only 4 in 100 new businesses still standing, only 5 percent of those will achieve $1 million in revenue, four tenths of 1 percent will rise above $5 million, and an even smaller fraction, 6 out of 100,000, will exceed $10 million in annual revenue.
Given the odds, the need for more and better innovation is clear as day and bright as the sun. The management titan Peter Drucker has already told us what that better innovation will be: the “specific instrument of entrepreneurship” and “the act that endows resources with a new capacity to create wealth.” Innovation is always an instrument and an act. As innovation pioneer 3M defines it, innovation is a simple equation: “New ideas + action or implementation = which result in an improvement, a gain, or a profit.” I would change just one thing—the first instance of or to and. Innovation requires both action and implementation. In the first of these, innovation is an act. In the second, it is an instrument. There is an act and its strategic application, verb and noun, motion and tool.
The action and implementation of innovation is delivered in three ways:
By Leadership: Defining your own innovation vision, values, and priorities by managing creative disruption (or disruptive creation) and by personally exemplifying the power of “thinking different.”
By Company: Creating and executing on a platform, driving a unique and effective business model, fueling a change culture and organization, forming a uniquely powerful alliance, or inventing a new set of processes.
By Offering: Inventing new, relevant, and differentiated products, services, or technologies.
So, we have choices. But we must start fixing innovation right away. A recent Boston Consulting Group study finds 70 percent of CEOs interviewed put innovation among their top three leadership priorities. Great! Seven out of ten are already on board—except that the same survey reveals that a mere 16 percent believe their own company outperforms their peers in terms of innovation.
As World Economic Forum founder Klaus Schwab tells us, “We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before.”
Faced with change at an exponential pace, we must all—CEOs and non-CEOs, inventors and non-inventors—take charge of innovation. Consider, for instance:
• Airbnb: Founded in 2008, born on the idea of renting air mattresses on the floor of its founders’ San Francisco loft, it is today one of the world’s largest hotel and real estate companies…yet it owns no buildings.
• Uber: Founded in 2009, an idea birthed on its founder’s smartphone amidst his own frustration over not finding a taxi in the rain, it is today one of the world’s largest transportation companies…yet it owns no vehicles.
• Facebook: Founded in 2004, inside a now infamous Harvard dorm room, it is today the world’s largest media company, with nearly 25 percent of all internet users signing in to look for news, photos, music, or videos…yet it produces no content.
• Bitcoin: Founded in 2009, based on an academic paper by Satoshi Nakamito, it is the world’s first decentralized digital currency, with somewhere between 3 to 6 million unique customers…and, of course, it uses no central bank.
• Alibaba: Founded in 1999, it is today the world’s largest retailer, featuring a billion different products on just one of its many portals, and managing as much as 80 percent of China’s e-commerce market…but it has no inventory.
• Salesforce: Founded in 1999, it is at this writing among the world’s largest marketing and sales companies, with over $10 billion in annual revenues…yet it neither employs nor offers any salespeople.
One glance at this remarkable list, and it is impossible to doubt the existence of exponential change all around us. The average age of these examples as of 2018 is thirteen years and, together, these relatively new companies represent over 1.3 trillion dollars of value.
For super achievers like Airbnb and the rest, innovation is happening earlier and faster than ever before. Our age of exponential change is an era of exponential opportunity. For example, companies such as Apple, Google, Amazon, Facebook, and Microsoft are, at their best, driving innovation at an exponential pace. And Airbnb and the other digital enterprises that control much but own little or nothing are known as “platform businesses,” digital (or digitized) business models that create connected ecosystems of producers and consumers, or, as the authors of Platform Revolution explain, the sheer innovative force of a platform is empirically impossible to ignore today. When it comes to disruptive innovation, platform beats pipeline, just as exponential thinking beats linear thinking. The elimination of gatekeepers atop platforms, just like the rejection of status quo thinking inside the world’s most innovative companies, almost magically unlocks new sources of value creation. The proof is in the numbers, which are staggering. Today, more than half of US startups are platform businesses.
Take, for example, just four US companies—Apple, Amazon, Facebook, and Google. Together, as of 2018, these companies have created $2.3 trillion—that’s trillion—in wealth (in terms of stock ownership) and have entwined themselves in the daily lives of billions of people. More specifically:
• Amazon in some ways has eliminated the consumer pain of shopping for things that are not fun. (Think toothpaste vs. Porsches) It is heading for a market capitalization perhaps twice that of its incumbent archrival, Walmart.
• Apple represents something of a religious offering to its loyalists and displays nearly unprecedented profit margins by offering low-cost products at premium pricing. At this writing, it is history’s most profitable company.
• Facebook is, by the numbers, perhaps the world’s most influential company—notwithstanding current privacy and security challenges. At present, one-sixth of the global population—about 1.2 billion people—sign in daily and spend an average of 50 minutes a day on the company’s platform.
• Google has become the modern world’s transcendent navigator—earning the trust of over 2 billion people, more than any other institution in terms of search and guidance. It is the Benjamin Button of companies, aging in reverse to become more relevant and valuable the more it is used, since it is through use that its associative database grows.
To put into context the ongoing platform-driven and disruptive innovation revolution, consider that the average employee at General Motors today creates $231,000 in economic value. Impressive—until you compare it to the $20.5 million in economic value created by Facebook employees today.
Separately and together, this new “Big Four” of mega-companies is driving the most exciting and disruptive technological wave ever seen. Moreover, imagine the coming rounds of future breakthroughs in, for example, machine learning, artificial intelligence, mixed reality, quantum computing, green energy and, even more fundamentally, the future of our human minds. Or just consider the extent of change already wrought by the power of platform. Founded in 1768, Encyclopedia Britannica defined the future of accumulated knowledge until 2012, when it ceased print publication and even shriveled into relative irrelevance as a paywall website thereafter. Back in 1999, Microsoft was sufficiently innovative to spend $450 million to develop an online encyclopedia. But even that was eclipsed just two years later when Jimmy Wales and Larry Sanger started Wikipedia, offering their web-based encyclopedia for free and today managing the fifth most-visited internet site in the world—one that is still maintained exclusively by volunteers.
Wikipedia and its ilk have prompted Wharton professor Jeremy Rifkin to forecast a paradigm shift from market capitalization to what he calls
