How to lead when change is NOT constant

“Any company designed for success in the 20th century is doomed to failure in the 21st.” David S. Rose

Last century we used to talk about change being the only constant. The expression could not be more inaccurate today.

There is nothing constant about the changes happening in the world right now. Change is actually accelerating and new forms of disruption are surfacing every day.

For most of human history growth has occurred in a linear fashion. On the farm or in factories to double output you doubled input. Twice as many dairy cows, twice as much milk. Twice as many line workers, twice as much production. 

Things haven’t changed that much in today’s organisations. To double sales we double the sales team or double our marketing efforts. To double revenue double the size of the organisation through acquisition or merger. To double profitability double the focus on cost savings.

However such linear tendencies are increasingly being outpaced by trajectories best described as exponential.

We all know what an exponential curve looks like from our days doing math at school. Another interesting but relatively useless piece of information I naively thought at the time. How wrong I was. The exponential curve is everywhere. 

In nature the human population growth is exponential.

In technology mobile data growth is exponential.

In the business world Facebook user growth is exponential.

And closer to home let’s look at the Atlassian's customer base, also exponential.

And there are plenty of examples of the exponential curve going down too. In the last 100 years according to Peter Diamandis in one of his fabulous TED talks:

• child mortality rates have decreased by over 10 times
• the cost of electricity has decreased by 20 times
• transportation costs have decreased by 100 times
• the cost of communications are 1000 times cheaper.

The mobile phone my eight year old daughter is glued to is million times cheaper and a thousand times faster than the supercomputers of the 70's.

And it is frequency of exponential trajectories is increasing at an accelerating rate, i.e. the number of exponential examples is itself increasing exponentially. 

To illustrate the power of exponential growth over linear growth one of my favourite stories comes from ancient India where a mathematician presents his new idea ‘chess’ to the Emperor. If you’ve heard the story before please skip down to the next quote.

After presenting his idea the Emperor is so impressed he asks the mathematician to name his price for the invention.

‘A single grain of rice on the first field of the chessboard. And then double the number of rice on each of the following fields.’ He did not ask for gold or diamonds rather he chooses rice on a chessboard.

Even the Emperor believes that it is too humble a payment. But the mathematician insists, and the emperor triggers the payment of the rice so that he can get on with the day’s chores.

It all seems a little crazy. Only one grain, then two, four, eight and 16 and so on at the black and white squares.

It does not seem like a lot to start with. A doubling of little, being only a little more. And even a little further along on the chessboard a doubling of that little still only amounts to a bit more.

But even an emperor can have trouble figuring out the extent of exponential growth.

Slowly the amount of rice is growing. And a doubling of more rice suddenly becomes surprisingly more.

Field 32 is the last field in the first half of the chessboard and there is now 4,294,967,295 grains of rice owed to the mathematician. It demands a bit of space but the emperor is still not blinking. After all he is the Emperor.

But there are 64 squares on a chessboard.

The moment they begin to calculate the volume of rice in the second half of the chessboard, it suddenly starts to accelerate. It gets out of control and the Emperor loses track. On field 56 at the entrance to the last row the debt has grown to more than 72 million billion grains of rice. More precisely 72,057,594,037,927.935!

In the last field, field 64, the pile would be equal to the size of Mount Everest or 18,446,744,073,709,551,615 grains of rice. More rice than there have ever been produced in history of the world.

It is almost impossible for a human brain to understand how fast it can go. The Emperor felt he had been cheated and beheads the crafty mathematician. A brutal but definitive way to avoid having to deal with the consequences of exponential growth.

The Emperor is not the only one to be caught out by exponential growth. We all know the Kodak v Instagram story, the Hilton v AirBnB story, the taxi industry v Uber story. And on an on it goes.

Part of the issue is that companies have become pretty good at studying each other for best practices and then trying to replicate them. The problem however is that most best practice studies focus on what the best companies do. Instead what should be focused on is how the best companies think.

