What is an Exponential Organization?
There’s bad news and there is good news. The bad news is that technology will disrupt all business. The good news is — disruption provides tremendous opportunities! By embracing “exponential organization” (ExO) techniques, your business can thrive!
Two years ago, I was a Vice President in IT for a mid-size, growing healthcare company, when we hired a new Chief Technology Officer (CTO). Inspired by Salim Ismail’s 2014 book, Exponential Organizations: Why New Organizations are Ten Times Better, Faster, and Cheaper than Yours (and What to do About it!), our new CTO eagerly began to transform the organization.
Our CEO had openly declared his intentions to grow our publicly-held company at a breathtaking pace. Now here was a CTO that claimed he had a way to realize that dream.
The new CTO had spent many hours educating and influencing our business partners with the ExO vision:
An Exponential Organization (ExO) is one whose impact (or output) is disproportionally large — at least 10x larger — compared to its peers because of the use of new organizational techniques that leverage accelerating technologies. (Exponential Organizations, emphasis mine)
These organizational techniques are the keys to the digital transformations that have been disrupting education (physical campuses to massive online courses), hospitality (hotels to Airbnb), transportation (taxis to Uber or Lyft), retail (brick-and-mortar to online) and more.
Cautionary Tale
Salim begins the book with a cautionary tale. Motorola’s doomed Iridium project, a 5 billion dollar project, was well-intentioned: install satellite coverage around the globe to connect the world with cell phone coverage.
Unfortunately, in the years between the start of the project and the termination of it, technology had changed so much that the original business assumptions used to predict financial viability were wildly wrong.
It is hard to believe just how far mobile phone technology has come in a such a short time! We went from bulky, expensive brick-like handsets to sleek, lightweight, multi-functional mini-computers in a few years!
And that is the first significant theme of the book: because technology is changing at an accelerating rate, we must change how we envision and manage our businesses.
Good News/Bad News
Motorola’s dramatic failure was clearly bad news for the once dominant technology company. Then there was Kodak, who invented the digital camera but never capitalized on that technology. And how about Blockbuster? They dominated the movie rental market. However, their inability or unwillingness to change their business model opened the door to the exponentially successful Netflix.
And then there are the brick-and-mortar retailers crushed by Amazon — the ultimate exponential organization.
But, the good news is that technology gets cheaper and more accessible every day. Anyone can start a company and grow it quickly.
Almost 30 years ago, as an engineer at an aircraft manufacturer, airplane parts took years to design, build, test and integrate into the final product. Moreover, those parts were extraordinarily expensive.
When I went to work in IT 25 years ago, I was awed by the relative speed and ease of producing software vs. the custom hardware. Even on older IT systems, development was weeks and months instead of years.
With current technology, you can now create a product like Facebook or SnapChat with a minimal investment and within a few years be worth billions. We measure software development cycles in hours and days, changes in minutes or seconds.
Or consider the encyclopedia business. When I was a child, salespeople went door to door convincing families to invest in a weighty set of expensive books. Those books took armies of people to research, write, print, sell and deliver. And most families could not afford this luxury.
Contrast that to Wikipedia, the online encyclopedia. It still takes armies of people to research and write. However, those armies are primarily volunteers. Now a quick, free Wikipedia search requires only a computer or smartphone. And, unlike its analog counterpart, it is rarely out of date.
Is your organization prepared for accelerating change?
Exponential Traits
Based on his analysis of the top 100 fastest growing startups over six years, Salim Ismail proposes two fundamental drivers that enable ExOs to achieve their extraordinary scalability. First, some aspect of their product has been information-enabled, freeing it to grow at Moore’s Law pace. Second, significant business functions can be moved outside the organization — to users, fans, partners, or the public.
Salim identifies common traits across all exponential Organizations. While not every company had every one of these attributes, more of these results in enhanced ExO capabilities:
1) Massive Transformative Purpose (MTPs)
2) Staff on Demand
3) Community & Crowd
4) Algorithms
5) Leveraged Assets
6) Engagement
7) Interfaces
8) Dashboards
9) Experimentation
10) Autonomy
11) Social
These ideas do not apply only to startups! They can be used in existing companies as well.
Follow me as I cover each of these capabilities in future articles.
