Exponential Organizations: Why new organizations are ten times better, faster, and cheaper than yours, by Salim Ismail, Michael S.Malone and Yuri van Geest (2014)**Pages: 250**, Final verdict: Must-read
What do Uber, Airbnb and Snapchat have in common? Besides having an app that is installed on your phone or their HQ in San Francisco, they are organizations that have been growing exponentially almost from their inception.
To understand what these types of companies have in common and to give the world tools to bring exponential growth to their own organizations, Salim Ismail - founding executive director of Singularity University, the 10 week educational program focused on exponential technologies - condensed his research and contact with these technologies and companies into a well versed and widely acknowledged book.
Exponential Organizations 101
Companies have long been deceived by their belief that markets evolve in a linear fashion, only to be kicked in the ..... by the realization that technology changes at a much higher pace. From the 5$ billion flop that was Motorola's Iridium project to how analysts and experts consistently underestimated the growth of the mobile sector in the 2000s, the books sets the stage to show us how using linear tools and trends of the past to predict an accelerating future doesn´t work.
Instead, in order to guarantee that your company will be around in the next decade, organizations need to think and operate as an Exponential Organization:
An Exponential Organization (ExO) is one whose output is at least 10x larger compared to its peers because of the use of new organizational techniques that leverage accelerating technologies - by Salim Ismail
And what does it actually mean to follow an exponential curve? Well, do you still remember how many times you need to fold a sheet of paper in order for it to reach the moon? 42. I know, wow. That is the power of exponential growth.
As the reader gets more acquainted with the ExO concept, Salim introduces a few examples of price reduction on some of the accelerating technologies that are enabling the creation of these Exponential Organizations, including:
- 3D Printing: From 40 000$ to 100$: 400x in 7 years
- Industrial Robots: From 500 000$ to 20 000$: 23x in 5 years
- Solar energy: From 30$ per kWh to 0.14$ 200x in 20 years
- DNA sequencing the human genome: 10 Million$ to 1 000$: 10 000x in 7 years
Moving past this introduction to the world of the ExO, the core of the book guides the reader through the common characteristics that make and ExO, what it takes to build one (or adapt your organization to become one), and a few fundamental areas for C-level execs to focus on.
The DNA of an Exponential Organization
Following the path of several companies that have scaled their way into ExO, Salim and his co-authors unravel the internal and external characteristics that make up an Exponential Organization.
Always leveraged by a powerful aspirational vision statement (called MTP - Massive Transformative Purpose) and armed with an arsenal of tools and ideas that new technology has brought to life, ExOs characteristics are wrapped around within the SCALE and IDEAS model. Here's a short overview of what that means:
SCALE - External mechanisms used by the companies researched on the book:
Staff on demand: The use of tools and outsourcing to enable flexibility in the workforce
Community & Crowd: The idea that communities such as TEDx shift the balance of power within an organization
Algorithms: The use of Machine Learning, Deep Learning and other technologies to make the most of the data available to us and mitigate our human biases
Leveraged Assets: Think of AirBnb, the biggest hotel chain in the world without owing a single room
Engagement: The use of gamification and other engagement dynamics to create network effects and positive feedback loops for its users
IDEAS - These are the internal mechanisms that most ExOs are taking to good use:
Interfaces: The ways companies are using to interact between the partners of their own ecosystem (example are Google Adwords or how Uber handles its army of drivers)
Dashboards: Real time insightful metrics for increased transparency and better decision making
Experimentation: The use of the Lean Startup methodology to arrive at the market faster and develop a better product through iteration
Autonomy: The introduction of self-organizing teams via frameworks such as Holocracy (or others) is having a disrupt impact into how some companies view their organization. Flagship examples include gaming company Valve and Chinese manufacturer Haier.
Social Technologies: The use of social technologies at the workplace (Google Docs, Slack) to reduce distance from information gathering to decision making
Examples of startups such as Uber, AirBnb or Zappos are complemented with a handful of insightful case studies on how established organizations - such as Coca Cola, Haier or Google - are working to avoid falling prey of te innovator's dilemma and get disrupted.
Finally, by piggybacking on this framework throughout the book, Salim exposes the reader to how these tools are changing the way companies operate and scale, and how to take advantage of them to help build a thriving ExO.
Exponential Organizations is the flagship book to anyone interested in understanding the mechanics that are driving the "crazy growth" that some of today's companies are witnessing.
And although I personally would have liked to see more examples of companies in traditional sectors where leveraging these accelerating technologies law is less obvious, I can't help but electing Exponential Organizations to my shortlist of must-read books (more complete and insightful than any talk you can watch online).
In a world where new companies and startups are the main responsibles for job creation (in the past 25 years almost all of the private sector jobs have been created by businesses less than five years old), learning the ins and outs of the fuel that makes these rockets take off seems like a no brainer.
Avoid being the next Kodak or Nokia, turn your inner chip from a linear to an exponential mindset and get immersed in the fast moving world of disruptive innovation.