The exponential paradox, overcoming fear, and the importance of scaling the edge

Posted by John Hagel III posted on August 20, 2018 

Digital technologies continue to improve at exponential rates, creating expanding opportunity. Yet, at the same time, we are seeing growing fear within populations around the world. What explains this paradox? It may be that these same technologies are producing mounting performance pressure on all of us, as individuals and institutions.

Exponential technologies are creating more opportunity and bringing abundance to the world as they solve global issues. Conversely, growing pressure is creating greater stress and more fear, as we become more insecure and defensive. What’s behind this pressure and the fear it generates? One explanation is that the competition for employment has increased. It used to be that we were competing only with people in our same city or town; today we are increasingly competing with people everywhere, not only in the same country but also around the world. How secure is our job in this kind of environment? That’s one form of pressure.

Another form of pressure comes from the increase in automation and the fact that machines are getting smarter and smarter and able to take over more of the work traditionally done by humans. So what does that mean for our jobs? Are we going to be able to provide for our children? Our retirement?

On the organization side, pressure takes many forms. Here, too, increasing competition is a factor, in that exponential technologies substantially reduce barriers to entry and barriers to movement on a global scale, so anyone with a good product or service can compete with companies around the world.

Pressure also comes from the accelerating pace of change. It used to be if you came up with a great new product and brought it to market, you could relax and reap the rewards. Now product life cycles are compressing, meaning you have a shorter and shorter time to enjoy the benefits of new products before needing to introduce others. And if that wasn’t enough, another pressure comes from our increasing connectivity, thanks to digital technology infrastructures, such that small, seemingly insignificant events in faraway places can cascade into extreme “black swan” disruptions. One key indicator of that growing pressure and our increasing inability to handle it, is the sustained erosion in return on assets for all public companies in the US—from 1965 until 2016, it has declined by more than 75 percent.

Getting past fear
Until we understand and address these pressures and the emotions they cause, we will never harness the full potential of expanding opportunity. We need to look beyond the technology itself and seek to understand the psychological factors that motivate action.

Not just important for individuals, this vision for a positive future from exponential technologies is even more important at the level of institutions, since they are primary drivers of economic advancement and business. We must root out the outmoded approaches and negative attitudes that exist in every institution—those antibodies to progress that are fed by fear. Instead, we must make the required transformations to see and effectively leverage the expanding opportunities created by technological change.

Deloitte’s research suggests there is an effective alternative and more promising approach to transformation that is enabled by the same exponential forces that today may be blindsiding companies. This alternative approach—scaling the edge— can overcome the innate resistance found in today’s institutions.

Scale the edge; absorb the core
Conventional organizational transformation is a top-down exercise akin to a Big Bang—a sweeping, high-cost, long-term proposition that tends to excite the company’s immune system and spark resistance. Why not leave the company’s core intact and instead focus on scaling the edge as a way to drive transformation? The key is to find an edge that can scale very rapidly with modest investment, especially at the outset, driven by the exponential forces that are reshaping our economy and amplified by the connectivity that helps to leverage our own investment by mobilizing a growing ecosystem of third parties. The idea is that as the edge grows and demonstrates accelerating impact in the form of operating metrics and ultimately financial metrics, it pulls more and more of the resources and people from the core business. In time, what was once the edge is the new core of the business—one that inherently capitalizes on the power of exponential technology because it was built on it.

Scaling the edge has the advantage of countering the fear associated with exponential technology by giving people and organizations quick and tangible proof of the opportunities. As long as companies resist the urge to pull the edge back into the core when it starts to become successful, thinking it will transform the core (a practice that can overwhelm and derail the edge’s momentum), the organization’s immune response isn’t triggered. Would-be antibodies that would typically resist change out of fear can see the positive effects at work in the edge.

Explore more
Our report, Scaling Edges, is a deeper exploration of the opportunities to transform organizations from the edge and includes how-to guidance and examples. I’ll also be leading a working session on scaling the edge at Singularity University’s Global Summit, August 22–24, 2018, and delivering a keynote focused on the future of work, the place we humans have in it, and the imperative for transformation. You can view a livestream of the Summit here.

We realize that scaling the edge is a mind-set shift that counters centuries of organizational practice. But given the Big Shift itself toward globalization and exponential technologies, it’s a way for companies and people to drive the transformation that will be increasingly needed to grow and prosper. By embracing exponential thinking, leadership, and technologies, institutions and people can realize and enjoy the benefits of expanding opportunity.

John Hagel IIIJohn Hagel III has nearly 40 years of experience in Silicon Valley as a management consultant, entrepreneur, author, and speaker, and has helped companies improve their performance by effectively applying new generations of technology to reshape business strategies. John currently serves as co-chairman of the Silicon Valley-based Deloitte LLP Center for the Edge.

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