Exponential organizations – how to become better, faster and cheaper than your competitors!
Exponential organizations have an exponential growth curve and can go from being a small, insignificant start-up to taking a leading market position within a short period of time. So short, that you as a competitor may not even realize that the game is changing before it’s too late. Examples such as Blockbuster’s journey from greatness to decay have made it clear that exponential organizations have impressive disruptive powers. Instead of just envying these organizations, seize the opportunity to learn from them to be better prepared for the competition you will face. In this blog post, we will explain what characterizes an exponential organization and how you can adopt these characteristics to prepare your own organization for the future.
Exponential organizations have the DNA to disrupt
In his book, “Exponential Organizations”, Salim Ismail is presenting what he describes as a whole new breed of organizations. In their core, exponential organizations are fast, technology-driven and with their forward-minded inventions, they redefine one industry after another.
“Exponential Organisations” is a hands-on guide for implementing the features that create and characterize an exponential organization. The purpose from Salim Ismail is for you to understand the future and to see the development in your industry. By seeing what is happening and understanding the future of your business, you will be able to leverage this development and make it an asset for your company rather than a threat. We have read the book with great interest and have summarized the most important elements for you to implement and understand the future. If you are in a hurry, download the infographic with the five most important elements to consider your business-strategy today.
Linear predictions in an exponential reality
The exponential organizations are hard to predict and grasp because they are in contradiction with everything we have ever learned about business. Most businesses still believe that it takes over 20 years to make a billion-dollar brand, but this is no longer the truth. All we have learned about doing business and how we predict the future is from the past and does not match the current evolution of business. Our current companies are created with a structure which reduces risk and creates a linear growth with steady predictions. But best practices are turned around and this makes experts hit way under the target when they try to predict the future of products that hold an exponential growth potential. The fact that you are reading this about the exponential organization will already today make you and your business a little more likely to survive the 21st century.
The exponential organization
Companies like Netflix, Google, Facebook, Snapchat and Airbnb are just a few of the organizations that have shown how new technology can change an idea to a billion-dollar business in less than 10 years. In his book, “Exponential Organizations”, Salim Ismail describes the common features that can be seen across these organizations and why the average exponential organizations perform 10 times better than its competitors. Salim Ismail presents the following formula:
Simple, right? Unfortunately, it is a little more complex to predict the future than we could wish for. Each of the letters represents one out of numerous element you should consider in your organization’s operations. We have created an overview of each of these elements and also reduced the term “Exponential organizations” to five main points for you to consider to future-proof your organization today. You can download the infographic here.
What is the Massive Transformative Purpose of your business?
– Exponential organizations want to do more than just making money
Exponential organizations all have what Salim Ismail calls “a massive transformative purpose”. The massive transformative purpose must be more than a simple phrase created on an internal marketing workshop. The massive transformative purpose must be a ubiquitous value-set that alter employees’ behaviour. The purpose of exponential organizations is not to maximize profit through an effective supply chain, but rather a purpose that relates to the emotions and purpose of the employees’ own set of values. The purpose must change the world like when Google organizes the world’s information, Coca-Cola allows customers to ‘opens joy’ and Airbnb ‘makes the world our home’.
Make your business future-proof: 10 elements that create an exponential organization
Besides presenting the idea of a ubiquitous massive transformative purpose (MTP) in the book, “Exponential Organizations”, Salim Ismail introduces 10 drivers that modern established organizations can implement in their organization to harvest the success of the exponential organizations. Though this might seem like a lot for your organizations, don’t panic just yet. Salim Ismail underlines that organizations, which are already doing well, can implement just four out of 10 elements to see a greater success and make the organization future-proof. The 10 elements are illustrated with the abbreviations SCALE and IDEAS.
SCALE – External Properties of the Exponential Organization
SCALE relates to your company’s external relations. How skilled is your organization in utilizing external resources? Exponential organizations are characterized by their ability to act as an open system, where knowledge from the outside is constantly flowing into the organization and used to improve the business. The ability to quickly involve skilled talent and restructure yourself is a key element in the success of exponential organizations. SCALE is an abbreviation for the following elements that you should consider implementing to learn from the success of exponential organizations.
Staff on demand – The freelancer’s role
In general, the exponential organization’s permanent staff is reduced to the absolute minimum. The exponential organizations hire the talent needed when needed. The ability to utilize experienced freelancers within different expert fields give exponential organizations the flexibility to adapt to the demands of the world and market around them.
Community and crowd – your best ‘people’ do not actually work for you
Community and crowd are all the people interacting with your organization but who are actually not on your payroll. External groups can have a close relation to and cooperation with your organization, but you should also be aware of the resources in more peripheral fans, whom you do not interact with on an everyday basis. The exponential organizations are characterized by being open systems, where the crowd one community are constantly offering their knowledge and ideas.
In the crowd, you will have both consumers and potential new employees and sometimes these people are able to see your decisions in another light and perspective – and might just be right. By opening up your decision process you get new opinions and can easily test out new products and ideas. It will make you both time- and cost efficient.
Algorithms – exponential organizations do not trust a 50,000 years old rule of thumb
In exponential organizations, the use of big-data is embedded in the DNA of the organization. In the future, more business ventures and changes will come from decisions based on recommendations from algorithms. Algorithms make your organization able to analyze and comprehend data that is too complex for the human mind. The time where organizations followed a leader’s gut is soon over and by implementing analysis tools in your organizations today you are able to get a clear picture of what is happening within your budget, employees, and operation.
Leverage assets – You don’t need to own the assets to be an exponential organization
The future demands a high degree of flexibility and therefore agile organizational structures. The old ideas of owning assets and saving money are therefore no longer best-practice. When your organizations lease its assets, it creates a great opportunity to scale on demand. Through changing this structure in your organizations, you will be able to easily tap into some of the success of the exponential organizations.
