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Super Enterprises or Kaizen 2.0
Exploring the full potential of digital twins.
Over the past few weeks, I have been reading the book “Lean Thinking” which essentially is a formal definition and set of cases studies of what I term optimization machines. The book elucidates the power of kaizen, which consists in making continuous and regular improvements to something, yielding non-linear efficiency gains through time that are very hard to catch up with and seem almost unexplainable to the untrained eye. As I finished the book, it became apparent to me that today´s top companies worldwide, like Tesla and Palantir, for instance, are indeed kaizen machines. I also realized that the world is on the verge of kaizen 2.0.
As you may know from my Palantir deep dive, I believe digital twins enable any company to turn into an optimization (kaizen) machine, by unlocking transparent information flow to everyone in the organization. To successfully adopt a digital twin, however, the company must first prime its culture so that it does not clash with radical transparency and innovation. Even if it does, however, the average company still is just a node in a value network, in which nodes collaborate to deliver some form of value proposition to the end customer.
Like so, regardless of how kaizen oriented a company may become, it is still dependent on other nodes. Unless the nodes actively collaborate to eliminate waste (muda) in the process of delivering value to the customer, the process becomes riddled with it. This is how industries become stuck in their ways and ultimately force customers to jump through a series of uncomfortable hurdles - like the airline industry for example. Today, our economy is corroded with examples of muda across value networks.
Kaizen 2.0 is when the nodes in a network all run digital twins that talk to each other, such that all relevant information in the process of delivering value to the end customer is visible to all participants inside each node. In this manner, organizations do not only optimize themselves, but the entire value network whilst keeping the end consumer in mind. The latter thus becomes a Super Enterprise, that is radically more efficient that the sum of previously isolated nodes, with ever decreasing muda through time.
The world´s top example of a Super Enterprise is Tesla. Thanks to its proprietary digital twins and unique organizational structure, the company is essentially a bunch of people running separate companies along different value chains, conforming some sort of vertically integrated value network that evolves exponentially faster than anything we have previously seen. Tesla is a deliberate manifestation of Kaizen 2.0, but I believe that as digital twins become widespread, 2.0 will flourish across the economy passively.
Many think of Palantir today as a sort of consulting firm, but as it productizes Foundry (currently evidenced by its rising contribution margin), its client base will look more and more like a set of nodes across different value networks. As it permeates a given value network, each node is gradually just one API away from talking to all the other nodes. Hence, the barrier to kaizen 2.0 becomes not technology, but cultural adoption.
Kaizen 2.0 is a threat to all forms of waste across our economy. As it comes online, I believe it will radically augment productivity across the board, turning value networks into Tesla-like, highly dynamic structures. The companies that move in this direction will thrive and those that do not, will likely perish. In turn, the company that owns and facilitates this network will become immensely valuable. This company will likely be that which excels at creating and deploying digital twins. For me, that is currently Palantir.
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