How to transform your company into an Exponential Organization (ExO)

Notes from Yuri Van Geest’s speech ”Exponentiele Organisaties”

Disclaimer: this notes are a collection of personal thoughts, data points and quotes from experts. All info is publicly available. The content hereby written does not reflect in anyway the position of the company I work for.

Dear reader,

A few years back I had the pleasure to attend an extremely interesting, passionate and visionary speech by Yuri Van Geest, author of Exponential Organizations (ExOs). At that time, Yuri worked at the University of Singularity in The Netherlands, studying the “Tsunami” provided by the new technologies. In 2017, he has been recognized by Thinkers 50 as one of the top 50 best emerging management book authors in the world. I am happy to share with you some of the key learnings from his speech, complemented by some personal considerations and notes. Although the following notes are a bit dated, these topics are still valid in 2018.


Exponential Technologies

The rise of disruptive technologies is evident to everyone. This is mainly due to two factors: declining costs of tech and increasing capabilities. Think, as example, about think DNA sequencing, which cost moved from $10M to around $1K.

One of the peculiarities of a new technology is that, when it kicks in, the first thing human beings do is… to be afraid. They are scared of it. What happens next is that people adapts to the new reality, then people embraces it and finally let control go and just trust the machine. The most recent example is voice control, with the likes of AI Alexa (Amazon), Cortana (Microsoft) and Siri (Apple). Who would have thought that in 2017/2018 thousands of people around the world were talking to an artificial intelligence on daily basis, just to be amused or to facilitate the execution of simple tasks? And that’s just the beginning…

“The future of news is humans talking to machines”. That’s the argument of the BBC’s Trushar Barot, who believes voice AI is the biggest technology revolution that the news industry is missing and that it’s not too late to do something about it.
Waiting for the day I can customize my voice device so I can interact with rappers… :D

There are many more examples of how technology is moving faster than we realize. Yuri mentioned many more, such as the following:

  1. D-Wave, a quantum computing company, based in Burnaby, British Columbia, Canada. D-Wave is the world’s first company to sell quantum computers. Quantum computer are 100 million times faster than conventional computers, with a proof of concept optimization problem
  2. VIV AI. The Global Brain. Viv radically simplifies the world by providing and intelligence interface to… everything. This AI platform enables developers to create an intelligent, conversational interface to basically anything
  3. Zero-employee Robot Factories. Factories with robots creating new robots, starting in Q3 2016
  4. Li-Fi. Qi Nanophotonics. A technology for wireless communication between devices using light to transmit data
Afraid of technology? You should be… but some robots are just irresistible… :)

Big data and AI are changing the world

According to Yury’s researches, the average half-life of a business competency has dropped from 30 years in 1984 to 5 years today. 89% of the Fortune 500 companies has already disappeared from the list. So how can large companies scale at pace, faster than others?

Disruption is the key word here. Disruption means moving rapidly from a linear type of growth to an exponential type of growth. Technology can help company to move from a scarcity status to abundance.

Companies need to move fast if they want to survive… :/

So how to scale the organization? Through two kind of SHARED VALUES (Ss):

  1. Hard Ss — Easy to identify. Something that the management in your company can directly influence: Strategy | Structure | Systems
  2. Soft Ss — Skills more difficult to describe. These are less tangible and more influenced by the culture of your company: Style | Staff | Skills

These new businesses are all built on agility, velocity, fast leaning.


What are ExOs?

An Exponential Organization (ExO) is one whose impact or output is disproportionally large — at least 10x larger — compared to others.

Everything will soon become digital. The next thing big things in digital will be crowdsourcing (e.g. leveraging the crowd, DIY, P2P[1], crowd companies, AI, Nano factories) and blockchains, which allow full transparency in processes (e.g. digital identities, supply chain). Decentralization will change the world as we know it.

Software is eating the world, in all sectors” [Andreessen]
Behold the power of the crowd!

Characteristics of ExOs

All ExOs have something in common: a MASSIVE TRANSFORMATIVE PURPOSE (MTP). MTP is:

  • The higher, aspiration purpose of the organization
  • The long-term compass
  • The guiding star, capturing the hearts and minds of those both inside

ExOs with MTP can nurture:

  • IDEAS through Interfaces, Dashboards, Experimentation[2], Autonomy, Social
  • and SCALE, through Staff on Demand, Community & Crowd, Algorithms (machine learning and deep learnings to get new insights), Leveraged Assets (rent or shared assets to stay nimble) and Engagement (comprised of digital reputation systems, gamification and incentive prizes, which create network effects and positive feedback loops)

Think these orgs as a complex neurological structure. On the left side, you have the left brain, composed by: Order | Control | Stability, whereas on the other side, the right brain: Creativity | Growth | Uncertainty.

ExOs have a complex neurological structure, like a brain!

