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Flash Boiled Frogs™ in the Era of Exponential Change – Are You Feeling the Heat?

Updated: Apr 13

According to Wikipedia, the boiling frog is a fable describing a frog being slowly boiled alive. The premise is that if a frog is put suddenly into boiling water, it will jump out, but if the frog is put in tepid water which is then brought to a boil slowly, it will not perceive the danger. It will slowly grow too weak to jump and be cooked to death.

Many companies behave like boiling frogs. Some completely miss the fact that a change in a horizon line, like technology, society, competitors, markets, or other business factors, represent a real threat to their business – they just don’t see the magnitude, speed and direction of changes on the horizon. Others see them but don’t intercept them, meaning, just like the boiling frog, they can sense that their environment is changing, but they don’t realize the gravity of the threat and don’t react until it is too late.

In today’s exponential era, the changes they need to sense are accelerating beyond the slow boil of old, and companies are now becoming what we call ‘Flash Boiled’. By the time they discern the horizon at a distance, at the current rate of change, the horizon line has moved from an opportunity to a threat. The slowness of companies’ responses in the face of exponential change renders them boiled in a flash.

Consider the examples below as we illustrate how prominent enterprises and entire industries have failed to intercept horizons at a growing rate of change.

Slow Boiled Frogs of the Past

Take a look at the cover of Forbes in November of 2007:

“Nokia, one billion customers – can anyone catch the cell phone king?” said the cover. At the time Nokia was earning more than 50% of all the profits in the mobile-phone business and was by far the most recognized brand in the industry. Who could ever overcome such prominent dominance?

That same year Steve Jobs introduced the iPhone. And, as they say, the rest is history. In 2013 the company was sold to Microsoft and the Nokia brand was gone.

How could Nokia miss the smartphone horizon? Mind you, this was a highly adaptive company that moved from rubber galoshes, to paper, to phones. It spent enormous amounts of money on R&D and was considered a technological powerhouse. Ironically, it introduced the first smartphone as far back as 1996 and built an internet-enabled touch-screen prototype in the late nineties. In that same year Nokia declared the cellphone as the eventual ‘remote control for life’.

So, what went wrong? In August of 2011, Marc Andreesen wrote the famous Wall Street Journal article entitled Why Software Is Eating the World. Nokia was a hardware company with great expertise and pride in building physical devices, but where software engineers were marginalized. What they didn’t understand was that the smartphone business was all about the software. Nokia missed the 'software-eats-the-world' horizon.

It took more than a decade, from the time smartphones were prototyped to when Nokia ceased to exist – Nokia became a slow boiled frog.

Around that time another interesting frog tale was developing. John Antioco - a retail genius with a long history of success - was the CEO of Blockbuster, a video rental powerhouse with thousands of retail locations, millions of customers, massive marketing budgets and super-efficient operations. Blockbuster was the category king of the video business, with absolute dominance over its competitors.

In the year 2000, John Antioco was approached by Reed Hastings, the founder of a fledgling company called Netflix who proposed a partnership where Netflix would run Blockbuster’s brand online and Antioco’s firm would promote Netflix in its stores. Hastings got laughed out of the room.

While Antioco basked in the sun enjoying Blockbuster’s success, Hastings kept growing his small mail-order video business. At the time, Netflix did not seem to represent a threat. It was hard for people to find it because it did not have any retail stores. And since customers received their videos by mail, they couldn’t just pick up a movie for the night on their way home.

Still, customers loved the service and told their friends, and slowly but surely, Netflix kept growing. By 2008, Netflix had taken some of Blockbuster’s market share, but Blockbuster refused to acknowledge the threat. Just like the boiling frog, it certainly sensed that the water was getting hotter, but even with a change in CEOs, it remained in denial.

“Neither RedBox nor Netflix are even on the radar screen in terms of competition” said Jim Keyes, CEO of Blockbuster, in December of 2008. By 2010 Blockbuster was bankrupt.

What happened here? Was Blockbuster truly oblivious to the threat represented by Netflix? No, but Netflix did not become an obvious threat until they adjusted their business model to leverage the ability to stream videos via the internet.

Blockbuster completely missed the network horizon, and in less than a decade, went from king of the hill to a boiled frog, experiencing a sharp drop in revenues in the last 2 years before bankruptcy. The rate of boiling had just increased significantly.

These are just two examples of companies that were unable to intercept horizons over a period of many years. There were several others who also failed to see or act on changes that had a profound impact on their business, all coming to a fatal boil in an accelerating rate of change:

Introducing Flash Boiled Frogs™

The companies above failed to intercept horizons at a time when the rate of change had not yet reached the elbow of the exponential curve. We now live in a different era.

The most profound changes are yet to come, and they are coming at speeds never experienced before. This is partly due to the fact that computing power and accessibility, represented by GigaFlops (billion calculations per second) per dollar has reached an inflection point on an exponential curve:

The increased access to cheap computing power, combined with the incredible amount of data now available via sensors, mobile phones and the internet, as well as significant advancements in algorithms, is accelerating change at unimaginable speeds and propelling us into the exponential era.

Whereas past failed companies experienced a gradual temperature change that eventually resulted in the boiling demise of countless frogs, current companies will experience temperature changes in a fraction of the time, and unless they jump, they will become what we like to call Flash Boiled Frogs™.

What happened to the newspaper business illustrates the concept of the flash boiled frog. In a short period of time newspapers lost 80% of their advertising revenues:

A more dramatic example is what happened in the taxi industry. Taxi companies watched as they lost over 40% market share in 15 months, as Uber grew exponentially.

Threat or Opportunity

Being at the inflection point of an exponential curve representing changes in science and technology can be scary or exciting, depending on your perspective. No one knows exactly which technologies will become game changers, and which will fade over time. All we can do is project what we know today into time-enriched models that can be used as lenses into a possible future.

Whether a change becomes a threat or an opportunity will depend on your ability to discern the horizon distance and to intercept that horizon. The key is to realize that in the exponential era the horizon line will quickly move from an opportunity to a threat.

The implication to businesses is that the planning processes of the past are no longer effective. We need a new model and methodology for strategic planning that accounts for converging horizons that are changing at an exponential rate. We cannot make decisions over timeframes that ignore the rapid movement and the convergence of horizon lines in science, technology, economy, environment, society, and politics. And we can no longer afford to produce stacks of paper that sit on a shelf for several months or years.

Today’s strategic plans are inversely worth the time they take to create and sit on the shelf. Is your strategic planning process fit for the exponential era?

“In preparing for battle I have always found that plans are useless, but planning is indispensable.” - Dwight D. Eisenhower

Better jump when you first feel the inklings of heat from changes on the horizon…. And jump fast before the water turns into steam in an instant, forcing you into the ranks of other ‘flash boiled frogs’™.

By: David Espindola and Michael Wright, Intercepting Horizons.

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