Thanks for joining me for the final installment of this series. The week I spent at Singularity University was very impactful to me. It’s been a true pleasure sharing my thoughts with you about what I learned and how it will revolutionize our world. I also want to thank all of you who have commented on the blog topics or sent me personal notes. If you missed any of the first three installments, there are links at the bottom of this article. As you might imagine, spending a full week at Singularity University proved to be mentally exhausting as well as immensely rewarding.
To this point, I have focused on the amazing technological advancements that have headed our way. I would now like to shift the focus to business. Now, more than any time in our lives, it’s important to recognize the rapid changes to our reality that continue to gain momentum. In the 1920’s, the average lifespan of a company on the S&P 500 was 67 years. Today it is 15. It is predicted by 2025, 40% of Fortune 500 companies will not only no longer be on the list, but will be out of business. The very things that made companies successful 50-60 years ago are getting in their way today. Companies that led the way in the 20th century are doomed to fail in the 21st.
If you doubt the enormous impact technology changes can have on business as we know it, consider these examples:
• In 1980, influential management consulting firm, McKinsey & Company advised ATT that the number of cell phone subscribers in the U.S. would be 900,000 by the year 2000. Based on this analysis, ATT decided not to pursue this market. The actual number turned out to be 109 million.
• Reed Hastings of Netflix recalls being laughed out of the room by Blockbuster Executives in 2000 when he proposed a partnership.
• Kodak invented and rejected the digital camera. When they filed bankruptcy in 2012, they still owned the patent rights for digital photography. While this was happening, three-year-old Instagram, with 13 employees, sold for $1B.
• Today, the process for Proctor & Gamble to get a new product on Walmart’s shelves takes 300 days. An upstart company named Quirky accomplishes the same thing in 20 days.
My takeaway from this (and something that I urge you to consider) is that your business is going to be disrupted. Make sure you’re the one doing it. Every week, startups that are threats to traditional business are being launched and the thing to fear about them is that they focus on the part of the platform that is really hard. They are nimble and they are fearless. Software companies now have the motto, “If you aren’t embarrassed when you launch, you waited too long.” This is counterintuitive to traditional software houses, with their large QA teams focused on finding and fixing bugs, but these new companies are prospering under this model…and they are growing quickly. Consider some of these new-world examples:
• Airbnb with 800,000 listings worldwide has more available rooms than Intercontinental & Hilton. One night in September of this year, over 420,000 of these rooms were occupied Their revenues have grown 200-300% every year since 2008 and they don’t own a single property. While the large hotel chains have tens of thousands of employees, Airbnb has a mere 1,300. Last month, their valuation was set at $13B ahead of their employee stock sale.
• Earlier this year, Uber’s valuation skyrocketed from $4B to over $18B. Last week, they received another $1.2 billion investment at a valuation of $40 billion raising more money from VC’s this year than any other private company . Today, they are valued at more than American Airlines or Kraft and operate in 250 cities in 50 countries. Of course, their recent controversy has caused some concern, but their ability to simplify logistics in a fragmented industry and eliminate layers of excessive costs is a game-changer. Uber, like Facebook is a great example of network effects at work.
• Chad Hurley’s sale of YouTube to Google for $1.4B, a mere 18 months after startup, was eclipsed by Groupon who went from zero to $6B in two years.
One of my main goals for this series was to encourage you to start thinking about innovations in your own businesses. What will carry you forward in this rapidly changing world? When figuring out where to start, I’d encourage you to find an adjacent area of your business and resist the temptation to monkey with the organization as a whole. You don’t need to do it on your own. Make a point of discussing this with your advisors or business coach if you have one. Familiarize yourself with communities like Kaggle who provide a platform for world-class statisticians and data miners to compete for providing companies with innovative models. Allstate used them to put their 60-year algorithm to the test…and netted a 271% improvement.
Salim Ismail’s book, “Exponential Organizations” is an exceptional reference to get you thinking about the possibilities. After reading it myself, I believe Salim is right. You can grow your organization by tenfold by implementing 4 of the 10 internal or external ideas presented.
One final thought about our time spent at Singularity University. The initiatives they are working on up there will have true global impact in the very near future. Their vision is to positively impact one billion people in the next decade in one of the world’s grand challenges. Finally, if you personally want to be a billionaire, figure out a way to impact a billion people.