be out of business.

Healthcare: Imagine a medical device that works with our smartphone, which takes a retina scan, a blood sample and a breath sample – then analyses 54 biomarkers that will identify nearly any disease. Then imagine everyone having access to world class diagnostic medicine, nearly for free.

Politics: We now have apps that can tell by our facial expressions if one is lying. Imagine a political debate where it’s being displayed when politicians are telling the truth and when they are lying.

Principle 4: The lunatics are running the asylum.

We’re already in the knowledge economy (as coined by Peter Drucker). As leaders, we supervise subordinates who have expertise we lack. Today’s leader must treat every member of the team as a collaborator or volunteer because there is no amount of monitoring that works. Control is a dangerous illusion for naïve leaders.

We are simply at the mercy of the lowest common denominator. No one cares what the CEO says if the front line of the business is not performing well and making good decisions. The lunatics run the asylum – the best you can hope for as a leader is to help them run it well.

We are transitioning our economy from atoms to bits. Not only is technology moving faster, but the rate of change is also accelerating. From robots in factories to pattern recognition software that automates analytical and complex tasks – machine capabilities ae replacing and outperforming human ones. The only area where this phenomenon is not true is simply in our ability to interact with one another. That’s the essence of having a competitive advantage in this new economy – the most valuable asset will be the human spirit. Welcome to the Exponential Age.