How CLEVER companies dominate the 4th Industrial Revolution
This is the English script of my speech at DisruptBA, in Buenos Aires (Argentina). It was the first time I spoke of C.L.E.V.E.R. organizations.
I’m currently working on a book that explores this concept.
I was born in 1980. The year I was born, you could drive from Buenos Aires to Rosario with about 40 litres of fuel. Fuel efficiency is now much better. You can now drive the same distance with about 25 litres. It’s a great improvement, of over 40% in fuel efficiency.
That same year, the most powerful personal computer available was the Apple II. If you wanted to store CD-quality music in the floppy disks it used, you could store about 1 second of it. Even if you played it in a loop, it would not make much of a party. But the mobile phone I’m using now can store more than 24 days of high quality music and it costs a fraction of the Apple II. This is an improvement of millions of times.
Today I’ll talk about this new type of technological improvement that is making the world unrecognisable, and what type of organizations thrive in this unrecognisable world.
I’m not sure I clearly explained how much of an improvement we’re talking about.
If fuel efficiency had improved at the same rate as computers, today you could probably drive from Buenos Aires to Mexico City with 2 or 3 litres of fuel. Imagine what that would mean… The car industry would be revolutionised. The oil industry would be permanently disrupted. Gas stations would disappear. Pollution would drop. Then we would start applying those technological improvements to other sectors and industries… logistics would change because transportation would become very cheap. This would allow different systems of production, for examples huge centralised factories that ship goods cheaply around the world. So, people would relocate near these factories to find employment, changing forever the appearance of cities… In other words, with a million-times improvement in just one technology, in just a few years, the world would be unrecognisable.
Unfortunately, fuel efficiency cannot improve at such speed, because it’s bounded by the laws of physics. But digital technologies can… artificial intelligence, driverless cars, biotechnology, 3D printing, robotics have improved more than a million times in a few years… and now, they are improving even faster! This is exponential growth: Two years ago a smartphone stored 12 days of music, now 24, then 48 and, if it continues like this, in just ten years it will be able to store 3 years of continuous high quality music! An entirely different scale! If you think that’s impossible, you are right… because in the entire history of humanity we have not composed that much music. But if we did, we could store it all in a small, cheap device that almost everyone will able to afford and carry around. That’s exponential: It may start slow, but it gets faster and faster and faster.
If improving fuel efficiency exponentially would rapidly make the world unrecognisable, what do you think many technologies improving exponentially at the same time are going to do? Nothing short of a revolution! This is the time we are living in now. We now call it the 4th Industrial Revolution. This means that the fundamental structure of the world economy has already changed.
Exponential technology democratised access to timely, accurate data and to products and services, creating new patterns of consumer behavior. New technologies have also disrupted the value chain and what it means to create value for customers and capture this value. Digitally empowered value chains allow exponential companies, too. Innovative startups raise to success at unprecedented speed. Companies like Airbnb, Jet, Lyft, Snap… reached an evaluation of $1bn in 3 years.
So, what are these companies that succeed during the 4th industrial revolution?
In my research on the organizations that dominate the 4th industrial revolution, I’ve identified some critical common features. I call these organizations C.L.E.V.E.R., because they are based on 6 building blocks that sets them apart from the old organizations. Here they are:
Collaborative Intelligence. CLEVER companies leverage the intelligence of large numbers of people. Even better: they leverage the intelligence of large numbers of both people and computers! Think of Wikipedia, where millions of people create great content based on their unique expertise and computer bots verify that there is no plagiarism or uncensored content. This collaboration disrupted encyclopaedias they way we knew them — and especially they changed the frequency and the way people use them! In short, it redefined creation!
Learning Machines. CLEVER companies are based on artificial systems that learn from large amounts of data and predict the future, so that we can be better prepared for it. For example, Netflix predicts which movies people will like to watch and produce them. More interestingly, we can now predict with 82% accuracy if a diabetic patient will have an acute crisis that requires hospitalisation one year in advance… We can change his treatment now, to prevent it. This redefines decision making!
Emerging Technologies. CLEVER companies improve at exponential rates, like I was explaining earlier. This redefines progress!
Value Facilitation. I’m sure you’ve heard puzzling questions like: How come Uber, the largest taxi company in the world, owns no taxis? Or how is it possible that Airbnb, the largest accommodation provider in the world, owns no real estate? Easy: because CLEVER companies create platforms, which facilitate the meeting of supply and demand. Consumers and providers find each other on these platforms, and make exchanges that create value. This redefines markets!
Ethical Leadership. The age of ruthless capitalism is also behind us. Companies are still assessed for the their financial results, but they are also increasingly subject to public scrutiny…. CLEVER companies recognise that the biggest business opportunities come from serving unmet needs for large populations… and these populations include billions of farmers without proper access to markets for their produce; displaced migrants without access to education, or unemployed women in rural areas. Serving these marginalised consumers makes good business sense. It also ensures an overall positive impact on society. This redefines value!
Responsive Design. CLEVER companies don’t sit down and invent cool gadgets for their own sake. They invest time and resources to understand the emerging needs of their customers and then they develop products and services that directly respond to these needs. How many of you have a Segway? Do you know, the personal transportation device? It was invented in the early 90’s, patented in 1997, developed in secrecy and finally released in 2001 with massive advertisement and hype… and then it failed… because the developers never spent a second thinking if anybody wanted it, and if they wanted it, how would they use it. Successful products are built in partnership with users, not in secrecy. This redefines the boundaries of an organisation!
Put these concepts together and you have a genuinely CLEVER company, ready to take on the challenges of a world that changes exponentially and becomes more unrecognisable every day.