Exponential Growth is a very important aspect of technology but also businesses. When we look at the pace of technology, we soon see why so many companies are struggeling to keep up.
Exponential Change explained
The whole world is getting faster and technology is the pacemaker for our change. But why are so many people talking about these fast changes? “Exponential Change” or “Exponential Growth” are two phrases that sum up what is going on in the world of technology. I give a little insight into how this works and why this exponential growth is now speeding up remarkably. We also need to understand the consequences of our society and especially on businesses.
Difference between linear and exponential growth
For us humans, it is a bit difficult to think in exponential numbers. We are usually working in a linear way where we are counting from 1, 2, 3, 4, 5… onwards. If we ask somebody what number after 9 comes, he will probably tell us 10.
When we speak of exponential numbers, we have to make an example. 1, 2, 4, 8, 16, 32, 64, etc. but when you ask somebody what 2 by the power of 10 (2^10) is, then most people would not be able to tell you that 2^10 = 1024. We think differently as humans, but computers can do this thinking anytime, and we see these exponential increases everywhere. No matter if viruses, platforms, algorithms, and much more.
Why is exponential growth so important?
Only in recent times, we were able to see the impact of exponential systems in our daily life. A good example was the first iPhone. It was released in 2007 and was a technological powerhouse in our pockets. 2014, just 7 years after, the iPhone 6 was released and had 50 times the CPU performance and more than 84x the graphic acceleration power. I mention this as within the 7 years on average the iPhone was twice as powerful as the year before.
But the iPhone is just an example. Every Processor, every computer, every System follows the same pace, and each year it is getting faster and faster how technology evolves and gets more powerful.
This basic understanding is so important because we are currently in a phase where technology is getting traction in every field of our daily lives. Especially when it comes to business impact and available technology. We see a first rising number of solutions out there and the exponential growth of many areas in the economy. These opportunities and also challenges need to be tackled.
Exponential growth in business
When it comes to business and business technologies, then we see the same picture. Every year we get hundreds of new technologies we can use for inventing new products, developing new services, optimizing processes, or even interacting with each other. This rapid technological change will also impact the way we do business as it is more and more important how we are dealing with this rapid change and this exponential growth of computing power and resources. Today also digital transformation is about 95% transformation and only 5% digital as there are so many solutions available that “digital” technologies are becoming a commodity.
For businesses, it is getting more and more challenging to keep up their business model with an “old economy” mindset. Rapid changing environments and fast-evolving possibilities also need to be reflected in the culture and in the organization itself.
One good example of a company dealing with this rapid change is Amazon. While constantly changing their core business model and adapting to new technologies, they can innovate in different areas when they see a demand for this. The fast adoption and rapid implementation are some key success factors of Amazon for most of their business units. They see a problem and try to use the latest technology to improve the experience. A very well-known innovation was the supermarket with a self-checkout system.
Scalability is (often) key for future success
When we are looking at Amazon as an example, we also see that they were able to use technology to scale their business model. This so-called scalability is a very important aspect of digital business models. Basically, it means that you can generate more output per unit the more you sell. E.g. as a consultant, you can generate 1 billed hour per 1 hour invested, this is a non-scaling business model. On the contrary, a scaling business model would be an app. You program it once and afterward, you don’t have to invest more hours, but you get the revenues coming in. The input for maintenance and development are not growing proportional to your revenues you might get for this app as the app can have an unlimited number of users with potentially unlimited income while your costs can stay the same no matter how many people download and use your app.
Of course, there are hundreds of examples and various industries that are undergoing this transformation. Here I deliberately only mention 3 examples, because otherwise, the list would be too long.
- Consulting Companies – The non-scaling business model of many consulting companies is the reason for many to expand into the digital field. They are looking for software and other solutions that can scale and don’t necessarily need so many highly skilled workers.
- Pharma & Healthcare – Another example it’s the pharmaceutical or medical industry. Usually, it involved production and lots of human resources (e.g. patient care) but with robotics, software-guided medicine, and also AI-supported diagnostics this is a huge market for these classical industries to expand into.
- Fitness Industry – Everybody knows the fitness trainer in the gym. But this is a classical example of a non-scaling business model. So many fitness-start-ups are looking into expanding into personalized but only online training models. One example is Freeletics
Change is the only constant
The Key for a long time successful businesses was always and still is, that they adopt fast, and they can react to a changing environment. This fast adoption to new fields and new business areas is getting more and more critical as the exponential technology trend is accelerating the market and the need for adoption. To survive in every field there needs to be a new mindset which reflects the constant change paradigm in the company. The better the culture for change and “trial and error” is the easier it will be to take a leading position in the market and use the exponential growth for the own development.