Exponential Technology Innovation creating Complex Strategy and Leadership Dilemmas

Wearables. Augmented reality. Robotics. Artificial Intelligence. Predictive Analytics. Deep Learning. Genome mapping.

The growth of technological progress is outpacing our ability to keep up. Over the last few decades, we’ve witnessed the dynamics of Moore’s Law extend beyond microprocessors to storage costs, biotech applications, human genome processing, and just about anywhere where processing power plays a role in advancement. As more of our lives become digitally connected, we must ask ourselves what does this mean for our collective institutions? More specifically, how will they change? And at what pace? And, how will traditional roles and functions evolve with them?

One critically important thing to note about the pace of change of technology driven innovation is that it’s exponential. If the pace of progress continues on its current trajectory, there is a strong argument that we can expect to see the same amount of technological innovation and progress over the next 10 years as we’ve seen during the previous 100.

For perspective, in 1914 there was no such thing as a radio tuner. Band-aids did not exist. There was no tommy gun, no bubble gum, no frozen food. There were no polaroids, no jet engines, no ballpoint pens, and no helicopters. There had not yet been a world war, and Babe Ruth had not yet swung a bat in a Major League baseball game. In essence, through today’s lens, 1914 feels like just barely on this side of prehistoric. It was a different era – several eras ago.

So is it possible that 10 years from now, when my oldest son will be getting ready to graduate from high school, 2014 will feel like an era long gone, as we contemplate how we ever survived without hundreds of (yet to be created) things?

Maybe. But that’s likely not the most important thing here.

These advancements in technology have brought about a great improvement for the most marginalized on our planet. Since 1990, the percentage of very poor people in the world has dropped by more than half. However, there are still more than one billion people living in extreme poverty. Still plenty of work for all of us to do there. While the progress is something to absolutely celebrate, there is simultaneously occurring a new set of challenges, even among those of us that are connected. A widening disparity is growing amongst those that know how to exploit the advantages of power laws in a connected world, and those that do not.

Senior government and corporate leaders are increasingly faced with a dilemma, or a set of dilemmas. As technology continues to enable exponential amplification of the best and most useful, it creates an ever widening disparity between the beneficiaries, and those detached from its use or benefit. The best of the best are being catapulted into hyper-speed success and others are slowly (or rapidly) fading away into oblivion.

In a connected world, positive growth often receives amplified returns. Positive feedback loops continue to reinforce those at the top of the wave. It becomes a fun ride for those at the top, frustrating and hopeless for those in the middle, and death and disappointment for those at the bottom.

For a very recent prime example, a 55 person company was just purchased for $19 Billion, while JC Penney, with 159,000 employees, has a market cap of under $3 Billion. The market value of the time, talents, and collective output of each JC Penney employee at $16,667, while the same for each WhatsApp employee is valued at $345,454,545 – 20,727 times more!

Transitioning to individuals, over the past 35 years, we’ve seen hyper-returns for households at the top of the earnings pyramid, while the bottom 20% have barely moved, as evidenced by the graph below.

As our world becomes re-distributed across a Pareto distribution curve, it is creating a series of dilemmas for senior leaders. I see this increasingly with many of my clients. I’m interested if others are facing similar challenges, and how they are dealing with them.

Dilemmas for Corporate leaders

(1) Should “successful” organizations continue on their current trajectory of 15-30% growth, or look to pursue exponential returns? It’s like “The Innovator’s Dilemma”, but the speed on the turntable has been turned up from 33 to 78. Looking ahead, as the speed accelerates from 78 to 900, will anything other than the pursuit of exponential returns become an option?

(2) Should organizations pursue a narrower high growth customer audience who are able to harness and leverage additional capabilities (therefore leading to potentially high revenue growth for the vendor), or continue to align their products and services to serve the current majority (even as the current majority evolves more quickly than before?

(3) How much should we invest in technology? Do the traditional models of investment work, or should we be overweighting our allocation to maximize leverage that technology can bring? How do we deal with the human skills change required to adapt new models? How much of our current workforce can adapt?

Dilemmas for Policymakers

For government leaders, this creates significant questions regarding policy. Some conversations at the World Economic Forum are not only focused on the economic divide, but the digital divide, and the increasing correlation between them. As digital absorbs more of the world, and the bell curve gives way to the long tail, how do we align policy to cultivate greater stability and progress?

We see Silicon Valley, the global hotbed of tech innovation, wrestling with this challenge amidst growing spurts of demonstrations and anger. As technology continues to expand its reach into our lives, is this the future facing society?

Economist Nouriel Roubini frames the current challenges:

“You have here not just the top 1% but the top 0.01%, So between technology, globalization, trade, the winner-take-all superstar effect, inequality is rising. This is not just a “moral” issue but also an issue of too little consumption too little savings that is bad for global growth.

So it becomes vicious cycle. It’s a bit like the old Marxist idea that if profits grow too much compared to wages, there’s not going to be enough consumption, and capitalism is going to self destruct. So I think that insight of Karl Marx is as useful today as it was 100 years ago.”

How are you and your organization responding to these emerging and accelerating realities? What implications do you see for yourself, your organization, your industry?