In his New York Times best-seller, Abundance, SU Executive Founder and Director Peter Diamandis elegantly lays out a paradigm for the exponential growth of a digital solution he calls “the Six Ds of Exponentials”: Digitized, Deceptive, Disruptive, Demonetized, Dematerialized, and Democratized. See the link or even better, read Abundance and see how well this model fits the reality of the digital revolution now in its 80th year. When we present the 6D’s in our programs at SU, business and public leaders quickly grasp the inevitable and want to know, “How do we do this, how do we stay relevant? Where do we start?” In this series, I’m going to share some of my own experiences in leading clients through a few of the D’s. It is in no way an exhaustive manual, but I hope you’ll enjoy the stories and find some useful insights. Let’s start with Digitized.
According to Peter Diamandis’ 6Ds, “Anything that becomes digitized enters the same exponential growth we see in computing.” From email to file-sharing MP3’s to the Human Genome Project, once an activity is digitized it flies forward, opening vast vistas of opportunity for entrepreneurs and users.
Digitization life lesson #1: great timing trumps big investments.
You have to recognize when digital technologies will be ready for a market. Investing too early in digitization means it’s too expensive or too large or moving too slow, and investing too late means you’re going to be writing enormous checks in order to catch up, assuming you can even stay in the market. As an effective leader with a strong organization you can seemingly bend many laws of nature to make the impossible happen, but changing the timing of digital technologies isn’t one of them.
Flashback to 1987: AI was going to change the world! Systems reasoning inconceivably faster than humans—with the knowledge of the finest human practitioners and none of the frailties of fatigue, emotion, or moral flexibility—would revolutionize industry after industry. A stunning financial crisis was unfolding driven by lax oversight of real estate loan portfolios and my startup had the answer: an AI to rigorously guide loan officers through the arcane details of deal analysis and lead them to a low-risk, high-return portfolio nirvana. At the time, in geek-speak, I was a “knowledge engineer” building an expert system with a forward chaining inference engine.
When we showed a major bank that our AI could save tens of millions of dollars of losses based on its previous year’s results, we were certain that our Tier-1 venture money would soon be augmented by a fat institutional investment: we had it made. Unfortunately, there were a couple of problems: our incomplete system was working 20 times slower than a human loan officer, the dedicated hardware cost nearly as much as that professional’s salary… Yeah. The digital technology needed wouldn’t be available for at least five years, by which time the “Second AI Winter” had arrived, and investment capital for AI had evaporated.
The EO Personal Communicator
Image credit: Peter Wicher
Digitization life lesson #2: digitizing too late can lose your company.
So we struck out on that venture. That was no problem for me, an ambitious product manager, because smartphones are so amazing. Can you imagine living without one? In 1993 at AT&T we didn’t think so, and through massive investments we backed the development and launch of arguably the first full-function smartphone, the EO Personal Communicator. It had a 7” touchscreen display, handwriting recognition, numerous apps, and let you send emails and faxes from anywhere on AT&T’s Gen-1 (analog cellular) network. Tom Selleck was the voice of our TV commercial giving the tagline, “Ever send a fax from the beach?” So cool, and yours for a cool $3,000. It cost us more than that to build it, so it may be a good thing that we didn’t sell very many. In 2012, PC Magazine named it “the first true phablet.” There’s one in the Computer History Museum next to the Googleplex in Mountain View. Steve Jobs watched our product and he knew when digital technology was truly ready: 14 years later when Apple introduced the iPhone.
Digitizing too early can lose your investment, but digitizing too late can lose your company. Digital strategists often quote from Blockbuster CEO, Jim Keyes’ famous 2008 Motley Fool interview in which he said, “Neither RedBox nor Netflix are even on our radar screen in terms of competition…” Blockbuster of course filed for bankruptcy less than two years after that interview, and it’s easy to conclude that the company didn’t see digital video delivery coming and therefore didn’t invest. What happened is more nuanced. When Jim Keyes gave that interview, Blockbuster had already invested heavily in digital video delivery technology and services. Yet even with that investment, the company’s analysis did not correctly anticipate the timing of when internet-based video delivery would be good enough for market acceptance. Digital streaming and encoding/decoding are exponential technologies. Making a linear projection of an exponential trend will leave you looking up at the competition.
So how do you get the timing right for digitization?
I hate to tell you this: It’s really hard. No one has a perfect record, but I’ve seen three exercises be very useful. They sure would have helped me to avoid buying into the dream of sending a fax from the beach about my AI banker.
- Look hard at the 4P’s of your idea. That classic framework (Product, Price, Placement, Promotion) is still highly effective today. The first critical steps of crisply understanding the problem that your product will solve and the detailed needs of the customers who will use it are where I still frequently see challenges in new concepts.
- Make a sober, honest analysis of the digital price and performance that you’ll need to succeed. The required processing power, memory size and speed, memory bandwidth, communication bandwidth, power consumption, display capabilities, etc., must be understood. Then you have to do the hard work of analyzing when in the future it will all be available at a winning price. Digital performance grows exponentially over time as Singularity University co-founder, Ray Kurzweil, explains in his outstanding essay, “The Law of Accelerating Returns.”
- Do experiments, ideally fast and cheap ones. Even when they don’t work, you get the benefit of knowing why in order to inform your next investment. Plus, it’s very likely that you will gain new ideas and relationships in the process that would not have happened any other way.
It’s completely fair to learn from someone else’s failed experiments, too. That iPhone 2G was an amazing product with excellent timing. Through our enterprise solutions, SU helps organizations learn to navigate the challenges of digitization and to look 10-20 years in the future to recognize and seize opportunities at the right time.
Being a pioneer is rough, and after you have led the Digitized phase with great timing you will often experience what I found to be the hardest challenge: championing a new solution when it’s Deceptive. That will be my next post.