Lesson 16 of 22
In Progress

Industry 4.0 & Exponential Growth (Ideas Worth Doing)

UPG Team March 17, 2023

The Fourth industrial revolution is a name chosen by the world economic forum. But there are many other names that you might have read. Books such as the second machine age, industry 4.0 or many others. Some people are even saying that what is happening is actually beyond an industry is actually affecting the whole society is not just limited to industries.

But let’s say we take fourth industrial revolution. First industrial revolution started in United Kingdom, which was the pioneer of the first industrial revolution in 17 and 18th century. Most of it was built on steam, but there were other machines also. We have industrialized lot of our production which eventually lead into the second industrial revolution.

At the end of the 19th and the beginning of the 20th century, electricity became a big deal and we have also designed new ways to produce things which we scalable such as assembly lines. Finally, we had a revolution information technologies and computing which we are at the end of, starting in the 50s and 60s and full coming to fruition at the beginning of the 21st century. I think it’s fair to say that, even today we are still feeling the impact of the last one and how much it has changed our world.

We are now at the beginning stages of the fourth industrial revolution. It might seem that we are quite far into it, but actually we are still at the beginning, and I’ll explain in a second why. If you consider how much the world has changed in the previous industrial revolutions, it’s by no means an understatement to assume that there are big changes ahead of us.

These are some technologies that are making up the fourth industrial revolution although there are more of them than you can see here. We can start on top – we have artificial intelligence which is now very strong when built for specific applications of artificial intelligence. Then we have blockchain, cryptocurrencies, and NFTS. I assume most of you are familiar with these, but I still think that the potential of what these mean for the global economic and financial system has not yet been explored at all.

Then augmented and virtual reality and drones. I’ll touch on augmented experiences, when we talk about self-driving flying cars.

We won’t highlight all of these, but quantum computing by Righetti is now in the cloud and you can run quantum computing applications. Then there is 3D Printing, nanotechnology, and robotics.

So those are some of the technologies that are happening all at once. In reality it’s more like 25 within a matter of moments which are all happening at the same time. You may remember, Gutenberg, when he came with a printing press, it completely changed how we as society and humanity disseminate knowledge. And we now have the equivalent of 25 Gutenberg moments happening all at once. For all these reasons, I think it’s fair to say that the world is changing faster than anyone has predicted.

One of the key reasons for this is actually the underlying dynamic behind those technologies and why they are growing so fast. These technologies – we call them exponential technologies because they are all powered by information technology, information science.

This means Moore’s law applies, which means that for more than 50 years the price performance of microchips doubles roughly every 18 months, roughly. Exponential progression and doubling pattern is very deceptive as it grows very slow for a very long time and then suddenly explodes. It seems that nothing is happening but then suddenly, everything is different. All the technologies we mentioned are powered by information and microchips which also means they are subject to Moore’s law. And that means that they are indeed very deceptive.

Let me show how – If I ask you now to stand up and go 30 steps, you know pretty much where you’re going to be at any point of the journey. At the end you will be 30 meters in the direction you choose, and you can estimate very well where you will be at any given point of the journey. You can estimate where half-way will be, where two thirds is, etc. Linear progression is quite easy to understand and is predictable.

However, if I ask you to take 30 exponential steps, one, two, four, eight, 16 (this is one kind of exponential progression – doubling at every step) this is what happens.

You will reach billion meters which is roughly an equivalent of being 27 times around the Earth. This is quite different to the linear progression. But what is most shocking around this is that it is impossible to predict where you’re going to be halfway through or elsewhere because our minds are not used to think in that way.

Let’s have a look at this. If you take 15 steps, which is normally halfway to the final destination, you won’t even reach 0.01% of your total distance. You can see the rest of the numbers on the slide – 20 steps, 25 steps, actually, the last five steps account for 97% – almost all of the final result. And again, this only happen in the last five steps.