After all

“to transform what we do we must first transform how we think.” Professor Mark Bonchek

Applying ‘best practice thinking’ in our companies may well result in us doing something very different to what the ‘best practice’ company does, but it is far more likely to be relevant in the context your company is in.

When confronted by a problem or opportunity most of us ask ourselves ‘what should we do?’ A better question to ask is ‘how should we think?’ As Einstein said

“No problem can be solved from the same level of consciousness that created it.”

So how do the best companies in the world think differently? 

To answer that question we first need to define what we mean by best. By best in this context we mean those companies that are outperforming and outgrowing themselves by at least 10 times annually. Yep, you heard it right. Not 10% year on year growth, 10 times year on year growth, in other words 1000% growth… at least.

The companies that meet this category are mostly tech companies but the principles underpinning their phenomenal growth are by no means limited to the tech sector.

Below are 10 mindframes that differentiate the linear from the exponential. There are more mindframes that matter and there is much more to each concept that I will expand on elsewhere. 

Each mindframe is phrased as a memorable motto but don’t let this distract you from the seriousness of getting your head space right when it comes to living in an exponential world. 

#1 Let go to grow – One of the biggest constraints I see in organisations today is a lack of autonomy with multiple systems, procedures, people and fiery hoops that need to be jumped through to get anything done. Interestingly we know from psychology that one of the three core needs of all humans is autonomy, yet the workplace is doing a fabulous job of depriving most people of that fundamental motivator. In so doing these companies deprive themselves of the very discretionary energy and creativity they need to go exponential. 

Control is an artifact of a linear world stemming from the factory era. Exponential companies use principles or a ‘code’ not ‘control’ to provide alignment and autonomy. A beautiful example of this in nature is how sparrows flock (pictured at top of article). A flock of sparrows has no assigned leader, no hierarchy, no approval processes if a change of direction is required. Instead they survive and thrive based on simple principles that all understand and adhere to that benefits the whole community.

#2 Focus is the new IQ – In a hyper distracted world the prize goes to those that are able to sort the wheat from the chaff and then turn the wheat into high end whiskey. The distillation process is one of refinement, focus and patience. Exponential growth at the start typically seems slower than linear growth. Remember the grains of rice on the chess board. But without focus and perseverance the exponential effect will never kick in. When everybody else gets impatient (see graph below) and have moved on to something else that’s bright and shiny the exponential thinker doubles down.

#3 Curious not furious – Exponentials (i.e. people that think exponentially) are not threatened by different perspectives… in fact they seek them out. The identity of an exponential is not bound by their ideas or thoughts or even beliefs. Their identity is tied to evolution and impact. Hearing different perspectives, or having things not go there way, or being rejected, or failing are all opportunities to get curious, learn and evolve. 

#4 Zero to one – Paypal co-founder Peter Thiel sums this one up well in his book by the same name using Paypal to exemplify this principle as they created a business that did not compete or destroy the competition. The existing payment systems of the time like Mastercard and Visa actually prospered from Paypal’s success. The same is true of exponential individuals who find ways to create and collaborate not compete. They don’t play a zero sum game where I win and you lose. Their game results in positive sum outcomes.

#5 Abundance over scarcity – Watching the nightly news may prompt you to think that the world is getting worse, more violence, more poverty, more disease. This could not be further from the truth. There has never been a more peaceful time to live, income per capita globally has never been higher, disease rates are falling almost across the board. The negative news cycle is part symptom part cause of a negativity bias most of us have hard wired into our brain’s survival software. Very handy for primitive humanity when the basic items required to survive were scarce and was to die were abundant. 

Today for most basic items are abundant and ways to die are scarce, yet we are still running a scarcity program, which narrows our field of view visually, cognitively and psychologically. We live abundant times. Time for a software upgrade.

