The world is changing at a faster and faster rate. It’s not our perception; it’s a genuine phenomenon that is explained by the networking principles that form the basis of our social systems.
The pace of life systematically increases with population size: ideas spread faster, businesses are born and die more often, and economies continue to grow. This increase in pace follows the Geoffrey Wests 15% rule, which states that if the population doubles then the pace of life will increase by 15%.
Sustaining this growth requires the time between innovations to get shorter and shorter. Significant changes and paradigm-shifting discoveries must happen at an ever-accelerating pace. The general pace of life is quickening but also that rate at which companies must innovate is getting faster and faster!
To see this in action, we only need to look to history. It took humans over a thousand years to move from the Stone Age to the Iron Age but less than thirty years to move from the “Computer Age” to the “Digital Age”.
You can see this same acceleration in the developments of human consciousness. Frederic Leroux’s work defining five stages of social consciousness development demonstrated how the time it takes for societies to shift phase is decreasing.
All of this means that although time isn’t getting faster, the pace of change is speeding up relative to it, driven by the forces of social interaction. It’s the reason we feel life is getting faster and also why companies must find new ways to develop innovations at a faster rate than ever before.
Over the last eight years, I’ve worked with a lot of different companies as a consultant. One question I’ve asked every company is, ‘what goals do you have?’ and I cannot think of a single one that didn’t mention growth.
I have nothing against growth, but I wonder if it’s always the right goal. Year on year revenue growth has become the default metric of success for most companies but is it possible to continue to grow indefinitely?
To try and find an answer, I turned to Geoffrey West’s book, Scale. It’s a fantastic book, that explains how the universal laws of scaling apply to everything from animals, cities and indeed companies.
West, explains that companies growth is fuelled by profit, the difference between total income and expenditure. Profit generally scales linearly with the number of employees, and mathematically, linear scaling leads to exponential growth. Just what most companies are striving for.
While exponential growth sounds good, it’s a significant challenge. The overall economy is also expanding exponentially, so individual companies need to grow at the same rate as the economy or faster to register real growth.
And here lies the issue. Young companies tend to shoot out the gate and grow rapidly before slowing down as they mature. But as they age and growth slows, they begin to rely on the growth of the market to sustain themselves. If you factor out the growth of the market, most mature companies (over $10 million in yearly revenue) are not growing. They are just floating on the foam of overall market growth.
This is dangerous territory. If these companies cannot keep pace with the growth of the market, they are in danger of drowning. This is why innovation is so crucial for mature organisations. Entering new markets and solving new customer problems isn’t optional. It’s essential if you are to weather the storm, keep your head above water and keep up with market growth.