Ownership vs Access

In 2007, two months after the launch of the Apple iPhone, Finnish mobile-phone giant Nokia spent a staggering $8.1 billion to buy Navteq, a navigation and road-mapping company that had embedded physical traffic sensors in a quarter-million miles of roads in 35 cities across Europe. Nokia pursued Navteq because it could dominate mapping, as well as mobile and online local information—assets that would act as a defensive barrier against the increasing market predations of Google and Apple.

During its quest for an acquisition, Nokia actually looked at, and passed over, a small Israeli company called Waze, which crowdsourced location information by leveraging the GPS sensors on its users’ phones as they sped down local streets and highways.

Within two years, Waze was gathering traffic data from as many sources as Navteq had road sensors. Within four years, it had 10 times as many sources. Today, Waze has more than 140 million daily users around the world—and fully 100 times the traffic signals of Navteq/Nokia. Moreover, it doesn’t own those sensors and its users upgrade their own phones and GPS devices. By contrast, the Navteq sensor system was a fixed asset—and upgrading it cost a fortune.

As you may already have guessed, the Nokia/Navteq acquisition failed spectacularly. By June 2012, five years after the first iPhones appeared in stores, Nokia’s market valuation had collapsed from $140 billion to $8.2 billion—that is, about what it had spent to acquire Navteq. 

Looking back, it’s easy to dismiss the foolishness of Nokia’s business decision. At the time, however, Nokia’s move not only seemed entirely justifiable but was also viewed as bold and brilliant. Some business analysts considered the acquisition a potential game-changer—one that might enable Nokia to dominate the world’s cellular phone business for decades to come.

Nokia’s acquisition of Navteq is a classic example of a linear organization thinking linearly. Waze, by comparison, is an example of an Exponential Organization and non-linear thinking. 

The lesson we can learn from the last dozen years embodies many of Peter Diamandis’s Six Ds, described in the previous chapter. Navteq’s sensors were expensive physical objects that required installation and maintenance. In contrast, Waze’s use of crowdsourced data from its users’ phones was a digitalization, dematerialization, and ultimately a demonetization of traffic data. 

Waze’s triumph and Navteq’s decline should be the model for every budding ExO. Ask yourself, “Which of my products or services can I digitize and dematerialize?” and “How can I use the Six Ds to leapfrog my biggest linear competitors? How can I use them to demonetize and democratize my products and/or services?”

Since we wrote Exponential Organizations, several fully exponential companies have climbed quickly into the top ranks of their industries. Uber, for example, has been valued at more than $80 billion—with few assets and no driver employees. Airbnb, with a similar valuation, does not own the properties rented on its site; they are owned by non-employee “hosts.” Both companies are growing exponentially. 

With that book, and in the years since, we have tried to make a strong case to you that the world is currently undergoing an “asteroid impact” period of rapidly accelerating change. As with the dinosaurs 65 million years ago, the slow and lumbering companies—those unable to make rapid and nimble changes—will go extinct. Those companies who are born as, or become, ExOs have the opportunity to dominate the new world ahead. Today’s asteroid impact has created the right conditions for the creation and cultivation of a new breed of organization.

Key Takeaways

1. While the information-based world is now moving exponentially, most of our organizational structures are still very linear (this is especially true for the largest organizations and governments).

2. Linear organizational structures evolved to deliver predictability and to maximize efficiency. This model works well for scarcity, but the world is moving towards increasing abundance.

3. We’ve learned how to scale technology; now it’s time to scale organizations.

4. Matrix structures don’t work in an exponential, information-based world.

5. The Six Ds of exponential growth—Digitization, Deceptive growth, Disruptive growth, Dematerialization, Demonetization, and Democratization—are a road map for companies that want to become ExOs.

David S. Rose, author of the best-selling book Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups, sums it up most dramatically: 

“Any company designed for success in the 20th century is doomed to failure in the 21st.”