This is something that is very hard for us to understand. All the technologies we are speaking about, they have been developing for many years, sometimes for decades, but they are now entering into a phase where they are moving to the steeper part of the curve, which is what makes things quite unpredictable.

This is our estimate – we are past the knee of the curve. This is why we believe our future is being defined as we speak and there are incredible business opportunities presenting themselves today.

Any technology on this slide has been developing quietly for years, sometimes decades but all of them are hitting the knee of the curve now or in the next few years. And that will change our world in fundamental ways and as shape our future. However, there is one more thing happening. While each of these technologies is disruptive on its own, because many of them are hitting the knee of the curve just about now, their convergence is what creates an unprecedented and previously unseen pace of change.

Let me give you an example.

Let’s speak about flying cars. Flying cars have been appearing in science-fiction literature for around 100 year. In fact, many people were sure than in the year 2000 or for sure in the year 2020 we would have been zipping around in flying cars at our leisure. However, this hasn’t happened yet. In fact, Peter Thiel, a Silicon Valley venture capitalist said at as a critique of the tech industry – we wanted flying cars and what we got was 140 characters. He was making fan in part but also asking a serious question – why are we not building flying cars?

And one of the reasons was that until now, the technology to make it happen simply didn’t exist. However, what is happening now is that thanks to the convergence of multiple exponential technologies, it is becoming finally possible. As we mentioned, each one of these technologies is by themselves disruptive but when they start to converge together, amazing things become possible. It is now predicted that we will see fully operational and available flying cars within this decade.

In 2019 alone, there has been a billion dollars invested in at least 25 flying car companies. And here you can see few technologies that were developed for a diverse set of applications but when they are brought together, they can make the flying car a reality.

Distributed electric propulsion means you can have multiple engines that coordinate and operate quietly which is very different than a helicopter with 1 loud large noisy engine which also happens to be very dangerous. With distributed electric propulsion you have multiple engines that are quiet and all coordinated via AI algorithms that can synchronize the small engines. This is needed because it’s impossible for a pilot to do it manually, so this development needed to happen to make this system possible.

Then you have things like LIDAR, accelerometer, GPS and other tracking devices which were developed in other places like self-driving cars and mobile phones but they happen to be very useful for a flying car. Thanks to developments and research in solar energy, we now also have batteries that are capable to store enough power to fuel the flying car for as long as it needs. We have advanced computer simulations that can design better shapes and materials. New materials have appeared in material science. And 3D printers are now actually able to print whole parts and sections which wasn’t possible before. Today, we can actually print large percentage of an aircraft engine which is incredible when you think of it as the sophistication and safety requirements of these are huge.

Because of all of these technologies, the flying car is finally possible. But not only flying car, as you saw on the previous slide – Future is faster than you think. The convergence of technology is speeding things up. As such, it is important for us to keep asking about the future and study resources that can help us to better peek into and understand the future.

Ray Kurzweil famously said we are about to experience 20,000 years of technological progress in just 100 years. That’s basically from the agricultural revolution 10,000 years ago to the present moment twice within the next century. Very, very fast.

But let’s have a look at what this actually means for businesses.

How do these technologies actually impact society, how do they impact the world, and how do they impact industries and businesses? Peter Diamandis is one of the cofounders of Singularity university, he is also a founder of the X-Prize foundation and the Abundance 360 and Abundance Digital communities.

Peter defined something called the ‘6D’s’. Basically, he says that once the domain becomes information enabled, it goes on a predictable trajectory characterized by 6D’s – digitized, deceptive, disruptive, demonetize, dematerialize and democratize.

Think about all the money invested today into digital transformation – well, that’s just a step number one out of six. There are five more that organizations have to deal with and can tap into. I sometimes say that becoming digital is like you’re buying yourself a ticket for the fourth industrial revolution but it’s not the end point, it’s actually just the beginning.

Let me cover each one of them in sequence.

Digitization is about taking things that were previously analog and turning them into data, into digital information. There is about trillion sensors predicted to be all around the world soon and each one of these gathers digital data. Many things that were previously invisible to computers will suddenly be visible. They can be analyzed and worked with. Nearly every domain of our society, nearly every organization is becoming digital.

When that happens, the domain then enters into a deceptive phase. An interesting metaphor for this is from nature – the Chinese bamboo. When you plant it for five years, nothing happens. You don’t see anything. But something is happening, underground. It’s just that you can’t see it. After five years in the ground, it then starts growing and in five weeks it actually grows to be 25 meters. For five years, nothing. And then in five weeks, it is the fastest growing plant on the planet.

This is what we call a deceptive. A similar pattern exists with every exponential technology.

You can see on the graph that initially, until you hit the knee of the curve, the exponential curve is actually slower than linear. People actually tend to underestimate what is possible. It seems nothing is happening.

When Craig Venter was sequencing the human genome for the first time, there was a set large budget and a timeline. And it was going very slow. When they were about 1% of the final outcome, it seemed they will need another 70 years to finish it at this pace. Most people were telling him to stop and save himself the embarrassment as they didn’t see any way the project could be done on time and on budget.

But Ray Kurzweil noticed that the progression was exponential, not linear. When people were losing faith in the project, he said they are half-way done. And surely enough, the project was finished under budget and before the deadline. Such is the power of exponentials. And genome sequencing is even going faster than doubling, faster than Moore’s law.

So exponential progression is deceptive for a very long time and then suddenly, we have a black Swan and things become disruptive. Um, so you do have some industries, books, newspapers, music, and movies that got disrupted, and you have the corresponding disruptors – the apps that are all around on the slide.

First 3 D’s – digitized, deceptive and disruptive. And then it gets very interesting. The second set of 3 D’s – first is de-monetize. Essentially, the money disappears from the old business model. The old way of making money which was built on scarcity, old technologies and old business models disappears, it’s gone. It has already happened in several industries and many more are to come.

For example, what happens with telecommunications companies once internet connection is ubiquitous? What happens with electricity companies once we figure out free, or at least very cheap energy, for example from the sun in combination with exponentially improving batteries and peer to peer energy networks? It is likely going to happen in every or at least in most industries.

We often ask companies – what would you do if your core product of today is available for free tomorrow? How will you make money? I think it’s a very important question companies should be asking today.

Next D is ‘dematerialized’. You can see on the video how over last few decades, everything we used for our office work moved from being analog to being digital. Software is eating the world was said by Marc Andreesen (author of Mosaic, the first internet browser).

I think this will keep happening. I think we should not forget that the physical world because it is very important, but it is quite likely that more and more of our daily professional and maybe even personal lives will be moving to digital space.

And the final outcome of that is that a lot of things are becoming democratized. While there is still a lot of inequality in the world, there is also at the same time more quality in certain domains than we ever had. People have access to things that they have never had access before. If you have a mobile phone connected to the internet, you have access to more information than presidents and heads of state had just a few decades ago. At the same time, with all this informational abundance, it has become of crucial importance to be intentional and selective about what information you pay attention to.

The fact is that companies will disappear in the next 10 years if they don’t radically change themselves.

So this is a brief introduction into the context of technological progress in the world today and how this affects society and organizations today. But for society to be fully changed by a new technology, something else is needed.

As such, as technologies around us are progressing at exponential pace, we need to also look at whether our organizations are structured well to capitalize on them. Salim Ismail and the author team of the book ‘Exponential organizations’ have done a thorough research into around 200 of the most iconic, innovative and original companies in the 2020s. Their central question was, can our organizations scale as fast as our technologies can? And if so, how they are doing it?

And they found out there are 11 ‘Secret ingredients’ that these companies are tapping into. These ingredients are a blueprint of scalable, innovative, fast-growing and very successful organizations. We call these Exponential organizations, and we will go deeper into each attribute in the next module.