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Adaptability in an Uncertain World

On February 24, 2011, Airbnb reached its first million bookings, and a year later it had 10 million. On June 12, 2014, Elon Musk released all of Tesla’s patents to the world. On January 24, 2017, Amazon became the first streaming company to receive a best picture nomination. What drove these achievements? What made these stories so different from countless failures? The key to answering these questions, said Frans Johansson, Swedish-American writer, entrepreneur, and public speaker, in the keynote address of the workshop, is understanding the forces of innovation and what they mean about the need to adapt.

Johansson has been interested in the nature of adaptability since he was a child. His mother is black and Cherokee, his father Swedish, and

he was raised in Sweden, surrounded by reserved, blue-eyed, blond-haired people. Growing up with parents from different cultures, he was exposed to ideas, perspectives, and norms that provided him with a multifaceted understanding of the world. Eventually, he wrote two books on the nature of innovation: The Medici Effect: What Elephants and Epidemics Can Teach Us about Innovation (2004) and The Click Moment: Seizing Opportunity in an Unpredictable World (2012), where he explored how the features of modern society have changed the pathways and requirements for innovation.

One sign of the increasing speed, spread, and sources of innovation is the decreasing average lifespan of companies, he noted. About half of today’s S&P 500 companies will be replaced in the next ten years. The economy has never been more efficient in sorting companies that can adapt from those that cannot, he said. However, just to say that companies need to be adaptable is not enough, because “adaptability is a tricky concept.” Organizations have different ways to adapt than do individuals, and nations may adapt in ways different from those of organizations or individuals.

THE ROLE OF EXPERTISE

An oft-repeated assumption is that expertise is the key to successful adaptation. This notion has a long history, said Johansson. For example, Serena Williams, one of the best tennis players in history, has gained her expertise through lifelong training and practice—she says she has never lived a single day without practicing tennis. Her success clearly supports the idea popularized by Malcolm Gladwell (2008) that expertise in a domain can be attained only after practicing for 10,000 hours.

Does the same rule apply in the modern economy? How many hours of practice did Reed Hastings have before he created Netflix, or Richard Branson before running Virgin Atlantic airline? Johansson said that if he were to ask five people in retail about the future of their business, he would get five different answers. “If I get five separate answers when I ask five experts, what does it even mean to be an expert?”

One difference between tennis and retail is that the rules rarely change in tennis. The most recent rule change was in 1961, when it was decided that players were no longer required to keep one foot on the ground during their serve. Today’s economy is the exact opposite, observed Johansson: The rules constantly change, often without warning.

In 2007 Nokia was three times larger than the next largest mobile phone competitor. The company “knew the rules of the phone world: Phones were supposed to have cool colors, cool shapes, and cool ring tones.” But after the iPhone came out, no one cared about colors or shapes, people wanted cool apps. Within two years, Apple and Google had transformed cellphones, even though their phones were viewed skeptically by experts when they were released. “That’s how quickly it could change.”

THE NEED FOR STRATEGY

The world is facing an onslaught of trends and developments that are making the future exceedingly uncertain, Johansson observed. Millions of people all around the globe are entering the workforce and trying to figure out the next big thing. Technologies like artificial intelligence and deep learning suddenly have the potential to reshape the workplace and society. Social networks and technology greatly magnify the spread of innovations, as demonstrated in a tweet from Airbnb’s founders: “Marriott wants to add 30,000 rooms this year. We will add that in the next two weeks.” Changes are behavioral as well as technological. “Parents always said, ‘Don’t get into a stranger’s car.’ Now everybody does it” with Lyft and Uber.

Money, access, and resources are available to fund and fuel the growth of virtually any idea. Success is unexpected, making it difficult to understand where to go next. Trends alone do not provide the key, because there are too many forces interacting with each other.

“Let me state this more provocatively,” Johansson continued. “What is the point of planning anything or strategizing if the world keeps changing as quickly as it does?” Strategy is necessary because people do not act randomly. Humans always have a rationale for their behaviors. “The purpose of strategy cannot be to figure out the right answer, because you’re likely to be wrong,” he explained. “It’s to convince yourself to act, to move, to execute, to test something. If we’re going to understand the heart of adaptability, we have to understand this piece.”

The need to have a strategy has four implications for what a strategy should contain, Johansson said: placing multiple bets; combining expertise and skills with new fields, industries, and cultures; preparing for unpredictability; and enhancing the speed of innovation.

PLACING MULTIPLE BETS

First, if developments in the world are unexpected, one must assume that one cannot know all the answers. Therefore, the more bets an organization or individual places, the better.

Companies and individuals must place bets in different ways, Johansson continued. For the individual, bets are determined by how quickly one can iterate oneself to become a new, better version given the surrounding environment. In business, bets set a company up for a number of possible futures instead of just one.

