Fast-Expanding Exponential Cost Reductions

This article describes a new concept for creating and implementing 96 percent cost reductions: fast-expanding exponential solutions. This is a subject I'm very excited about, and I hope you will share my enthusiasm for and interest in this process.

When I was a youngster, controlled atomic chain reactions were being developed as a source of electricity. To help children understand the difference between an atomic blast (an uncontrolled atomic chain reaction) and an atomic power plant (a controlled atomic chain reaction), scientists designed impressive demonstrations.

One of my favorite demonstrations of an uncontrolled atomic chain reaction was conducted in a huge room filled with spring-loaded mouse traps that were each topped by two table-tennis balls. The narrator would start the demonstration by tossing a single-table tennis ball into the room, and within a second the air would be so filled with flying table-tennis balls that you couldn't see more than a few feet ahead. Within just a few more seconds, the energy in the traps would be expended and quiet would soon return.

To me that demonstration was very powerful because it showed that you could move from no motion to universal motion almost instantly. Although I had no interest in setting off uncontrolled atomic chain reactions, I was impressed by the potential to stir actions that would create immediate, multiplied effects. Since then, I always wondered how such effects might be encouraged for people.

I began to see examples early in life. If someone stood up on the top level of a stadium, perhaps one or two people in the vicinity would also stand up, but no other action would usually follow. If by standing up the person at top could reach a ventilation duct that created a loud noise when struck by hand, that person could induce a much larger reaction by starting a rhythmic drumming on the duct and shouting a familiar chant. Following such a beginning, the whole stadium would soon be clapping and chanting to the beat. Occasionally, I played this role of starting the drumming and chanting just to help me understand the cause and effect.

I observed a similar phenomenon a few years later: If a person stood up in the first row of a stadium or auditorium in a way that blocked the view for the people behind the standing person, most of the people who couldn't easily see would stand up immediately rather than ask the first person to sit down. Each time one person stood up in front, four to ten people behind that person would also stand. Each of those standers, in turn, led another multiple of four to ten people to stand. Within a minute or two, most people behind the original stander in that part of the stadium would be on their feet. Some people would stay standing, even if those in front sat down. Seeing that others were standing, some people in other sections would also stand either in excitement or to stretch. Whenever such reactions followed among many of those on the bottom tier, almost the whole crowd would be standing during much of the event.

I began to think about the conditions that cause such reactions. The second example was due in part to obvious self-interest: People had come to the event to see what was going on. Interfere with their views, and they would stand up to gain a better look... even if more effort was required. The first example was helped by a more subtle kind of self-interest: People enjoy feeling that they are part of an energetic crowd. To gain that feeling, many people will quickly take up chants, dances, and shouting slogans that show their affiliation with the crowd. Even some normally reserved people will be seen sheepishly joining in.

Experience and habits play roles, too. Many people have been in similar situations, and they have learned to enjoy the event more by acting in such ways.

I began to think about how self-interest combined with experience and habits could be used to stand in for those two table-tennis balls sitting on each spring-loaded mousetrap to create a chain reaction by human beings.

Let me pull out some themes and pose some questions for you to consider:

1. Communications costs are rapidly approaching zero. What doors does that open for you?

2. Computing costs are rapidly approaching zero. What can you afford to calculate and to do now that you couldn't do before?

3. Work can be redesigned now to produce higher-quality results at vastly lower costs. What can you redesign now that wasn't possible to redesign before?

4. Customers and other stakeholders are becoming used to do-it-yourself solutions where they participate more in accessing and using information. What new offerings can you provide that depend on such increased ability to perform and interest in do-it-yourself solutions?

5. Technology is advancing rapidly in creating cost-reduction potential. What cost reductions from technology should you be using that you aren't?

6. Cost-reduction opportunities open up more frequently than before. Are you studying how to develop and to apply new cost reductions often enough?

7. Noticing new low-cost methods is a critical first step for making large cost reductions. How are you monitoring what can be done?

Now let me pose a key question for you: What one change can you make in your business model that will set off a similar set of chain reactions by employing self-interest, experience, and habits that will cut costs for your organization and for all your stakeholders by 96 percent or more?