Marketing’s habit of planning for incremental growth is at odds with the exponential changes occurring in the world. Steve Sammartino on the Law of Accelerating Returns.

This article originally appeared in The Intelligence Issue, our April/May issue of Marketing magazine.

 

Marketing has always been about intelligence, but it’s a nuanced kind, one that involves making sense of all the bits that make up an economy.

We need to have a handle on macro trends, sociology, psychology, consumer sentiment, technology, demographics, finance, regulation and pop culture to name but a few.

Such is the complexity and quantum of information we must grasp, utilise and leverage, it’s nigh on impossible to pretend what we do is scientific.

Occasionally we get lucky enough to concoct a market formula that works for a period of time. We may even bask in a period of dominance, become a market leader, or even invent a new industry. Over time, however, the ingredients that worked become less effective in our ever-changing world.

We must constantly tinker with the ingredients and gain real world feedback. The dream of a classic rinse-and-repeat strategy that works in perpetuity is mostly confined to hopeful directions on the back of a shampoo bottle.

While marketing is abound with quasi-scientific ingredients, the process itself is really a game of pattern recognition. We see a pattern, incomplete and emergent, try to facilitate the continuation of the trajectory. We create solutions for problems, possibilities, or substitute the existent with something better. We become the missing pieces to what is happening anyway.

The better we are at using the tools of intelligence the more evident the patterns become to the marketer. Those who master the art of reading the patterns have the best chance at benefitting from changes. Our success as marketers is often based on our ability to embrace future inevitabilities.

If we miss a forking pattern it can be extremely costly. The tales of industry disruption these days are hardly surprising. The patterns of shifting behaviour and solutions were clear to see for anyone or any company who had the courage to admit the technology would facilitate an alternative. The fact that the advertising, music and media industries have given up the high ground to new players can at least partly be blamed on ignoring the patterns.

In the early days of the internet (think early 1990s) every industry that was imagined as transitioning to a largely online presence has mostly happened as predicted. The dot com bust that happened half way through the journey allowed most industries to develop a false sense of security, a belief that change isn’t happening as quickly as we imagine.

The reasons a lot of these digital disruptions faltered at first was simple; the infrastructure supporting the shifts to new solutions were severely lagging behind the possibilities of the technology.

Marketers will not be so lucky the second time round. The truth is that the pace of change isn’t just fast, it’s actually accelerating.

So it’s time all marketers add a new kind of intelligence to our basket of indicators – the Law of Accelerating Returns.

 

The Law of Accelerating Returns

Put simply, the Law of Accelerating Returns states that technological change is exponential and that the rate of change acts like compound interest. It increases against the starting point at ever increasing rates. Contrary to the way our human minds work, the change is non linear.

Let’s take this example of exponential growth: 30 linear steps would take me about 30 metres. But 30 steps doubling the distance each step will – wait for it – take me around the world 26 times.

This means that we won’t experience what feels like 100 years of progress in the 21st century, but what feels like 20,000 years of progress. The common trope is that of Moore’s Law, yet it turns out that the Law of Accelerating Returns relates not just to computing power but all digital processes.

Every communications technology, then everything we do as marketers, no matter what we make or sell falls inside this definition. The Law of Accelerating Returns is no longer an optional consideration, we have to understand it’s impact if we want to plan even the medium term with any hope of success.

We have to do this because it is all around us.

Here are a few accelerating technology laws beyond Moore’s law which get far less attention:

• Koomey’s Law states that the energy required for computation halves every 18 months,
• Kryder’s Law states the amount of information we can store doubles for the same amount of space ever 18 months,
• Butter’s Law states the amount of data we can put through optic fibres doubles every nine months,
• Nielsen’s Law states that bandwidth to the average home doubles every 21 months,
• Sawnson’s Law states that the cost of solar panels drops 25% every doubling of manufacturing capacity, and
• Haitz’s Law states that the amount of light generated by an LED 20 times each decade and the price falls 90%.

 

They all have the same clear pattern. What is interesting is that many consumer products leverage a number of these technologies simultaneously.

What this means for marketers is that change is happening so quickly we are getting to a phase in business where our launches will need to be the preamble of the near future reality.

If cars are merely becoming rolling computers, then it makes sense that new electric versions will probably half in price in the next two years. Just in time for our all-electric house with cheap solar and off the grid battery storage.

Or maybe self-flying drones will circumvent self-drive cars before they arrive? So we won’t need to build those new roads after all, we’ll just fly above them in five layers of drones. And while most voice-recognition software and natural language processing isn’t much better than a six year old kid today, it will be the equivalent of a PhD in every subject in less than five years, based on the current rates of acceleration.

If we think of the possibilities of virtual and augmented reality, there is the potential to change not just the way we experience things, but to be location independent and feel as though we are somewhere else entirely. Maybe harbour side housing will be disrupted by augmented windows. Or front-row seats will become an everyman product while we sit in a haptic suit in the middle of centre court or on stage of a concert.

Once we develop an intelligence for technology’s accelerating properties, we have an advantage in seeing the patterns of the future, and connecting the dots of possibility.

Silicon Valley became an epicentre of industrial tourism not because the people who work and live there are smarter, but because they invested in the possibility of tomorrow, today. They understand the impact of digital exponential intelligence.

For marketers, this is the most important pattern we ought to recognise today, because the change is now happening so fast that we need to be on the brink of embracing fantasy.

In marketing we have a habit of making our plans a bit like last year with a small amount of incremental growth. But given what we now know, it’s time to re-consider the five-year plan to make it a reflection of the crazy world we’ve just entered.

If it feels wrong, too ambitious or just too crazy to be possible, then you’ve probably got the reality of accelerating returns right.

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