The idea that people who change the world try far more ideas is a prominent finding from research on innovation and applies across the board—from entrepreneurs to artists to scientists to corporations. Picasso created over 50,000 works of art. Einstein published more than 240 papers. Both continually tried new things, unsure of what would succeed. More recently and at the corporate level, Angry Birds is one of the most downloaded games of all time and changed the way gaming companies thought about the possibilities of gaming. But Rovio, the Finnish developers of the game, made 51 games before Angry Birds. This experience enabled them to create a game maximally appealing to the public and with a focused, scalable marketing strategy.

The trend toward smaller and faster bets will accelerate, Johansson predicted. Today, many companies are being funded on a small and incremental basis. People have been taught that the rules of success tend to be rigid, but as the world becomes more unexpected, the opposite is true. Success is based on flexibility, creativity, and speed. Amazon is a prominent example, expanding from a book-selling business to a huge corporation, with a diverse portfolio of departments and investments, that constantly innovates—with movies, Alexa, drone delivery, grocery shopping.… The company places bets as far as it can reach as part of its strategy to remain a dominant commercial power.

The idea of placing multiple bets is different for an individual than for a company, Johansson noted. An individual cannot place multiple bets simultaneously. Rather, the individual needs to determine, “How quickly can I become a new version of myself, given the realities of what’s going on around me?”

INNOVATION DERIVES FROM COMBINATION

The second implication Johannsson cited is that innovation comes from combining existing expertise with new fields, industries, and cultures. The extent to which an individual or organization can acquire, combine, and build on new skills determines adaptability.

He cited the example of a hospital in the United Kingdom that was having trouble transferring patients from surgical units to the intensive care unit. The transfer involved two separate teams, creating opportunities for potentially fatal errors in communication. For insights, the hospital decided to study racecar pit crew operations developed by the McLaren organization. New procedures allowed the hospital to develop best practices for speed, efficiency, and communication, resulting in fewer errors.

The best preparation for adaptability is to combine building blocks of knowledge, Johansson said. Education helps inform decisions by providing the tools to acquire new skills. School is not the only venue for learning new things, but it can provide the structure and models to enable the acquisition of new skills.

The United States, China, and Russia have advantages of large populations, a national language, and insularity at the early levels of scaling. But these nations also boast immense diversity. When Chinese nationals return from the United States, their experiences allow new insights and accelerate innovation in their home country. The combination of insights across cultures, fields, and industries inspires innovation in ways similar to the combination of building blocks of knowledge.

EXPECT THE UNEXPECTED

The third implication of a rapidly changing world is that people and organizations need to pay more attention to the unexpected. This implication is in contrast to what happens in schools. Schools are becoming more and more similar in order to remain competitive, but this model is not universally suitable. The endless comparison of statistics and scores in education can stifle innovation, even though the purported purpose of tests is to promote maximal success.

To promote student passion and drive, universities and grade schools need to rethink and revise old and rigid approaches and models, Johansson said. Schools need to focus on the issues students care about

rather than focusing on perfection. Successful companies are not those that do everything perfectly but those that have the drive to push on.

Much in life is based on the idea of a predictable path. In school, one grade follows the other. A student who is a grade level above his or her peers is applauded. But after graduation, there are no longer such differentiators.

“If we want to prepare ourselves for the unexpected, for the unpredictable, then we have to be willing to acknowledge that we gain insights, we gain our passions, and we get our knowledge in ways that don’t follow a necessarily normalized path,” said Johansson. The resulting deeper understanding of the world may cause one to examine and question the unexpected, the outlier, whereas schools actively teach that the outlier is to be ignored. Surprise is a leading indicator of innovation.

SPEED IS THE NEW IP

The final implication Johansson cited concerns intellectual property (IP). With the massive changes that outliers can produce, speed becomes more important than IP. IP matters only as long as an idea or a product is relevant, but the shelf life for relevance is shrinking. When Elon Musk released Tesla’s patents to the world he dramatically accelerated the speed of innovation in that field. The velocity of innovation must match the speed of the changing world, Johansson explained. “You want to be innovating so quickly that you can invalidate your prior patents.”

This implication holds for both individuals and organizations. Adaptability depends more on speed than on the knowledge one controls. “The world is changing faster than ever, and it follows that you have to as well.”

A WORLDWIDE CHALLENGE

All countries are struggling with these issues, not just the United States, Johansson concluded. Even as the United States worries whether its students are acquiring enough basic skills, other countries are trying to make their educational systems more like the US system to emulate the way it fosters creativity and innovation.

Johansson was optimistic about the United States’ prospects in a world of accelerating and unexpected change. “We have a good shot at getting this right,” he said. “We have a good chance of getting ourselves into a position where we, as a country, will keep on taking what’s good

about what we do—the creativity part, the innovation part—and push farther.”

“The world is increasingly moving in unexpected ways,” he said. “We should move with it.”