Exponential technologies are having a disruptive impact

The past decade witnessed the rise of numerous digital unicorns (also referred to as Exponential Organizations or ExOs), which are defined as privately held startups valued at $1 billion or more. As of December 2017, there are 168 companies in The Billion Dollar Startup Club, which includes some globally known household names, such as Airbnb, Uber, SpaceX, Pinterest etc. Salim Ismail, founder of Singularity university and his co-authors stated in their influential work, Secrets of Unicorn companies:

“The basic metric that we have established is that ExOs scale at a minimum 10x better than their peers in the same space.”

Research by Salim’s team as well as an influential study by HBR (Harvard Business Review) discovered some traits that are common across bulk of ExOs, which:

• have a Massively Transformative Purpose (or mission) to which they latch on with laser-sharp focus. It could be a quirky idea, or a truly forward looking and disruptive break through innovation.
• have an exponential mindset and seek to deliver at a minimum, a 10x improvement over their peers or status quo, which helps them to choose the problem space, and not the problem or solution itself.
• leverage exponential technologies such as AI, ML, VR, AR, Robotics, digital biology and other emerging technologies to create disruptive, and innovative solutions
• start small with a core group
• make heavy use of social collaboration tools
• experiment heavily and take risks
• are organized around autonomous teams

In many industries AI (Artificial Intelligence) and ML (Machine Learning), which were once considered as futuristic technologies, are becoming as ubiquitous as UI (user interface). Augmented and Virtual reality (AR, VR) are already being used for creating virtual and/or augmented user experiences in diverse domains ranging from fashion to real-estate. A host of exponential technologies including data science, digital biologyand biotech, medicine, nanotech, digital fabrication, networks, computing systems, robotics,and robocars are rapidly accelerating and shaping major industries and all aspects of our lives.

Successful Unicorns or ExOs have demonstrated that there is a new way of doing business, that uses a combination of culture, technology, needs, and incentives to deliver innovative digital solutions at lightning speed. HBR calls this approach as Lightning Innovation, which doesn’t involve huge technology risks, targets established domains and markets, delivers immediate returns with innovations that outperform established way of doing things.

As ISVs (software business) matured over the past few decades, they have also acquired many characteristics that are often associated with old economy businesses. Very often successful software businesses are organized in a hierarchical structure, with linear processes, and focus on meeting immediate or prioritized (and narrow) customer needs, which forces them to think and act incrementally.

While this incremental mindset might help the ISVs in the short run, it will certainly doom them in the long run, as it holds them back from pursuing breakthrough innovations. ISVs that wish to be the next Unicorn and scale exponentially must adopt a lightning innovation strategy, and:

• Think big with an exponential mindset and choose a transformative purpose
• Engage experienced leadership with sharp focus
• Embrace risk and learn to fail fast
• Use new-gen paradigms such as Business Model Canvas, Design thinking, and Agile execution
• Use platform thinking and target to serve large markets, domains, and business ecosystems (customer of customer and supplier of supplier)
• Think about business models that can achieve near zero cost of incremental supply
• Target innovation in established domains by coming up with new ways of doing old things
• Scale their organization outside their core team