Two weeks ago, I had the opportunity to attend the Middle Market Summit hosted by GE Capital and the National Center for the Middle Market. The Summit is an annual spotlight for how to run a successful customer event. Each year, it mixes bits of education, entertainment and media into one wonderful day. While the Summit cuts across a variety of topics — economics, leadership, politics — what really struck me this year was the talks on technology.
This post provides an introduction to the topic of technology disruption by summarizing the exponential nature of it as described by Salim Ismael of the Singularity University.
We’re living in a period of unprecedented change driven by technology. Technology is cutting across all aspects of our economy in ways only a science fiction writer could have foreseen. Which technologies will truly transform our lives is still a bit fuzzy, but based on the speakers at the event, I think professional services firms should be paying attention to 4 big technology-related topics:
What Disruptive Technologies Do
New technology hits the market all the time. Some of it just fizzles out. Some of it solves the same problem in a marginally better way. And, some of it just completely changes the fundamental dynamics of a marketplace or quite possibly the entire world. This isn’t really a new story, but what Salim Ismael brought to life for me was this:
- Disruptive technologies take something that is relatively scarce and make it widely abundant.
- They do it much more quickly than we ever expect or are usually capable of forecasting.
#1 — From Scarcity to Abundance
Essentially, a truly disruptive technology shifts the market from a scarcity problem to an abundance problem. When something is scarce, it’s generally expensive — the world develops a wide range of mechanisms and industries to enable us to gain access to that scarce resource.
What the disruptive technology does is make that resource widely abundant relatively quickly. When it does this, it shifts the entire dynamics of the market. Entire industries built to provide us with access to this scarce resource become obsolete, and whole new sections of our economy emerge to help us manage this new abundance.
#2 — The Doubling Effect
If you spend much time around technology, you’re probably familiar with Moore’s Law — “the observation that, over the history of computing hardware, the number of transistors in a dense integrated circuit doubles approximately every two years.” This is basically what has enabled computers to consistently get more productive and more powerful for over 4 decades.
What Salim Ismael made clear was that we’re seeing this doubling effect in all kinds of technologies — yet, we don’t often spot it. In fact, we tend to predict that technology is going to advance or adopt lineary (10%, 15%, 25% a year), when it actually advances and adopts exponentially (it doubles year over year).
And, while he didn’t come out and say it, I think it stands to reason that the period of time in which a typical technology doubles is probably much shorter today than it was even 10-15 years ago.
Examples
Here are a few examples of recent and potentially up-and-coming disruptive technologies that demonstrate these two forces in effect.
#1 – Digital Photography
This is an easy and relatively recent example of a disruptive technology. Buying and producing film was a costly and time-consuming process. For this reason, we were selective about the photos we took.If you think back to the 1980s or 1990s, a typical young family might take 8-10 rolls of photos in an entire year (that’s maybe 300 photos). By contrast, I’m willing to bet that my daughter had more photos taken of her in the first month of her life than were taken of me in the first decade of my life. I’ve been known to take over 500 photos and 30-40 HD videos in the span of a single week of vacation.
Digital photography took something that was relatively scarce and made it so abundant that it created an entirely new problem — How do we managing the volume? How do we organize, search, find, store and share the thousands (or possibly tens of thousands) of images we produce each year? While film processing is virtually gone, image storage and digital asset management is a healthy and growing industry.
#2 – 3D Printing
This is an example of an up-and-coming, and potentially much more disruptive technology. For decades now we’ve mass produced small consumer products overseas and shipped them around the world navigating multiple forms of transit and customs to get them there. This process has spawned billions of dollars of ancillary industries related to packaging, shipping, warehousing, distribution, trucking, and supply chain management.
Yet, within a few years, 3D printers will become mainstream consumer products. To use Salim Ismael’s words, essentially this will turn “a small, complex object into a file.”
- What happens to all the supporting industries up and down this supply chain when a small, complex object can be produced at your desk for practically nothing?
- What happens to these industries as ever larger and more complex products can be produced from your home?
- Is it conceivable that one day virtually any consumer product could be manufactured by the consumer with the simple press of a button? Given the exponential rate of technology change, it might not be so far fetched.
#3 – Solar Energy
It’s quite possible that we’re experiencing the early stages of a disruptive technology change in energy. Solar energy has been around for decades. When we renovated our building 5 years ago, we looked into investing in solar energy and just couldn’t make the economics work to justify the investment. However, if we were renovating our building today that solar investment might look entirely different.
The cost/performance relationship of solar technology is growing exponentially. Over the last 15 years, the number of systems installed and the capacity of those systems is doubling every 1-2 years.
Simultaneously, costs are in a free fall — dropping over 75% during that time period. Both these trends will will likely continue unabated for some time (or possibly in perpetuity — after all, there seems to be no drop in the pace of improvement in semiconductor performance; why should we expect solar energy to be any different?).
Currently, we live in a world where energy and access to it is relatively scarce. We’ve talked about and written about peak oil for decades, yet according to Salim Ismael all the world’s collective fossil fuels are roughly the equivalent of just 5 days worth of solar energy. As these trends continue in solar energy, it is quite possible it will be the disruptive technology that shifts energy from a scarce resource to an abundant one. What will be the repercussions of this shift?
- What will happen to the grid when energy production is essentially localized?
- What will happen to the energy companies? Will they cease producing energy and become solely distributors of energy?
- Will we even need to distribute energy?
- How will our infrastructure and lives change when what was an expensive and scarce resource becomes so abundant any one person has more than they could ever possibly need and it’s practically free?
- What new opportunities will this create for the economy in general?
Implications on the Professional Services Firm
How do disruptive technologies, like some of these mentioned, impact professional services firms?
For A/E Firms
The very nature of the global built environment could be on the cusp of a massive change. Industrial production, shipping, distribution, warehousing, energy production, energy distribution, ports, all elements of supply chain infrastructure are all going to be impacted by just this short list of technologies provided here. At the very least, the nature and use of these structures are going to go through meaningful change. It’s also conceivable that some of these industries may undergo such massive change that they cease to exist, at least as we think about them today. Clients will be clamoring for A/E firms that can provide guidance on how to design and build flexible infrastructure that can adapt to the rapid pace of change ahead.
For Consulting Firms
Which technologies have the most potential to disrupt any one industry or business? How can a client capitalize on the opportunity these technologies represent. Once again, clients will be clamoring for research-based thought leadership related to all these topics.
- How quickly are these technologies accelerating?
- How quickly are the costs of these technologies dropping?
- We know they’re doubling, but at what rate?
- How will it impact my industry and my company?
- What are leading edge firms doing to capitalize on the opportunity? How can I learn from them?
It’s almost as if we need a Reengineering the Corporation 2.0 for the wave of disruptive technologies that stand before us. The firm or firms that really gets their finger on the pulse of any one or a number of these disruptive trends has the potential to expand very quickly.
Wrapping it Up
We’re living in an age of rapid change. Potentially disruptive technologies exist all around us. And, they’re all improving and adopting at an exponential rate. Learn more about the four big technology-related topics your firm should be monitoring:
