Azhar describes how exponential change begins slowly and, especially in the case of improving technologies, is often disregarded as an edge case or fringe interest (for example, mobile phones, solar panels, electric cars) until it grows so rapidly it threatens institutions.
Those who understand and can map what he describes as “the exponential gaps” can then re-orient to harness the power of exponentiality and thrive into the future.
Exponential. That’s a word I like to think I understood but realised recently I did not. Not because I’m bad at maths but because, like many, I hadn’t understood the implications of exponentiality. Especially with regards to change.
Consider the ‘Rice and chessboard’ story. According to the story, the inventor of chess was offered a reward by his ruler. He asked for one grain of rice on square one, two on square two, four on square three, eight on square four, and so on. The ruler laughed it off until his advisers calculated the amount needed to fill the last square: 2,000 times the global annual production of rice.
This is why Ray Kurzweil coined the phrase ‘The second half of the chessboard’ to describe the massive gains that technology will deliver. This is the reward for those set up not just to digitise the old ways of retailing, but to fundamentally reimagine the exchanges of value.
That unsettling fatigue we’re feeling is a symptom of the growing awareness that humanity is moving to the second half of the technology chessboard. And while there is much to be gained, there is more than a little to be lost if we can’t orient ourselves successfully in the new era.
It’s a mindset challenge now, not simply a technology one.
Learning velocity, the secret recipe
Big brands are stable institutions with operating systems designed for scale, not agility. This is a feature when change is predictable, but a bug when change is exponential.
It’s vital to understand the emergent properties of technologies to be able to design new ways for them to relate to retail business models. Business model innovation is needed for brands to stay ahead. And that requires deliberately accelerating organisational learning velocity: designing a process to learn faster than any competitors and translate that knowledge into action. That’s the purpose of R&D.
To succeed also requires something slightly unfashionable: playing a longer game. Much of the developed world has succumbed to the pressures of short-termism. But there’s never been a better time to consider how, in an era of systemic and exponential change, we might stand back and apply research and design to orchestrate diverse initiatives, using the data and insights we gather to provide an evidence base for rapid change.
Putting design back into R&D
When we look for examples of retail brands benefiting from this kind of R&D investment today, it’s hard to ignore Amazon. In 2019, as a 25-year-old company, Amazon reportedly had an R&D budget of just under $36 billion. That’s just behind the UK government’s R&D budget of $39 billion for the same year.
Amazon designs ways to learn, understand, and apply systems thinking to create new forms of value for the brand, new relationships, and interplay that offers a competitive advantage that’s hard to replicate.
This approach works not just for retailers entering the second half of the chessboard, but also for brands transitioning to the circular economy, because as Azhar puts it, “Most of our most urgent issues can only be solved by exponential technology: climate, food, healthcare.”
So how can you apply this thinking to your business? Firstly, take a fresh look at how you approach R&D. Are you truly factoring in the future state of technology and its impact on retail? Are you avoiding shiny tech meant for consumers to focus on strategic progress? Secondly, is your brand so big that you’re unable to be agile in ways that matter? If so, how fast can you design ways to explore future scenarios and de-risk your innovation investments? And lastly, are you ensuring your R&D team is constantly thinking beyond the digitisation of your existing business to explore emergent properties and designing a new future?
We’re a couple of moves from the second half of the chessboard and the only way to make it is by designing your way out. Because when you know how to learn fast and create rapid results, you and your team won’t feel fatigued, you’ll feel energised.