of Exponential Progression
We introduced you to the concept of the inflection point in the beginning of the book. Some authors refer to it as the elbow of the exponential curve. When exponential growth is plotted on a graph, it appears as if very little, if anything, is happening for a long time. The graph is essentially flat until suddenly an elbow appears. At first glance, that elbow may seem like a single point on the graph where the inflection happens, and the curve starts to go way up. But in reality, the business characteristics of an inflection have three distinct points, as illustrated in Figure 1.1: the Initial Inflection Window, the Turning Point, and the Point of No Return.
Figure 1.1 A closer look at the elbow of the exponential curve
These distinct points mark important phases of growth that have significant implications for the development of business strategies. These phases are analogous to what you might encounter in Gartner's hype cycle, to represent different stages of technology development and commercialization.20
Before the Initial Inflection Window, as discussed before, the graph is basically flat. During this period, new technologies are being developed, new terms are being coined, and the press is starting to pay attention to these developments. Think of artificial intelligence in the 1950s or Bitcoin in the mid‐2010s. This may lead to some initial “hype,” and you may start to hear pundits proclaiming that a new world order has arrived. Inevitably the initial hype leads to disillusionments as these technological wonders fail to deliver on their overhyped powers.
This is when you will start to hear the naysayers remind you how they were right, and how this overhyped change is never going to happen. At this point, only a few initial entrants to the market will have survived as the Initial Inflection Window reveals itself. This is the time period when threats and opportunities become more pronounced.
It is during the Initial Inflection Window that the early signals start getting stronger and clearer. At this stage, it would be advisable to set up several short experiments to explore the possibilities and start putting the proverbial “toe in the water.” This is the time to make initial small investments in capabilities, but it is not yet the time to make big bets.
Subsequently, the inflection point starts to become more pronounced and as those early market entrants start to get traction, we enter the Turning Point. By this stage at least a rough plan should be in place based on assessments of risks and opportunities. A priority list based on early experiments will guide investments as the organization iterates on gathering data, collecting market feedback, and making executive decisions on what initiative to scale or terminate. We will cover this process in detail later in the book.
Eventually the growth accelerates as we get past the Turning Point. At this stage, the benefits created by the exponential growth have become apparent to everyone, and what used to be an opportunity has turned into a threat for those who adopted the wait‐and‐see approach. Those who did not engage in the previous stages of the inflection point or who stubbornly stuck to their now stale “strategic plans” scramble to catch up watching powerlessly and in disbelief as their businesses go into decline. They have now reached the Point of No Return.
At this stage, what seemed like a faraway future has become the new reality, and it bears no resemblance to the past. It may appear as if it happened suddenly, almost magically, like a marvel that came out of nowhere. But in reality, the future does not just happen all at once, as McGrath insightfully noted. It begins to unfold in a cadence that allows you to detect early signals, but only if you are paying attention.
Humans tend to ignore the early inklings, lose patience with the slow progression of change during the early compounding, miss the lift‐off in the inflection window, chase past the Turning Point, and then become exasperated when the curve disappears into the Point of No Return. All of it in what seems like the blink of an eye.
In addition to our natural struggles in seeing exponential change, hierarchies in large organizations also create dangerous blind spots. The early evidence of change seldom reaches the CEO's office or the corporate boardroom. In fact, we know that by the time information filters through several layers of management, the early signals that are so critical to spotting inflection points in the Exponential Era are muted by PowerPoint presentations that lack granularity and clarity. The early signals are usually only visible by those working at the frontlines. It is the frontline employees who first hear about competing startups that are hitting the market; disrupting technologies that are threatening existing business processes; or customers who are migrating to cheaper, faster, and more efficient ways to get what they need. As Andrew Grove eloquently explained in Only the Paranoid Survive, “When spring comes, snow melts first at the periphery, because that is where it is most exposed.”21
Intuitively, being alert to the early signals that may indicate a potential business inflection point makes perfect sense. Yet, it is surprising to see the number of senior executives whose agendas are filled with urgent matters related to making this quarter's numbers. Instead of being at the periphery, paying attention to the early signals, many spend their time in internal meetings, surrounded by team members who are worried about self‐preservation and don't necessarily want to “rock the boat.”
The danger here is that you may end up building a self‐reinforcing echo chamber that filters any signals contrary to deep‐rooted beliefs. Leaders may have the best of intentions as they communicate their visions and encourage their troops to go out and win more business. Middle managers will “drink the kool‐aid” but will avoid reporting conflicting news up the chain. Frontline employees may unintentionally hide information from their managers in a misplaced effort to give a good impression. Consequently, senior executives become completely isolated from the realities and the signals coming from the edges. They may think that their vision and strategies are spot on because they never get to hear conflicting signals.
Amy Webb, Founder of the Future Today Institute and author of the bestseller The Signals Are Talking: Why Today's Fringe Is Tomorrow's Mainstream, is a great proponent of creating mechanisms that allow organizations to effectively forecast changes so that they can identify risks and opportunities before disruption hits.22 These mechanisms force the organization to be on the constant lookout for signals that are not visible through the usual channels. They bypass organizational hierarchies and introduce processes in which there is a continuous cadence of discoveries and learning opportunities across all layers of the organization, from individual contributors to the CEO.
Such mechanisms are implemented effectively by organizations that have adopted a forward‐thinking, discovery‐based methodology and whose leaders have instilled a culture that embraces changes and risk‐taking. This is the essence of what we are going to explore with you in this book.
“A strategic inflection point is a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end.”
Andrew Grove
The Exponential Explosion
As we explore fast‐growing technologies that are impacting our future, consider the following exponential curves, their accelerated growth, and consequent cost reductions.
