Exponential Times – Will Your Organization Adapt or Expire!

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Exponential Times – Will Your Organization Adapt or Expire!

Digital transformation is either the worlds largest hoax or it is the most important single business modifier of our times. My opinion is that is no hoax. We live in exponential times and business model innovation tied to an ever increasing digital world is vital for organizations to adapt, survive and thrive.

Exponential Times

Exponential Times refers to the fact that burying your head in the sand, while digital transformation occurs around you, and doing nothing is harmless until it is too late to react to sudden shifts in which case you face a fight to survive let alone thrive.

When I first show this image to people they think I am referring to the pace of technology change. No doubt technology is changing dramatically around us. What I am referring to though is the rate of business model change being enabled by rapidly shifting technology. For me digital transformation does not happen without business model innovation.

Digging into exponential times

For the longest time I have experienced that the pace of change around technology, use of data and the use of analytics organizations is constantly accelerating. Despite that few existing companies have truly digitally transformed. This tells me that the key to digital transformation does not just lie in swapping old technologies for their newer, smarter or cheaper counterparts. Many companies have already done that but have still not digitally transformed.

Indeed as I look at companies who are on their digital transformation journey the key is very clearly the business model innovation they are undertaking. Innovating a business model is not easy. It requires you to consider if the services you offer, the way you offer them and the price at which you offer them is most appropriate moving forwards. In fact it requires you to ask if what you do today is even relevant in the future.

Essentially you need to question everything that makes you successful today and ask how you can modify the supply chain, change the consumption model, deliver new experiences or enter/change the markets you operate in.  In many cases it might require you to consider creating a new market for your digitally transformed company to sell into.

It is happening now

There is no doubt in my mind that we are quickly approaching the point at which business models are going to evolve so dramatically that entire industries will be completely changed.  Basically it is time to look to adapt or to accept the organization might just expire or fade to insignificance!

I see digital transformation underway daily as I work with partners and customers. Each of them are looking at business model innovation as the key to their survival and future leadership. There is the normal list of disruptors and their revolutionary business models such as Uber, AirBnB, Amazon (with retail) and more. You all know the well publicized ones. Despite that companies still think this is not going to hit their industry.

My experience which, I always share, is that there are many business model disruptions experiments happening behind closed doors people  would be surprised about. When one of those hits the light of day only then will people wake up.

On the flip side I also see those who are not moving. No investigation of new technology capabilities, no acquisition of new skills, no investment and generally apathy thinking most of “Digital Transformation” is hype. The end result is that they are not trying to innovate their business model at all.

Those who are not doing anything often point to their leadership or growth position today. They explain how profits or market share are rising. What they fail to see is that when an exponential change happens their time to react will be minimal and then they will be caught up in the dust.

Evolving a business model is not a quick exercise even if you have the technology, the services and the people to do so!

Handling the change

When an exponential change occurs you either have to:

  1. Throw a lot of money and people at the problem to quickly catch up (and even that is no guarantee) while dramatically shifting your business model (fast follower)
  2. Look for the next chance to disrupt the disruptor accepting a temporary setback in your market position

In truth neither of these is easy which is why the majority of the companies we know on the S&P 500 today will not be around in the 2020’s. Put simply organizations have to adapt, or prepare to adapt, NOW otherwise they will expire. Only 25% of those companies we see today on the S&P 500 will be there in the 2020s.

The biggest mistake organizations are making is not doing anything to try to disrupt themselves. As an example this includes:

  1. Not evaluating disruptive business models for fear of impacting current ones.
  2. Refusing to look at new technology due to investments in incumbent ones and because what they have “works” today.
  3. Not establishing new partnerships for fear of annoying current ones.

I believe an organization that is not trying to put its current self out of business is destined to be put out of business by someone else!

Esteemed Company

In an interesting twist there was a recent discussion about the role Artificial Intelligence (AI) will play in our futures and when it will overtake humans. There a similar discussion is raging just in this narrow field. On one side people are estimating that AI will improve in a linear fashion, so do not worry about it for 30 years or so. On the other side people like Elon Musk have shared that he thinks progress is exponential so dramatic shifts will happen sooner.

I am not going to dwell on the AI discussion here (I have some posts on that coming soon).

The crux of the matter, exponential or linear, is not who is right or wrong.  If that is where an organization is focusing their thinking then they are missing the point!

Developing a strategy based on linear change risks missing any sudden change which could be catastrophic.  On the flip side developing a strategy that tries to anticipate exponential change should at the very least see them outperform others even if it might mean a few false starts along the way.

It is my contention that focusing on the exponential change,  when developing a strategy, enables an organization potentially be the cause of the dramatic change and/or to be ready to rapidly react to one by having acquired some experience before it hits.

Over to you!

Every organization should be looking at what is fueling business model innovation today outside their industry and starting to think about how that could apply to them!

Don’t stop there though. Take away the thing which makes an organization their money today. Then ask what strategy or approach might need to be used to replace it without thinking about the legacy.  That is your exponential step change strategy in a nutshell. Do you know what that looks like? If not the time is now!

Which strategy will you choose? A linear thinking strategy or an  exponential thinking strategy?

Choose wisely… the very future of your organization might depend on that choice!

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