Emerging Technology Transforming tomorrow today Edition 2: Transforming in the exponential era Contents The imperative of transforming in the exponential era 02 How leading organisations are transforming 06 Transforming in the exponential era 10 The ethics of transforming in the exponential era 20 Overcoming transformation inertia 26 Contacts 30 01 Section 1 The imperative of transforming in the exponential era Transforming tomorrow today 02 The opportunities of the exponential era are not limited to those companies that have been designed to capitalise on its opportunities. There is plenty that more traditional organisations can learn from their non-linear competitors, and lots of opportunity available to them too. The key is in learning how to transform to seize those opportunities. In the first chapter we looked at In this chapter, we will look at how what the term exponential meant, more traditional organisations, especially in reference to growth, in any sector, can adopt the and the implications of doing characteristics of non-linear business in the exponential era organisations, and transform to set and at the new type of non-linear themselves on a non-linear growth organisations emerging, uniquely path. designed to take advantage of exponential technologies to achieve exponential growth. The imperative of transforming in the exponential era 03 The opportunity to What is a platform business? create and capitalise In the 21st century – with the abundance of information on new markets available – the preferred business model is to extract a return from accessing assets, rather than Scaling rapidly owning them. Accessing assets is There are certain organisations the process of identifying assets designed to capitalise on the not owned by the organisation proliferation of information and creating value from the asset’s stemming from the digitisation unused capacity. of our world. Whether it’s by For example, Deliveroo’s outcome is harnessing the opportunities feeding people. But their assets are created by Industry 4.0, or by basing not restaurants or food, rather the their business on a platform model, asset is the platform which allows they have been designed to scale them to connect hungry customers closer in line with the technological with restaurants looking for diners. advancement and exponential The asset is the information, rather growth surrounding them. They than the physical restaurant or leverage the crowd and their open food. ecosystems, they capitalise on asset value by accessing the assets (or Creating new markets aggregating them), not by owning As well as the opportunity provided them. by non-linear organisations, Platform businesses make designed to scale rapidly, there up three of the five most valued is the possibility of creating and companies in the world – Apple, capitalising on huge markets. Often, Google and Microsoft – as well disruptive companies who have as seven of the most valuable ‘broken the mould’ in terms of their unicorns (defined as starts ups business models, have done the worth more than US$1bn in their same with the markets they have latest funding round.)i created. The companies created huge demand for a product that didn’t exist yet (e.g. Tesla). Some, by harnessing the best technology and reducing cost, have provided access to huge sections of the market, previously unable to afford this service e.g. online payment service Afterpay opening up the deferred payment market or Canva scaling graphic design solutions. Some have tapped into sweeping Transforming tomorrow today 04 social change that has created a demand for products or services produced or delivered in a particularly ethical way (e.g. Indigogo, a global crowdfunding platform empowering people around the world to fund projects that matter to them, or Warby Parker, online opticians, who train locals in deprived areas to deliver eye tests and sell low-cost glasses). The size and scale of the market that can now be reached has also been transformed. Five hundred years ago the only people who had the resources to impact a region were kings and queens. One hundred years ago, wide scale impact was restricted realistically to politicians or barons of industry. Today, through the connection provided by the internet, the vast majority of people in the world can reach a huge audience. We can all access capabilities that only the largest corporations and governments had access to 20 years ago. Impacting a billion people would previously have been unthinkable. In 2008, Ray Kurzweil and Peter Diamandis co-founded Singularity University (SU) to enable brilliant graduate students to work on solving humanity’s grand challenges using exponential technologies. Now impacting a billion people is the aspiration of several companies who have emerged from SU.ii The imperative of transforming in the exponential era 05 Section 2 How leading organisations are transforming Transforming tomorrow today 06 Contrary to widespread perception, transforming and thriving in the exponential era is not the exclusive domain of start-ups and scale-ups in information-driven sectors. Large established corporations in traditional, asset-intensive industries can and should be thriving in this era. Because in our ‘exponential era’, every industry is becoming digitised, and is rapidly transitioning to be information-driven. How leading organisations are transforming 07 Case study: Capitalising on new The proliferation of connectivity, opportunities networks and sensors has It is common for transformation accelerated the adoption of the to be perceived narrowly as just a Internet of Things (IoT) which driver of operational productivity is driving rapid digitisation in – fulfilling current objectives, but these previously analogue, asset- faster and in new ways. A recent intensive industries. The shift to an Deloitte survey on Industry 4.0 information-driven sector – and the revealed that only 50% of Global ability to innovate your business CEOs indicated the importance of model to capitalise on it – presents transformation to maintain, or drive an abundance of opportunities. profitability and growth.iv Rolls Royce – the 112-year-old, multi- Transformation – and the national industrial conglomerate attempt to achieve non-linear that spans aerospace, engines growth or return on investment – is and power systems – applied not about the implementation of IoT, predictive data analytics and the latest and greatest technology business model innovation to shift for the sake of it. The driver behind from selling aircraft engines, to non-linear transformation in the selling engine uptime, reliability exponential era is the attempt to and predictive maintenance, the meet an evolving customer need ‘core’ needs of the airlines, by (or create a new market), solve a implementing key organisation fundamental problem in the system design options; including aligning underpinning a sector, or capitalise price with use, turning products on an adjacent or transformative into product platforms and opportunity space created by implementing a virtuous and exponential change. circular business model.iii In our exponential era, successful transformation is about pivoting and redesigning your business model around the new opportunity, and using the application of emerging technology as an enabler. Innovation – whether business model, organisational configuration, product and service or experience innovation – is the core driver of organisational transformation. Transforming tomorrow today 08 Innovating and 2) 3M: 3M has long empowered transforming at the edge its researchers (or ‘Scouts’) with The focus of a large majority of autonomy to find and solve transformation attempts is on the problems at the edge of the core of an organisation. The issue organisation. In an attempt to solve with this is that the core is fiercely a problem, the near- ubiquitous protected by loyal ‘corporate change Post-It note was created (albeit antibodies’, and broad internal unintentionally). change is an exhausting, multi-year 3) Google X: In 2010, Google X was long, and an intensely expensive formed to “create radical new endeavour. technologies to solve some of the To avoid these common world’s hardest problems”. Waymo – transformation challenges, John the self-driving car project is Google Hagel III and the Deloitte Centre X’s first moonshot project that has (C4TE) for the Edge designed the become its own Alphabet company. ‘Scaling Edges’ methodology. This Transforming and scaling an approach to transformation helps edge offers a pragmatic pathway businesses focus on low investment, to achieving broad internal high-growth-potential opportunities change, and redefining the core – ‘edges’ – with fundamentally of an organisation in our different business practices that can fast-paced exponential era. ultimately transform the core of Transforming and scaling an the organisation.v edge offers a pragmatic pathway to achieving broad internal change, Notable companies who and redefining the core of an have successfully innovated, organisation in our fast-paced transformed and scaled the exponential era. edge include; 1) Apple: The secret to Apple’s Different by design successful approach to new product In the context of the exponential development and innovation has era, the characteristics of a 20th been to empower a small team to century business model – asset- design new products at the edge ownership, closed ecosystem, and of the organisation. In 2012, 80% centralised, top-down bureaucracy of revenue at Apple