Welcome to From 10% to 10X

Thanks to digital technology, change has become exponential. Business leaders need new tools, new skills and most importantly new thinking. Learn to harness the power of network effects to drive exponential growth, and discover a new model for exponential leadership.

Incremental vs. exponential

Being exponential means going from 10% to 10X change. 

Perhaps the most fundamental area where we need to update our mental models is from an incremental model of change to an exponential one. 

Incremental change (10%) is constant, while exponential change (10X) has an increasing rate. 

The incremental is linear and additive, while the exponential is non-linear and multiplicative. While the incremental is about 10% improvements, the exponential is about 10X acceleration.

Exponential thinking is hard for humans

Our brains evolved in an incremental world. 

Imagine someone taking 30 steps. These are incremental steps of about two feet each. You have a pretty good sense that it’s about the length of a very large room. 

Now imagine someone taking 30 exponential steps, meaning each step doubles in length from the one before. How far would that be? 

It turns out it’s nearly the distance to the moon.

Digital technology is making our world exponential

The technologies of the industrial age were incremental, but digital technologies are exponential.

If the automobile had advanced at the same rate as the computer, it would go 500 miles an hour, get 200 miles to the gallon and cost $1.50. 

We all know Moore’s law about exponential increases in capacity for computer processors. 

The same holds true for technologies like storage, bandwidth, IoT sensors, artificial intelligence, blockchain and genomics.

But what does that mean for organizations and leaders?

Technology alone is not enough for 10X results

Without exponential thinking, digital technology can only deliver incremental results.

Why do 90% of digital transformation projects fail to meet expectations and only deliver incremental improvements? 

One reason companies struggle with digital transformation is because they think technology alone will deliver exponential results. 

When you have exponential technology but apply only incremental thinking, you end up with incremental results. 

Network effects drive exponential change

The key to going exponential is unleashing network effects. 

Consider building a tower of blocks or lining up a chain of dominos. Each block or domino can only impact the one right next to it. This kind of linear relationship can only deliver incremental results.

Now imagine a contraption made up of mouse traps and ping pong balls, like the one in the video.

Dropping a ball into the box leads to a chain reaction in which each ball can set off multiple other traps. 

Where blocks and dominos are linear and either one-to-one or one-to-many, the ping pong balls are networked, non-linear and many-to-many. 

Check out this video for a great example of exponential change

“Exponential Growth” Uploaded by ProfChrisBishop

Example: Google Maps / Waze

Two different exponential strategies for navigation.

Consider the different strategies of Google Maps and Waze. Both are owned by Google and use a traditional advertising-based business model. Both also have the goal of helping people navigate and avoid traffic. But they have quite different exponential strategies.

Google Maps works by creating a network effect between devices and data. Google can tell where people’s mobile phones are and how fast they are moving at any given time. That enables them to know where the traffic is in real time. 

By contrast, Waze works by creating a network effect between drivers and passengers. Waze has cultivated a community where people share what they are seeing as they are driving. 

With Google Maps, the devices do the reporting; with Waze, it’s the people that do the reporting. They offer different kinds of value, and many people use both.

Example: Uber / Airbnb

Most people don’t realize that the source of their growth comes from a network effect. 

Both Uber and Airbnb have platform-based business models. They don’t turn inputs into outputs like most companies. Instead, they are multi-sided platforms that connect supply and demand. 

Uber doesn’t employ drivers or own vehicles. Airbnb doesn’t own hotels or employ housekeepers. Instead, Uber’s platform connects people who have cars with people who want rides, and Airbnb connects people who have rooms with people who want a place to stay.

Take a look at these charts for Uber and Airbnb. You can see how the number of drivers and rooms have grown exponentially. This would never have been possible for a taxi company or hotel chain with a linear business model. 

Uber and Airbnb aren’t alone in using multi-sided platforms as business models. YouTube, Paypal, and Amazon have all done the same: connecting creators and viewers, senders and receivers and retailers and consumers.

Network your capital

You don’t have to create a new business model to take advantage of network effects. You can network almost anything.

As you consider how to create your own exponential strategy, think about how you can network together these five different kinds of capital:

• Financial capital. In a digital world, money itself is becoming more intelligent and connected, and we are moving toward more networked forms of currency.

• Intellectual capital, whether data, software, or ideas. For most companies, intellectual property like patents, trademarks, brands and data is something that sits on their balance sheet. But what if the value is not in the intellectual capital itself but in the connectivity of that IP?

• Physical capital such as products or assets. We normally think of the value of an asset as originating in what someone will pay for it and how they will use it. But in a digital world, physical goods become sentient and social. They can generate value in how they work together.

• Human capital. Organizations typically create value by managing people (inputs) to generate products and services (outputs). Consider the organization itself as a platform, connecting people who have ideas, skills and work with the people who need them.

• Relational capital. To achieve loyalty, most companies focus on managing customer relationships. But a networking mindset goes beyond the relationships you have with your customers and looks for opportunities to connect them with each other.

Incremental vs. exponential leadership

Exponential thinking requires a new mindset about what leadership looks like.

Incremental Thinking

• Set realistic goals

• Follow the plan

• Minimize risk

• Standardize

• Centralize decision-making

• Expand authority

• “Make your numbers”

Find your edge

Learn to fall without failing.

Professional skiers have a saying: “Find your edge.” Finding your edge means finding how far you can lean over without falling. And the only way to find your edge is to fall sometimes. 

If you’re skiing so cautiously that you never fall, you’re not pushing yourself enough. But you need to fall without hurting yourself so you can get up and go back up the mountain. 

For exponential leaders, the mantra is “Fall but don't fail.” You need to fall but in a way that you can still get back up. 

Nobody likes to fall. But learning how to fall well is an important part of maximizing your learning. 

From 10% to 10X recap

Being exponential means going from 10% to 10X change.

Exponential thinking is hard for humans. Our brains evolved in an incremental world. 

The technologies of the industrial age were incremental, but digital technologies are exponential. 

Without exponential thinking, digital technology can only deliver incremental results.

The key to going exponential is unleashing
network effects. 

You don’t have to create a new business model to take advantage of network effects. You can network almost anything.

Exponential thinking requires a new mindset about what leadership looks like. 

Learn to fall without failing.

Up Next

In our next topic, we’ll compare the curves for exponential and incremental innovation and learn how to manage the gaps between them.

Go deeper

Read “To Build Your Platform, Network Your Capital” by Mark Bonchek

Practice

Are there places where your organization is already generating and leveraging network effects?

Can you see some ways that exponential learning may be a stretch for you and others in your organization?

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