Where (to go) ExOs

Linear vs. Exponential

In order to build a successful exponential organization within your company, you would need to make sure of the following:

  • All data should be accessible to everyone, employees and even competitors
  • Strategies should be developed around the MTP and customer insights
  • Lean methodology should be part of the new ways of working, through experimentation and feedback loops (the BUILD/MEASURE/LEAN cycle). This way your company would be able to differentiate from the ones who still implement the obsolete linear sequential thinking)
  • Flexibility and smart failure celebration, in opposition to process inflexibility and risk intolerance

Focus on the new scarcities

This was probably one of the most important messages of Yuri’s speech. In order to succeed, your company should focus on the new scarcities of this world: nature, literature, arts (music, sculpture, painting, design and more). The first is sacred and something to protect, the last two are strictly related to human intellect and difficult to replicate by AI. Well… not for long at least. The latest? As example, researchers from Rutgers University, College of Charleston, and Facebook’s AI Research Lab have created an algorithm that allows AI to create art that is so convincing, human experts could not distinguish the difference between AI or human-made artworks. What’s important at the end is to always look for creating new experiences for your customers.

By the way, China is racing ahead in AI startup funding and patents, according to CB Insights.

People and hiring processes

With regards to people and talent, pillar of paramount importance in every successful company, Yury also shared some suggestions on how to hire new employees. As example, the peculiar way GitHub hires developers is to benchmark answers against the principles of passion, purpose and potential. In the case of Amazon instead, each employee is assessed against the company’s leadership principles, such as insist on the highest standards, bias for action, learn and be curious, customer obsession and many more. The hiring process is so thorough that almost nothing is left out. In some occasions, I remember spending even 30 minutes or 1 entire hour in debrief with 6–7 other colleagues to decide whether to hire a candidate or not. That is huge amount of time dedicated to just one single potential hire and it shows the incredible level of detail and attention that company has towards its future employees. More on this on a separate article I am planning to release in the next future.

Here some of the questions interviewers should ask during interviews:

  • What did you learn? Make an example”. The candidate should be able to demonstrate that he learnt and absorbed from his past experiences.
  • If you do a mistake, are you able to get up quickly? Make an example”. The candidate should be able to demonstrate his effectiveness in rapidly adapt to each situation and find solutions to problems and obstacles.
  • Who do you want to be when you’ll leave this company?”. The candidate should be able to clarify what kind of skills and competencies (rather than what role or level) he/she is aiming to have acquired at the end of his journey in your company
Companies should hire talents that posses strong motivation and ability to learn quickly…

How to create ExOS?

Well, you will need to put in place some new pillars, building blocks and transform your company from within. A few suggestions:

  • Transform Leadership — Give full autonomy to decentralized teams. Foster education, have a board management anchored to ground (meaning making sure the Senior Leadership spend time with employees at all level and listen to their needs), respect diversity and promote leadership skills at all levels
  • Create an Lite ExO — Become the platform of platforms, decimate the investments over time in the usual business and gradually invest in the new business models
  • Disrupt— The most difficult thing! Disruption can be achieved with the creation of Edge ExOs (which reward employees by using learning KPIs, having people in each team doing creative stuff), Black Ops (which simulate external attacks but within the company)
  • Model Google (X)
  • Partner with, invest in, acquire other ExOs — Start-ups in early stage should be cheaper than solid and consolidated businesses already in late growth stage; the challenge here is to identify these gems before they move to scale phase, so when they have reached product market fit but not yet pouring money into scaling efforts
  • Partner with incubators, accelerators, hackerspaces
More and more large companies are partnering or even creating internal accelerators or incubators…

What is the future of ExOs?

Future ExOs, the exponential organizations of tomorrow, will:

  • Have less employees
  • Leverage blockchain technology
  • Be distributed autonomous organizations (DAOs/DACs)
  • Be algorithmic corporations
  • Become RoboCorps (autonomous companies that don’t need human workers)
Will we all look like this guy? Well, that face is definitely not reassuring… :D

I’d like to end this article by reporting an unasked question that I am now sharing with you. I am looking forward to hear your thoughts in the comments section below:

  • Technology is tearing us apart, it is becoming a drug
  • The advent of new technologies is breaking real social relationships or transforming them dramatically (e.g. people get to know each other on apps like Tinder, no longer in bars)
  • Society is becoming more and more individual, and autonomous
  • Cooperation is being reduced (e.g. Sweden, the perfect society, or Japan, alienated by technology)

So now the question: how would you be able to embrace technology without fear, but still keeping our human social values intact over time?

We fear the unknown, but what we know is very limited… :|

Definitions:

[1] P2P: A decentralized network leveraging direct interactions between people

[2] ExOs use the lean startup and design thinking methodology and other techniques inside different organizational departments to constantly experiment with new ideas and processes, culturally enabling risk/taking decisions