Engagement – Create a feedback loop that actually works
Engaging your customers around your product is key to a success that cannot be disrupted by anyone. Getting consumers to work with you on the massive transformative purpose of your organization will make your business sustainable without a lot of work. You can make engagement with your customers through competitions, marketing or community groups. Through engaging with the customer, you can easily gather information about your customers need and they will get to know your company and thereby increase loyalty. The goal is to convert a scattered crowd into a strong community that is loyal to your product and Massive Transformative Purpose like it is seen in exponential organizations.
IDEAS – The internal drivers of the exponential organization
For many organizations, adapting the external resources that are part of the “SCALE” focus is probably the easiest part, but to get the full growth and success of an exponential organization this is not sufficient. It is time to look within and change internal patterns and behaviour.
Interfaces – how the exponential organizations remove the limits for growth
Interfaces are a filtering and matching process without any manual interference which allows exponential organizations to scale their business with low marginal cost. The platform between your internal massive transformative purpose and your external resources needs to be able to run without you for you to truly make your business able to scale infinitely. An example of this is the platform Uber. The interface matches driver and your phone without anyone at Uber being involved with the process. The costs at Uber is thereby reduced to the maintenance of the platform and counting the money rolling in.
Dashboards – Changing the KPI to OKR
In traditional organizations, we all know about our KPI’s and how they are used to control and monitor employees’ performance. In exponential organizations, they use their massive transformative purpose to help employees to perform better. This is done through OKR – Objective and Key Results. The purpose is to ask your employees and organizations these two questions:
– What is our desired goal? (Objective)
– How can we see we have achieved that goal? (Key results)
With modern technology, it is possible to live- stream information from already existing systems in the organization. By customizing a ‘ dashboard ‘ all your employees can follow how the organization is doing. In exponential organizations, the OKR is created bottom-up instead of top-down, this way all your employees will have a feeling of common purpose instead of being stressed out by unreachable KPI’s.
Experimentation – The secret of Apple’s success
A culture that allows experimentation and errors is key in the exponential organizations. The culture must have space for new projects and allowing employees to seize an opportunity when presented for it. Making your employees work with projects that are not directly related to your core-operation can be intimidating and might not lead to anything – but hey, they tried! Apple is a successful organization creating room for trial and errors. Each time they have conquered a business they take a team to the edge of the organization and make them attack a new industry. This is how they have evolved and placed themselves as a market leader in a diverse range of industries such as music, computers, watches and even cars.
Autonomy – the exponential organizations is a bee-hive, not a family tree
The changes in business are also a result of the change of the modern employees. They are no longer satisfied with any job, but they want the right job. The millennium worker wants to be motivated to go to work and feel like the massive transformative purpose is their own. An overlap between personal values and the values set in the exponential organization is creating organizational structures that look more like a bee-hive than and actually organizational chart. The bee-hive structures make the exponential organization, such as Google, seem almost cult-like for people on the outside. And it works! If you can get your employees fully committed to your massive transformative purpose, you don’t have to think about retaining talent. They will work not for you but for the goal of changing the world.
Utilizing social technologies in the exponential organization
A dusty old intranet in the basement is no longer enough. The social technologies in your organizations can be taken to a whole new level. In the exponential organizations, social technologies facilitate fast decision making and thereby making the organization effective. In the exponential organization, the structure needs to be flexible to changes of teams and focus. Therefore, you must choose your technology with great care. The technology should support the complexity of your organization and the tasks rather than inhibit it. There is a real danger in choosing the wrong social technology or even choosing too many of them. The solution should always be capable of changing when you do. A rule of thumb is to never sign a contract for more than a year – the world will have changed by then.
Exponential organizations do 10x better
According to Salim Ismail, the above-mentioned elements are worth your while to implement in your organization. Even though the implementations of these drivers will require a lot of changes in your business, tapping into the success of exponential organizations will lead to greater success for you as well. The exponential organizations do perform an average of 10 times the traditional organizations. The exponential organizations are so fast and disruptive that they over time will change your business as well. So, if you want to be ahead of competitors – now is the time. In the book exponential organizations, the different drivers are explained more in depth. While reading the book or just this post we must stress the fact that you shouldn’t panic just yet. Salim Ismail predicts that established organizations can survive by only implementing 4 out of the 10 drivers to see the growth and success of the exponential organizations in their own. So just get started.
Test your company’s exponential quota ( ExQ )
You can read more about exponential organizations on Salim Ismail webpage and also get elaborated on what your organization’s status is in the individual areas of these drivers. The authors behind the book, “Exponential Organizations” have created a test for you to see how well you are doing already. Find it here.
Welcome to an unknown future
Even though the book is predicting some extreme changes in the future, the future is still bright. The fact that you are reading this already made you a little more aware of what is coming, and you are already better equipped to navigate and manage your organization towards the future. We have created an infographic with the most important pointers for you to implement and start changing already today. Remember: If you do not create the future, others will do it without you.
Utilizing freelancers is one of the success criteria for becoming an exponential organization, get a free offer on your next freelancer here.
Written by Josefine Bjerrum
Singularity University – Learn how to understand the future
Salim Ismail is currently the dean of Singularity University – a university and a remote, crowd-based educational institution in Silicon Valley. In addition, he is a keen lecturer on this new breed of organization and we dare to predict that you will hear a lot more from him in the future. Singularity University is known for their constantly updated curriculum that every 3 months is revisited and changed to keep up with the pace of the real world. 70 percent of their curriculum is to focus not on what has happened but how it will impact the future. Watch their promo video and follow their work here: