In my last post, I shared some of my experiences and observations regarding the first phase of development of an exponential technology: Digitized (see Peter Diamandis’ 6D’s of Exponential Growth: Digitized, Deceptive, Disruptive, Dematerialize, Demonetize, and Democratize). Digitizing a process alone does not in and of itself lead to a useful product or an explosive business. The most challenging phase, both technically and for a leader personally, is next: Deceptive. It’s hard to champion a deceptive solution; success requires telling a story that your stakeholders will not at first understand and making plans for a future that they may not be able to see.

A Deceptive phase case study: the early days of flat-panel TV

Eighteen years ago, brimming with enthusiasm, I took the most amazing video display I had ever seen, powered by my company’s digital video processing technology, to show a senior group at one of the world’s most sophisticated and successful consumer electronics companies. It was a small, 17-inch LCD with the grainy resolution of early YouTube videos and a production cost supporting a then incredibly-low [BG1] $1,500 retail TV price. (Today you can buy a 60” LCD TV with 12 times greater resolution for $500.) Their experts commented that maybe in a few years with very hard work this new video display paradigm might be sufficiently improved to justify serious testing. They explained their need to focus on the imminent threat from “flat” CRTs from China that were eroding their analog TV market share and their household brand name.

Five years later both CRT televisions and that brand name had disappeared. In 2001, flat-panel displays and digital video processing were in the Deceptive phase of growth. In this phase, the technology is desirable in a few early applications and has a profound potential for exponential growth. However, we call it “deceptive” because of its immaturity in key areas, such as cost, availability, reliability, and ease of use, camouflage its potential. Even the most clairvoyant among us are often unable to detect the power of technologies in the deceptive phase. The average automobile of 1900, more expensive, less reliable, and slower than a horse, was a notable example. The internet of 1985 with its limited access points and the requirement of knowing a 12-digit address to access a file on another computer, was truly Deceptive—as was the $98,950 Tesla Roadster in 2008. As a thought exercise, consider what Deceptive technologies may now be in our midst that we do not perceive.

The unique challenges of leadership in the Deceptive phase

In the Deceptive phase an exponential project is especially vulnerable to cultural and financial threats. Your organization is coming down from the adrenalin rush of launching the project and winning initial funding. Though you still burn with the vision of the phenomenal benefits to come, large swaths of your ecosystem—including potential customers, channel partners, board members, analysts, and even some of your team members—harbor skepticism because your exponential solution is fundamentally different from the existing paradigm (e.g., transitioning from a horse to a car, or a CRT to a flat panel). Low revenue also makes you vulnerable: Deceptive solutions don’t help with next quarter’s numbers. If you’re in a large company, your colleagues who built and lead the current businesses are smart, dedicated, and experienced. You’re telling them that you’ve seen the future and it’s different from what made them successful. That’s a tough sale to make.

There are many imperatives for successful Deceptive phase leadership. I will focus on two: (1) constantly updating your narrative, and (2) building a granite foundation for supporting the subsequent Disruptive phase growth that you’re investing everything to achieve. Your task is to make the future appear increasingly real while preparing for when it actually arrives.

First, your narrative is a vital tool for keeping stakeholders engaged while your exponential solution grows past its limitations. In digital flat-panel displays we found that an effective narrative contained both a clear vision of the destination, “60-inch HD displays in every living room,” and discrete, measurable mileposts that objectively demonstrated progress. We delivered a series of ongoing updates that created a rhythm of anticipation and fulfillment in our ecosystem. In regular road shows we presented not only our latest algorithms but also detailed updates on panel prices, sizes, resolutions, refresh rates, color quality, and supply. Our message was simple and compelling: “The future that we’ve been talking about is coming, we’re tracking it, and we’d love to see you be a part of it!” (The implication: our data shows that if you’re not part of it you’re screwed.) One stakeholder who was always eager for my updates was a securities analyst whose entire career rode on his recommendations. He did his homework and he always leveled sharp challenges such as, “Flat panels will never be fast enough, they’ll never be bright enough, they’ll never be big enough, and how are your algorithms going to compensate for all the physical and electrical differences that these weird displays have…” We had to anticipate those objections because without well-prepared updates, especially with hard data and third-party corroboration, our ecosystem supporters would have lost courage and then lost interest in our grand story.

Second, a concrete foundation is a must-have to maintain momentum. The narrative is a tool to enable the essential work of preparing to capitalize on the explosive growth that your exponential concept can achieve. You’re investing phenomenal effort in the Deceptive solution to make it Disruptive. As I’ll discuss in a later post, when your concept is becoming Disruptive it’s going to attract a lot of attention from hungry, strong, talented competitors. Without a sufficient foundation for fast growth, your Deceptive success will only validate the market for the winner—and it won’t be you.

In the evolution of flat-panel video processors, the greatest hurdle to our growth was the engineering and design support required for frightfully complicated hardware/software systems. Consumer electronics manufacturers needed to make our technology work with any video source virtually anywhere in the world, and the image had to be superb, every time. A year and a half prior to the literally exponential ramp of flat-panel television in 2005, we were out meeting potential partners in multiple countries, reviewing which internal staff could be trained for leadership roles, and hashing out how to design our organization to scale the company. We got it right and eventually captured a 60% global market share.

At SU, we help many organizations, from corporations to governments to non-profits, to recognize and manage the challenges of the Six D’s of exponential growth. You can learn more here about how to engage with SU to support your initiatives in leadership, strategy, and innovation.

I remember a call with that securities analyst around the end of 2005. He had a different question for a different phase of exponential growth: “Your customers tell me there are a bunch of competitors coming after you with some pretty aggressive stuff. How are you going to stay ahead?” We had made it up the long, gradual incline of the Deceptive phase and stepped onto the rocket-ride of the Disruptive pase. It was a good thing that we were already strapped-in.