Saturday 1 December 2018


The danger of ‘horse thinking'

At the end of the nineteenth century, London was the largest, richest, most advanced city in the world. More than 100,000 horses kept people and goods moving around the city via hansom cabs, horse-based buses and other vehicles. The city’s bold ambitions for further growth and expansion poised London’s horse population to grow significantly.

The problem was, collectively those horses produced about 2,300 tonnes of manure every single day. The Times newspaper predicted: “In 50 years, every street in London will be buried under nine feet of manure.” Urine and decomposing horse corpses augmented this situation. London was beginning to poison its people

With manure at the top of the concerns list, in 1898 London sent its brightest urban planners to attend the first International Urban Planning Conference, organised over 10 days in New York. The manure crisis was the centre of all conversations. After the third day of debate, frustrated and resigned, the attendants quit the conference, and went home without any solutions.

Within two decades, however, horses were no longer the primary mode of transport in London. A technology called ‘motor cars’ – which had existed in humble numbers when the manure debate raged – completely disrupted thousands of years of dependency on horses. The most prepared minds of the time were victims of linear thinking, unable to see the disruption to occur, though it was right in front of their noses. (Although let’s not forget that their noses were overwhelmed by the stench of manure.)

Our poor linear brains

We cannot blame the Londoners of that time; we humans are essentialy linear machines. When exposed to situations of a non-linear nature, we tend to overestimate what can be achieved in the short term while vastly underestimating what can be achieved in the long term. Humans are not well equipped to process exponential growth.

When we were hunters, our lives depended on our capacity to predict where the prey would be a few seconds later. Those with the capacity to do a quick linear projection were able to pass their genes to the next generation. Proper linear projection was a matter of survival; as a result, that response is deeply rooted in our DNA.
That is why, when we are confronted with something that doesn’t behave in a linear fashion, often we simply don't see it. It is too difficult for our poor brains to process.

Those with a flourishing horse-based business in London of 1900 almost instantly saw their business disappear, unable to predict the exponential growth of the motor car market.

The exponential mindset

Exponentially is a core megatrend of our time. It refers to the ability of innovative business models to escalate at an accelerated pace, following the shape of the exponential function (f(x) = bx). 

We have seen several cases of exponential business models in the last few years: Airbnb, Netflix and Uber for example. Their stories make evident that exponentially in business is intrinsically supported by the exponential capacity and ubiquity of technology. 

Exponentially is an incredible opportunity for disruptors, but at the same time it's a terrible challenge for incumbents being disrupted, because there is no time for a 'reactive' response. 

The rise of motor cars in London from 1900 is one of the earliest cases of exponential technologies reshaping businesses and testing human exponential blindness, but the business world has abundant examples.

In 1975, young Kodak engineer Steve Sasson invented the digital camera and presented it to all company division heads. They all hated the idea. In 2012 Kodak filed for bankruptcy, disrupted by the rise of digital photography.

In 1981, Xerox PARC Research developed the Computer Graphical Interface (GUI) and the computer mouse, but the Xerox executives never paid attention. Bill Gates and Steve Jobs visited the labs and each created their empires using Xerox PARC’s creation.

And in 1998, Larry Page and Sergey Brin offered to sell their new PageRank system to Yahoo for the bargain price of $1 million. Yahoo was not interested, so Larry and Sergey founded Google. Twenty years later, Google (or its parent company Alphabet) is valued at over $750 billion.

Though all these events were exponential in nature, their stories were unique in the business landscapes at the time. The situation is very different now: the frequency of such events is also growing at an exponential rate. Convergence of new technologies and the appearance of new business paradigms are producing an explosion of opportunities and risks.

Ray Kurzweil, futurist and acclaimed innovator (and recipient of 20 honorary doctorates) illustrates the concept of exponentiality very nicely: "We won’t experience 100 years of progress in the 21st century – it will be more like 20,000 years of progress (at today’s rate)".

The anticipation game

The strategic planning rules that ensured success in the industrial age are, unfortunately, intrinsically linear: businesses plan the future as a linear projection of the past. They can multiply the past by 2, 3 or 10, but it is still linear. This way of planning is no longer effective and will quickly become fatal.

In this new context, we need to think well ahead and differently; if we look only at our current business domain, we are not going to be prepared. We must test the periphery of our business domain, and try to detect weak signals that provide some hints of the next potential exponential surge. Then we must act with boldness under uncertain conditions.

This method isn’t infallible, however: in some cases, we will find that we overreacted and the signal didn't translate into a business disruptor. But if we do adopt such an approach, we will be in position to ride the next exponential wave.

Walter Gretzky once gave his son Wayne advice that transformed the young Canadian boy into the legendary hockey player we know today: 'A good hockey player skates to where the puck is. A great hockey player skates to where the puck is going'. In exponential business environments, good players don’t survive, and even great players can at times underestimate the proverbial ‘puck’.

It takes extraordinary effort to avoid sleepwalking on linear delusions. It’s the way we’ve evolved, and linearity often  performs better in the short term.

However we must formulate our vision about the future, conscious of its likely exponential nature, and start preparing for it.  Because our only chance of survival is to be at the right position, fully prepared, when the future arrives.

Context first

The Fluid Transformation Playbook is a call to all organisations to embark on a deep transformation journey to be able to thrive in the new, still-forming business landscape of the 2020s. But what are the drivers behind this tectonic shift?

In Chapter 2, I discussed one of several components of this required transformation: the workforce. In doing so, I considered one of the emerging megatrends for businesses: 'the rise of smart virtual agents and robots'. In this chapter I continue with megatrends, discussing 'exponentiality'.

Before delving into how to prepare organisations for the new landscape, I will explore the rest of the megatrends that we must pay attention to. To design an organisation responsive to contextual challenges, it is essential to have a sound understanding of the context first.


Summary of Chapter 3:

  • To prepare organisations for the new business landscape, it is necessary to understand the megatrends affecting that landscape.
  • Exponentiality is one of those megatrends, and represents a big challenge to humans as linear machines.
  • The only way to respond to exponentiality is to prepare for an exponential future with ambition and boldness, well before that future arrives.

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