Exponential thinking, flexibility and fast execution is the new reality

Do you recognize the following in your company? It is budget period. Time to come up with the growth figures for next year and a forecast for the years thereafter. In mature companies, growth prognoses are frequently based on linear extrapolation of the results over the past years in combination with an assessment of the external market…resulting in ‘exciting’ growth rate predictions of 1-3x GDP, at best. Every year the same dance with the same outcome. You have a strong R&D and an Innovation department – so where is the step change? Where is the double digit growth? Is this the best you can do?

Exponential thinking is important to both identify risks for your business in an early stage and to secure the future growth of your company.

Innovation can either be sustaining or disruptive (1). Besides best practices in sales, logistics, production, customer experience, digital marketing, most companies intend to accelerate growth with sustaining innovations that can either be incremental (like product improvements) or radical. These innovations are at best customer driven, yet often internal driven with boundaries dictated by the corporate structure. We all know the senior manager that gets an ‘epiphany’ and directs the team to generate innovations with higher margins (surprise) beyond the existing value network (existing suppliers, partners, competences, applications and customers).

Your quest for higher margin, beyond the existing value network, may result in innovations, technical improvements, that outperform the the market requirements and therefore creating a space for disruptions to materialize at your current customer base. Failure is inevitable, as the financial and organizational structure of the company is inherent to the value network it operates in and actually may result in becoming less competitive at existing customers, since the drive is towards higher margin solutions instead of an integral approach towards the customer. This linear programmed thinking and flight forward may not be your best bet.

Everybody knows that the increase in computational power drives technology exponentially. The convergence of technologies (AI and 3D printing) in combination with faster and cheaper computer power are already resulting in many disruptions (in technology and especially business models). Tencent, one of the Seven Giants (2) on AI (Artificial Intelligence), masters the art of deep learning, which is essential as the race shifted already years ago from from creating algorithms to the expertise of self-teaching thereof with massive amounts of data. Tencent created WeChat and is able to collect a great variety and amount of data 24/7, i.e. they created their own exponential path forward.

Elon Musk announced this year to make Uber obsolete. He argued that people are used to extrapolate on linear basis. He argues that software is improving exponentially and the cumulative data grows exponentially, favoring the scenario of (a certain level of) autonomous vehicles in combination with a business model that combines Uber and Airbnb. The speed and quality of execution may be the true hurdles of bringing this vision into reality.

Back to our assessment on how to accelerate growth in your company. If these developments are inherently unpredictable and have an exponential nature, what can you do as a company?

It’s all about culture, people and team.

Your team needs to be ready to:

1.    Think exponentially and be able to bend the rules of the existing game (of the current value network)

2.    Empowered team (by senior management) to facilitate fast decision making

3.    Push themselves to think an order of magnitude larger

4.    Every product, every business model, needs to have a true differentiation (3)

5.    Behave like a startup and create MVPs (Minimum Viable Products): iterate and improve, be flexible

6.    Execute fast, be pragmatic and create a safe environment so they dare to fail

7.    Don’t boil the ocean with your ambition and execute on (sub-)projects of max 6-9 months

 And when this sounds appealing to you…start small, scale fast.

Sources

1.     The Innovator’s dilemma - when new technologies cause great firms to fail, Clayton M. Christensen

2.     AI Superpowers - China, Silicon Valley, and the new world order, Kai-Fu Lee

3.     ZAG, Marty Neumeier