The Changing Business Landscape

The world is changing quickly. The amount of change that once took a decade, or several decades may soon be occurring on an annual basis. This is the result of exponential technologies. Exponential technologies are technologies that double in performance on a regular basis.

Consider the following comparison of linear versus exponential growth in the book Bold by Peter Diamandis:

“Unlike the +1 progression of linear growth, wherein 1 becomes 2 becomes 3 becomes 4 and so forth, exponential growth is a compound doubling: 1 becomes 2 becomes 4 becomes 8 and so on. And this is the problem: This doubling is unusually deceptive. If I take 30 large linear steps (say three feet, or one meter per step) from my Santa Monica living room, I end up 30 meters away, or roughly across the street. If, alternatively, I take 30 exponential steps from the starting point, I end up a billion meters away, or orbiting Earth 26 times.”

Exponential technologies are driving the growth of exponential business, or exponential organizations. It is estimated that the average lifespan of an S&P 500 company will drastically reduce in the coming years. Consider the following excerpt concerning S&P 500 company average lifespan from Bold:

“According to Yale professor Richard Foster, in the 1920s the average life span of an S&P 500 company way sixty-seven years. Not anymore. Today the final three Ds in our chain reaction can disassemble companies and disrupt industries almost overnight., reducing the average life span of a twenty-first century S&P 500 company to only fifteen years. Ten years from now, according to research done at the Babson School of Business, more than 40 percent of today’s top companies will no longer exist. By 2020, comments Foster, more than three quarters of the S&P 500 will be companies that we have not heard of yet.”

Exponential growth as applied to individual companies is similar to Moore’s Law of technology.

This rate of rapid change led me to consider unicorns - companies that have achieved a value of at least $1B in the public or private markets. Presently there is much speculation around the true value of unicorns and if these companies really have enduring value, or at least enduring value in a “Built To Last” sense of the term.

At first glance it’s easy to brush off unicorns as an artificial inflation of value created by investor speculation. However, when considering the exponential growth concept outlined in Bold, there may be much more here. In fact, the book Exponential Organizations describes in great detail on how to build a $1B company and outlines the conceptual architecture of such a exponential growth firm.

It is now possible to build a billion dollar business in under two years with minimal physical assets and start-up capital. YouTube and Instagram are examples of this type of growth - both companies diverge from the typical traditional business building model. Both are comprised of minimal assets and a small team that used the power of the crowd to build their respective business. Instead of factories, machinery, and hordes of employees, these exponential organizations were built with a small core team and a leveraged virtual workforce.

The question many people ask is - will such businesses last over the long term? This may be the wrong question. The question may need to shift to - do such businesses need to last over the long term?

According to the predictions outlined in Bold and the exponential growth curves, the answer very well may be no.