# 6 Eco-system over ego-system – The day and age of hierarchies and corner offices are artifacts of a linear world largely dominated by ego driven white men in their 40s and 50s. Thank heavens that era is over. Being a white male in my 40s I clearly have nothing against this demographic but I am so relieved that of the 1000+ CEOs I’ve worked with 'ego' is increasingly being substituted by 'eco'. What do I mean? There is a fundamental shift from the individual hero style leader at the top of a linear tree to leadership being a collective function that serves the broader eco-system.

#7 Direction not perfection  - A regular go to formula I use with clients when discussing decision making is E=QxA, i.e. the (E)ffectiveness of a decision is equal to the (Q)uality of the decision times the (A)cceptance of those behind the decision. Too often we strive for a perfect solution under the illusion we have access to all the relevant information and can somehow process that information impartially and accurately. What a joke! Perfection is not possible and even if it were it would take too long. By the time you got your product to market the market would have moved on. Direction, alignment, acceptance on the other hand is possible. Direction not perfection is how exponentials think.

#8 Networks beat hard work – Network effects are the primary reason for the success and competitive advantage of the top 5 most valuable companies in the world, i.e. Apple, Alphabet, Microsoft, Amazon and Tencent. The companies’ products and services gain additional value as more people use them. But network effects are not unique to tech giants such as these. In fact individuals can benefit from network effects too. We are all surrounded by a network of people, assets, ideas and experiences. Exponentials invest in growing their network and continually look for ways to create value for themselves or others by connecting the dots. All the hard work in the world will never beat somebody that is highly networked. As they say “you are the average of the company you keep.”

#9 Emotionally agile not fragile – The wonderful Susan David PhD and author of the book Emotional Agility talks about “emotions as data not direction”. Too often we allow our thoughts and behaviour to be dictated to by our emotions. We all ‘have’ emotions but too many of us are ‘had’ by our emotions. As my old mentor used to say “emotions are a powerful servant but a terrible master.” The first step on the pathway to being emotionally agile not fragile is to see emotions as data or information, a clue if you will, as to what is going on inside you. Then applying mindframe 4 getting curious about the origin of the emotion and what that says about your deeper values and purpose. With that knowledge you then choose how to respond from the infinite behavioural options available. Simple right but not easy. 

#10 Life on purpose – “People buy your why” apparently according to Simon Sinek. Despite Simon’s phenomenal success (not-so-secretly envious) there is more to ‘why’ than first meets the eye. Yes it may be true that “inspired leaders and inspired organisations [ ] think, act and communicate from the inside out”, i.e. from their why first then to how and what, but not all ‘whys’ are created equal. 

Professor Mark Bonchek on the faculty of Singularity University describes three levels of purpose. Some companies have a ‘purpose to’ achieve a certain outcome, e.g. double digit growth. Not particularly inspiring unless you are a shareholder. Others have a ‘purpose for’ the benefit of its stakeholders, e.g. ‘to make a serve the freshest, most delicious coffee and donuts blah blah blah.’ Slightly better, if you like coffee and donuts. The ultimate level however is a ‘purpose with’, a purpose that is shared with all. 

Sephora has had purpose statements at all three levels. Early on their purpose was to be ‘the beauty authority.’ Then their purpose became for ‘transforming beauty’. Then they developed a purpose they could share with the world, that everyone would be inspired by, aligned with their brand but universal in appeal… BE FEARLESS.

Exponentials live life on purpose and that purpose is one that can be shared with others.

You've all heard the Lincoln quote about chopping wood, i.e.

Bonchek believes in these exponential times your mind is the axe. Time to sharpen it up!

Rich Hirst is a leadership, change and high performance psychologist. His insights are based on real world experiences from his work with 10,000+ leaders and over 1,000 CEOs, underpinned by his knowledge as an organisational psychologist and expertise as a change agent supporting organisations for more than 20 years going through major transformation.

For more information please go to www.richhirst.com or contact me via email on [email protected]. Please find below links to my previous monthly posts.

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