(5) Expectations

In past installments here it was suggested that the speed of recent technology-driven change (as much as its magnitude) has had a destabilizing effect — in industries and the broader economy — that was rooted in uneven recognition. As we now enter a period in which the changes and their pace have been absorbed (and in most circles, accepted), what may have been an initial disorientation seems to be subsiding, and the uncertainty is giving way to a path that is in some aspects more predictable. But, while planning and investment decisions may be smoothed out as a result, expectations are being accordingly reset.

In this fifth installment of the series, a summary is presented of how we arrived to this point, and what it might mean for strategy, finance and valuation going forward.

The turbulent ascent

Although the Internet and the industry that it created were popularized in the 1990s, one might say that the modern world of digital technology more truly emerged with the introduction of the smartphone — if a demarkation point has to be picked — a handheld supercomputer in billions of global pockets. Parallel advances in data gathering, processing, safekeeping, and distribution have created new systems and methods in virtually every field. Because it is easier, when making note of big changes, to point to big symbols, here is a sample of very big objects that were transformed or have repositioned in the period: Microsoft, GE, Ford, Dell, IBM, Verizon, Wall Street, banking, all communication, urban transport, hospitality, education, retail, entertainment, services, the workplace, the home…

With exceptions and explanation for individual circumstance, these transformations took place over much less than a decade, in certain instances just in the past few years, and the sums of capital involved or impacted are beyond estimate. Of the top-10 companies worldwide as measured by market capitalization, half are now in the core technology sector (including the top-3), and most of the others are on the fringes and moving in.

On the surface, innovation and, more to the point, disruption (which implies breakage and thus a volatile event), became operative words during this time. Beneath the labels, however, more substantive shifts in atmosphere were forming — as illustrated — that make the buzzwords seem almost trivial. There is something much more monumental and historically consequential about the environment that has emerged, something that seems far greater than mere economic cycle or technology evolution. It feels like an era of its own, that one day will be looked back upon as a defining and redirecting period — such as the Industrial Revolution — and needs to be understood as such. The new atmosphere, arrived at in no time at all, has changed everything.

At cruising altitude

With an event of change, the novelty itself does not necessarily trigger instability; the principal actor, rather, is the velocity of the change (or the sharpness of the contrast). By the same token, when change is happening continuously, what may lead to some imbalance is acceleration or deceleration (increase or decrease in velocity). Now that the velocity of innovation seems stable (albeit, at a high rate), now that transformations are happening at a steady clip and this is the clip to which we are becoming accustomed, we find ourselves now in a stretch where innovation and disruption are more than merely accepted, but in fact expected. This is a very important distinction to consider.

The Innovator’s Dilemma — in which the incumbent is disrupted by the startup because the incumbent is correctly focused on its proven and expected offering — may itself be disrupted now. For many incumbents reinvention is becoming a focus and innovation has in many ways become the core offering — that which its customers and market now expect. Refer back to the list of transformations a few paragraphs above, and, as was previously remarked in this series, note the countless large corporations that are now launching venture initiatives and accelerator or incubation programs, (even as startups rise to incumbent status while development is still in process).

A mobile introduction is no longer a shock, artificial intelligence breakthroughs are still exciting but no longer really that surprising, a new business area may not be seen as bold as much as defensive in many cases. The absence of such events, in truth, would be the disappointment: When certain industrials reposition themselves as software companies, the market barely flinches; car manufacturers are buying into ride-sharing and self-driving cars, and the reaction is, by market standards, muted; a global investment bank launches an online deposit-taking operation, and the event is registered as though a new consumer app; a deep-learning program surpasses calculation and proves itself also at intuition (!) in a complex game, and this is news for about a week before it fades into the vague remembrance. It feels as though the questions are not as much about what the innovator-disruptor is doing, as about what else…

This is the nature of the air through which we are now cruising. When an aircraft settles in at a cruising speed it may feel to passengers like it is stationary; but, thankfully, it is not.

Staying airborne

The machinery that keeps an aircraft in flight is complex, the work is hard, and the energy required is enormous. The industrial trends showcased in this article are similarly dependent on a continuous effort of an increasingly strenuous order. As technology tends to commoditization and its economy is impacted by deflationary forces, these act like a gravitational pull that must be fought with velocity and lift:

  • When disruption is expected and innovation is a central aspect of almost any enterprise, a steady state of movement is as important to the incumbent as it is to the startup.
  • In a technology-based business — which, as suggested, is (or will be) almost all business henceforth — the core must at a minimum be perpetually refreshed, and quite likely reinvented.
  • Inventiveness and its qualities — curiosity, openness, creativity, risk-taking — and the optionality that may with a bit of luck be achieved, are thus a matter of survival, rather than excess.

The value of an enterprise, therefore, would more than ever capture the likelihood of its subject, over time and many changes, to survive.


As all businesses, even the most mature, demonstrate aspects of new ventures today, there are venture-like expectations to be observed and parallels to be drawn with venture investment considerations, in all areas of the economy. Besides those contemplated in the preceding, another is the cautious and reluctant use of debt in venture capital, and the importance of preserving flexibility: Leverage will be the subject of the next installment.

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