David Espindola - The Exponential Era

To summarize, SPX provides leaders a clear methodology for innovation in the Exponential Era. Specific tools and guidance are included for a number of critical aspects of innovation: Ideation, as well as deep analysis, prioritization based on both risk and reward, market trends and competitive insights, fast iterations for both prototyping and commercialization, and knowing when to quit and when to stay in the game. This is all built upon a foundation of culture, behaviors, and executive engagement. Our goal is to help organizations embrace a process and mindset that deal effectively with continuous disruption and chaos. The word “continuous” has often been used within the context of continuous improvement and operational efficiency. Operational efficiency is not in the scope of SPX. We are also not interested in addressing incremental improvements. Instead, our focus is on disruptive changes, and the use of the word continuous is to emphasize a distinction between the iterative nature of SPX versus the discrete nature of traditional strategic planning.

Several books and articles have been written about the Exponential Era, albeit, they may refer to it by a different name, such as the 4th Industrial Revolution. Even though much has been written about the changes that are occurring during this period, we felt that there was a gap in providing business leaders with a robust, well‐thought‐out, and effective methodology. One that not only can create clarity around these changes but also develops an actionable plan for benefiting from the opportunities and for mitigating the risks unearthed in this era. That became the impetus for our efforts in developing a new methodology for strategic planning and in describing it in this book.

The book is organized into three sections. In Section Iwe provide the context for the realities of the Exponential Era. We explain why it is so difficult for people to understand the nature of exponential growth. The gradual nature of the early stages of the exponential curve can be deceiving. We struggle to see how quickly exponential growth accelerates once it gets past the inflection point. These inflection points are so difficult to foresee that many large and successful companies have completely missed them, with disastrous results. We describe how Gordon Moore, co‐founder of Fairchild Semiconductor and CEO of Intel, published in a 1965 paper his observations about the doubling of the density of integrated circuits every 18–24 months, and his projection that this would continue for decades. The overarching principle behind Moore's observation, that computing capacity would continue to double every couple of years, still holds today, albeit, through unanticipated means of innovative materials and new technological approaches. This exponential growth of computing capacity has been one of the foundational forces driving the Exponential Era.

In Chapter 2, we discuss megatrends that are being shaped by the convergence of technology platforms. We describe several of these technology platforms, including Artificial Intelligence, Blockchain, Internet of Things, Biotechnology, and others. We discuss how the convergence of these platforms is creating trillions of dollars in economic value and generating unforeseen possibilities for business disruption and transformation. One example is how IoT and 5G combined to create a new ecosystem of superfast hyperconnected sensors and devices, allowing us to monitor and proactively deal with a vast number of situations, from weather changes to the spread of diseases.

In Chapter 3, we depict the types of organizations commonly found in the Exponential Era. We tell the story of several companies whose inability to intercept changing horizons led to their demise – we call them Flash Boiled Frogs. We show how emerging companies that took advantage of inflection points quickly grow to billion‐dollar valuations – the Disruptive Unicorns. We define Fast and Furious Gazelles, companies of all sizes that are able to grow very fast. We also describe large established companies – the Dancing Elephants – that use ambidextrous capabilities to simultaneously manage exploration and exploitation, jumping from one S‐curve to the next. And of course, we could not leave out the Dominating Gorillas, companies that are achieving overwhelming dominance in every sector of the exponential economy.

Section IIis about how organizations can deal effectively with the realities of the Exponential Era by following a robust methodology that challenges the current thinking in strategic planning. In Chapter 4, we introduce this new methodology we call SPX and describe how it differs from traditional strategic planning processes. Then we get into the heart of the methodology. In Chapter 5, we explain how to listen to the early signals in order to identify and monitor horizons. In Chapter 6, we illustrate how companies can generate insights by setting up and learning from experiments. In Chapter 7, we discuss how to map organizational capabilities to risks and opportunities. In Chapter 8, we show how companies can formulate and implement plans, and make prioritized, feedback‐based, data‐driven decisions about strategic initiatives. Chapter 9is a discussion about leadership, and how to create a culture that embraces change.

We close in Section IIIwith a single chapter. Chapter 10provides a discussion about the impact of the Exponential Era on humanity, and how the rapid changes we are experiencing challenge our current societal structures, economics, and ethics. We reflect upon our individual and collective legacies and the world we will leave for our children.

According to Dr. Albert Bartlett, Professor Emeritus at the University of Colorado at Boulder, “The greatest shortcoming of the human race is our inability to understand the exponential function.” 12In March 1996, Nicholas Negroponte, head of MIT's Media Lab and author of Being Digital expressed the same sentiment less eloquently but in a very straightforward manner: “People don't get exponential.” 13More than 20 years have passed since Negroponte's pronouncement, but that reality still holds true today. To this date, people still do not understand the power of the exponential curve. Perhaps this is a reflection of its deceiving nature, and how the exponential curve manifests itself in a way similar to a line in Hemingway's The Sun Also Rises : “Gradually, then suddenly.” Or perhaps it is a reflection of the fact that exponential is simply too difficult a concept to grasp for brains evolved to work efficiently based on the timing of circadian rhythms that function best with emotive images, and that prefer to think linearly. 14

Our continued use of agrarian words to describe business activities, like “seed” (as in seed money in the venture world), “plant” (as in initiate a foothold in a market), “cultivate” (business development of a new market), “harvest” (sell), and “cash cows” (usually revenue streams that are being “milked” for remaining profits before the market collapses or is disrupted) has locked our thinking into a pattern of behaviors completely out of sync with our era. In the Exponential Era, we don't operate on circadian rhythms or agrarian time scales.

This is an era marked by the confluence of fast‐changing technologies that converge to create new ecosystems, resulting in digital disruptions at a rapid velocity. It ignores our hard‐wired primal core, leaving us slow to adapt to changes that are happening in new time scales. The technology growth that we are experiencing today does not follow linear progressions like animal migrations, growing seasons, and calculated production runs.