SME's as Exponential Organizations

I draw a line between startups and other types of businesses. I like Steve Blank's definition.

"a startup is an organization formed to search for a repeatable and scalable business model." — Steve Blank, What is a Startup? First Principles.

One a startup does that, it's not a startup anymore. Other uses of the word are abusive. Can a startup be an ExO? Absolutely! But, startups are very different in the context of ExO than big or small operating concerns. The implications of applying ExO attributes are very different. We are going to save that story for another day. Today, we talk about SME's that have found their place in the world.

For everybody else from mom and pop to Fortune 50 their organization is on a spectrum of maturity based on various features(factors) like number of employees, revenue, market cap and more. Some SME’s play really big. They are more mature and they drive outsized revenue and even valuations. For example, I would have considered whatsapp an SME pre-acquisition. They definitely swung above their weight class at the time and exhibited many ExO attributes.

Some SME’s are less mature and aren’t even valued at revenue. This can be true even when revenue is substantial! This is mostly because if the founders/owners stopped working one day (the hit by a truck scenario) there would be nothing to salvage. These get relegated to the category of lifestyle businesses. I think lifestyle businesses are great if they work for the founders.

What's an SME? The standard definition according to Wikipedia is that an SME is a, "Small and medium-sized enterprises (SMEs, also small and medium enterprises) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits."

So, without worrying too much about the limits for now, here is what I have found about the work of turning SME's into Exponential Organizations. They still implement almost exactly the same way as a large business. People find this surprising. But, it really shouldn't be. Everything just happens at a different scale at first. If you get it right though then GROWTH!

SME's use the same techniques of ExO-Lite and ExO-Edge just like a bigger company. But, there is a difference in risk.

The SME cannot afford to disrupt themselves. At first glance, this appears to be a catch-22. It would be lights out fast if they actually succeeded at disrupting themselves. So, ExO-Lite is more important! The delicate balance between ExO-Lite and ExO-Edge has more at stake for the SME. Failure is not an option if the business is to continue operations and succeed itself as an ExO.

For Review…

ExO-Lite. Used inside organizations as stated in the book Exponential Organizations when, "Even when large companies must maintain their status quo and thus can’t be turned into ExOs, that doesn’t mean they can’t take on some of an ExO’s attributes, which can be implemented to accelerate company operations."

ExO-Edge. "The organization structures of established companies exist to suppress disruptive influences."-Exponential Organizations. However, by creating safe spaces at the edge or even outside the existing organization, what we call ExO's at the edge this immune system can be avoided.

SME's wants to innovate! They are okay eventually disrupting themselves and not being disrupted by others. But they need a little more time if it is available in many cases due to resource availability. They have less human resources and more expensive capital resources (cost of capital) with which to experiment. Therefore, they have to be even more careful in the management of of their ExO Edge experiments. Moonshots will be harder to stomach. They may not have the resources for full isolation for example.

From a case study perspective, on how things can work, I worked with a small financial services company recently. During the two days of the workshop we were able to judiciously:

• Build a lot of new knowledge about exponentials and the potential impact on the business
• Prioritize and plan the kick off one(1) ExO Edge experiment in Machine Learning/AI
• Identify some real Moon Shot opportunities in their segment.
• Begin the MVP development process. Having an MTP is generally non-negotiable.
• Apply/adopt other ExO attributes into a pre-existing OKR-like process they use, integrating with their existing processes, to deliver impact over time
• Select 4 / 10 attributes for year one (just like the big boys) with quarterly evaluations of progress which they do already anyway.

Companies that are uncommonly organized, like the one I am referencing above, and purposeful in their quarterly/annual planning process can move faster towards becoming ExO. Becoming ExO means becoming more agile. Becoming more agile means the potential for disruptive innovation and growth.

SME's are particularly interesting. They have to be careful but they also, when they get this right, will be able to accelerate. If they employ processes to manage their own internal innovation and planning all the better. It is possible to adapt the ExO implementation work, Edge & Lite to their pre-existing processes. In fact, I think it is critical.

Additionally, and perhaps even ironically, if they are successful with their first edge experiment, they will become a “tech company.” I get a lot of grief about having more ExO examples of non-tech companies. Bad news folks. You are an IT company whether you like it or not in most cases.

We used the ExO Canvas to good effect first to drive the process of technology and experiment selection. Then, second, it becomes a powerful tool for driving highly scalable business models through the application of exponential technologies. The canvas is a little like and engine powering the car in that case. The canvas is free! You can download it at the ExO Canvas site.

Hi, I am Kent Langley. I am the author of The 41st Square. My primary site is at www.productionscale.com where I am the Chief Exponential Officer(CxO). ProductionScale helps companies activate data using a proprietary process. That makes data useful for people and computation. Iam core faculty at Singularity University where I teach Data Science and Exponential Organizations. I am the Head of the Global Exponential Organizations Movement. I am fortunate to work with a TREMENDOUS network of AMAZING people from all around the world every day who make it all worth doing.

All opinions here are my own opinions and not those of any other organization or human being.