The Pace of Disruption Is Accelerating
Originally published as part of, “The Day Before Digital Transformation” by Phil Perkins and Cheryl Smith
Many people do not realize that highly disruptive shocks that reshape the world’s economic landscape have happened with regularity throughout history and are a well-studied phenomenon. We have learned many lessons from what has happened in the past, particularly about disruptions that have been caused by technology. Understanding this history can teach today’s business leaders how to navigate the disruptions and position their organizations to win.
The current waves of disruption we are experiencing are part of what historians are calling the Fourth Industrial Revolution or, more specifically, the Digital Age. Research shows we are two-thirds through this age, with about 20 years left to go. The winners of the first half of the Digital Age were companies such as Google, Facebook, and Amazon that capitalized on the early digital technologies, such as web, mobile, and cloud. The winners of the second half of the Digital Age will create business models that capitalize on emerging digital technologies, such as artificial intelligence, robotics, sensors, and wearable devices. If historical trends are accurate, organizations have until about 2030 to truly capitalize on the technologies of this age before opportunities start to dwindle. That does not mean organizations can start around 2030. It means the winners and losers will be decided by then because a new age will begin around 2040.
Whether students of history or not, disruptions are not new news to business leaders. Organizations have been experiencing crisis-level changes over the past two decades. Retail stores and chains were in deep financial trouble long before covid-19 struck. Taxicab companies started downsizing in 2017 when ride-sharing apps Uber and Lyft reached a tipping point. Hotel chains have struggled since Airbnb posted an 80% growth spurt between 2015 and 2016. Teams can no longer rally around the familiar cry of “How can I sell more units of my existing product?” while investing in random acts of technology innovation. It is time for leaders to act with forethought and reason.
The Digital Age, at its core, is about incorporating early and emerging digital technologies into current (or new) products, services, and ways of doing business to give your organization sustainable competitive and financial advantages. Based on this definition many believe that by adding a mobile app or outsourcing their IT infrastructure to a public cloud vendor they will be digitally transformed. “We have taken those actions…or are in the process of doing so. So, what is the crisis?” they ask.
History helps us better understand why those actions are not transformative. It teaches leaders what they need to know about how technology disruption has worked in the past, why transformation is necessary, and what organizations have had to do to transform successfully.
A quick history lesson
During the Agricultural Revolution (circa 10,000 BCE), many human cultures transitioned from hunting and gathering to agriculture. It was at this time that settlement started to take place. A stable community life enabled humans to experiment with plants and learn how they grew and developed. This new knowledge led to the ability to cultivate food and allow large numbers of people to live and work in close proximity. This agrarian society lasted for almost 12,000 years.
As individuals began to band together and settle into tribes, then villages, then towns, and then cities, agriculture and handmade tools remained state-of-the-art. It is difficult to imagine today what life was like prior to the introduction of technology into society. A simple example shows the overwhelming value of the ‘leap’ that the first technologies created.
The First Industrial Revolution (1720—1830), the Age of the Steam Engine, was the transition from hand production of food, clothing, basic day-to-day products, and transportation methods to machine production. The invention of the steam engine in 1714 led the way to the cotton spinning jenny, the power loom, the cotton gin, and the steamboat. These inventions gave rise to the development of machine tools, the factory system, and amazing new means of transportation.
The technologies were not well received. Initially, they took away jobs in every village, town, and city. We hear the term Luddite today used to refer to a person who refuses to accept or use technology. It comes from the story of Ned Ludd who was a weaver in Anstey, England, a victim of the first wave of technology. Although today Ned is believed to have been a fictional character, he has been remembered in song as the person who led a riot to destroy the automated looms in Anstey with his cry: “Death to machines! They tread on our future and they stamp on our dreams.” [ii]
Even though there was massive job loss across the country, England was the beneficiary of substantial wealth creation throughout its society during the First Industrial Revolution due to major changes in work activities, jobs, and lifestyle.
The Second Industrial Revolution (1830—1910), the Age of Electricity and Mass Production, saw an explosion of technology inventions, and innovations. The invention of the light bulb and the introduction of public power stations completely changed the way we live and work. Transportation was changed forever with the introduction of the factory assembly line that led to the mass manufacturing of the automobile, which led to the improvements in the gasoline engine, which led to the development of the first airplanes during this age. Communications were revolutionized with the successive inventions of the telegraph, the transatlantic cable, the telephone, and the radio.
England, Western Europe, and the United States were the major beneficiaries of the wealth created during those years.
The Third Industrial Revolution (1910—1980), the Electronic Age, leveraged and substantially improved upon the inventions of the Second Industrial Revolution, but also created many new technologies on its own. The age began just prior to World War I, a war that started with men on horseback using lances, flame throwers, and bicycle-powered generators for “mobile’ radio communications. By the end of the war rapid-fire guns, aerial bombardment, and armored tank attacks were commonplace. The age moved through inventions that created the nuclear bomb, satellites, and rocket ships that allowed a man to walk on the moon. It began with the invention of hearing aids and the electron microscope and ended with artificial hearts and the MRI scanner. It gave us television, movies, video recorders, video games, and endless hours of new forms of information sharing and entertainment.
Among the most critical inventions were the development of analog electronic and mechanical devices, from early age stenotype machines to mainframe computers. Midway through the Third Industrial Revolution, the United States Navy developed an electromechanical analog computer small enough to use aboard a submarine to solve the problem of accurately firing a torpedo at a moving target. By the early 1970s, most large and mid-sized organizations had a mainframe or a minicomputer that helped run their operations. The Electronic Age ended with the introduction of the first in-home PC. If people thought that technological advances created miracles in the Electronic Age, those wonders paled in comparison to what happened next.
Western Europe and the United States led in the development of a major portion of these technologies, with the United States taking a strong lead at the end of the age with computer technologies. The United States and Europe were the primary recipients of the wealth created during the Third Industrial Revolution.
This, the Fourth Industrial Revolution (1980—2040 projected), originally called the Information Age but now known as the Digital Age, refers to the advancement of technology from analog, electronic, and mechanical devices to the digital technologies available today. It is marked by technology breakthroughs in miniaturization, nanotechnology, and telecommunications. The Digital Age started in the early 1980s with the delivery of the IBM PC and the IPOs of Apple and Microsoft. When the Internet accommodated acceptable speeds by the end of the 1990s, Cisco, Amazon, eBay, Netflix, Google, Facebook, Twitter, Airbnb, and Uber became the early innovators to successfully leverage it as the core of their business models. Advancements continue through today with new ways in which technology becomes embedded in our products, services, ways of doing business, and even the human body, enabling what used to be science fiction to become real. Examples range from the 3D printing of body parts to self-driving/flying vehicles.
The United States led in the massive wealth created at the beginning of the Fourth Industrial Revolution and continues in the lead today. But China is closing in, as later charts reflecting company market valuations show, and may match the US in wealth creation by the end of the age.
In the next age (projected 2040—2090) the advancements in technology may lead to a new type of revolution. Some futurists predict that ours, the Fourth Industrial Revolution, maybe the final age that is designated by the term industrial. By 2040, the projected end of the Digital Age, there will be nine billion people to feed, clothe, educate, transport, and entertain. The individuals and organizations that successfully learn from history will address these challenges.
If you were keeping track of dates, another pattern becomes clear when viewing the revolutions in chart form: the time between technology leaps has gotten shorter with each revolution. (Figure 2)
Since the pattern is distinct, we can predict with reasonable certainty when the Digital Age will end, and a new era will begin. The timing for the end of the Digital Age, estimated to be around 2040, matches the projected timeframe for quantum computing to mature enough to be mainstream. Quantum computing is the last major technology that has been invented in the Digital Age.
As we have mentioned (and believe it is worth repeating), this does not mean organizations have until 2040 to get started. It means the winners and losers will already be established by the end of this decade. While the decision to digitally transform your organization is an event, successfully transforming it is a journey. Organizations must get started now, so they are well-positioned by 2025 to 2030 in their transformation journey or they will miss this final wave.
[i] Leonardo Da Vinci, Walter Isaacson, Simon & Schuster, New York, 37-38.
[ii] “The Myth of New Ludd,” www.ludditelink.org.uk, ludditelinkpdf1.pdf.
[iii] “GLOBAL 2000 The World’s Largest Public Companies,” Andrea Murphy, Hank Tucker, Marley Coyne and Halah Touryalai, Forbes, May 13, 2020.