Neither size nor depth, nor scale can guarantee the continuity of businesses for tomorrow. We therefore ask the question, what can organisations do to be more future-ready? In this week’s Knowledge Nuggets, a special guest will help you better understand the premise in the book Exponential Organisations by Salim Ismail.
Insight: Organisations that are able to learn and take action have the best competitive advantage. They are acknowledged as learning organisations, evolving at a faster rate than their competitors.
Data: Only 10% of CEOs believe their company’s leadership development initiatives have a clear business impact. (McKinsey)
What’s the step change: Learn how to build an organisation that is scalable, fast-moving, and smart for a better chance of success.
So what is an exponential organisation?
An Exponential Organisation (ExO) is one whose impact (or output) is disproportionately large— at least 10x larger— compared to its peers because of the use of new organisational techniques that leverage accelerating technologies. Exponential Organisations are built upon information technologies that take what was once physical in nature and dematerialise it into the digital, on-demand world.
Exponential organisations are the future of business. If your company is to survive, you must adapt ExO thinking and practices. So whether you're founding a start-up or transforming an existing organisation, outline a clear massive transformative purpose, get a ﬂexible team and don't rely on linear planning. Expect the unexpected and always rely on your creativity!
The real, fundamental question of our exponential age is: What else can be information-enabled? The key outcome when you access resources and information-enable them is that your marginal costs drop to zero.
Futurist Ray Kurzweil, who has studied this phenomenon for thirty years, makes four signature observations:
- Law of Accelerating Returns (LOAR). Shows that doubling patterns in computation extend all the way back to 1900.
- The driver fuelling this phenomenon is information. Once any domain, discipline, technology or industry becomes information- enabled and powered by information ﬂows, its price/performance begins doubling approximately annually.
- Once that doubling pattern starts, it doesn’t stop. We use current computers to design faster computers.
- Several key technologies today are now information-enabled and following the same trajectory.
These technologies include:
- artiﬁcial intelligence (AI)
- biotech and bioinformatics
- data science
- 3D printing
- aspects of energy
Becoming an ExO is more than just understanding technology. It’s a whole new way of thinking.
The most important asset for an ExO is information. Customer and market data have to be stored and analyzed. This does require experimentation and ﬂexibility. Many ExOs manage data automatically with the help of technological innovations.
Linear organisations are dependent on having assets and a large number of employees. ExOs have few employees and few assets giving greater ﬂexibility.
Massive Transformative Purpose
While not all ExOs share the same characteristics, any organisation hoping to become an ExO needs to have a massive transformative purpose (MTP).
An MTP charts an ExO's aspirations. It outlines an organisation's higher purpose, showing what it stands for.
Every ExO shares ﬁve external characteristics: SCALE
- Staﬀ on demand – Often ExOs maintain a small, permanent workforce that's diverse, creative and ﬂexible, while hiring contractors when needed.
- Community and crowd – Maintaining a community and a crowd both lower the costs and risks of doing business.
- Algorithm – Learn from Google and how they became the world's leading search engine through algorithms.
- Leveraged assets – It isn't necessary to own assets anymore — you just need access to them. While some companies still need to own some assets (like Amazon owns warehouses), if your company is information-based, the situation is diﬀerent.
- Engagement – Crucial for an ExO. Networks, games, competitions and positive feedback loops are all ways of engaging people.
ExOs also share certain internal characteristics, which should support the company’s external ones: IDEAS
- Interfaces – Connect the SCALE externalities — such as your community — with the company’s internal workings. ExOs need interfaces to manage work and projects and send them into the world.
- Dashboards – These allow people in an organisation to access data in real time.
- Experimentation – The biggest risk for an ExO is not taking any risks, so ExOs experiment in order to succeed.
- Autonomy – The ideal ExO employee is comfortable with autonomy.
- Social – Social technologies keep communication channels open. More communication allows for greater transparency, and importantly, this keeps the organisation connected to its massive transformative purpose.
Implications of Exponential Organisations: The 6 Ds
- Digitised – Information accelerates everything. Huge improvements in information storage and processing technologies have accelerated the speed at which companies can do business.
- Deceptive – Beware of the “expert”. History shows that the best inventions or solutions rarely come from the experts; they almost always come from outsiders.
- Disruptive – Disruption and unpredictability are also the new norms. It's no longer practical to plan too far ahead.
- Dematerialised – Death to the five-year plan. The future is changing so quickly that any forward look is likely to produce false scenarios, so much so that today’s ﬁve-year plans have a high probability of giving the wrong advice. Another change is that it's now rather advantageous for a company to be small. Small teams are more ﬂexible, can take more risks and can be more specialised.
- Demonetised – It's now possible for a business to function with virtually no marketing or sales costs.
- Democratised – Trust beats control and open beats closed. Trust your employees to manage themselves if you want to maximise their creativity.
Below are some business models behind the best Billion-Dollar Unicorns
Recommended reading: The Business Models Behind the Best Billion-Dollar Unicorns
The Five Key Takeaways from Exponential Organisations
- The landscape is shifting from linear to exponential change which amplifies the rate of how change in one category affects the others. Focus for exponential change is on information-enabled technology
- Starting an ExO or creating one needs massive transformational purpose (MTP).
- Successful ExOs share the following external and internal core attributes:
Staff on demand – a small but aligned and flexible workforce
Community and crowds – a pool of collaborators and supporters
Algorithms – organisation and automation of data
Leveraged assets – owning few but meaningful assets
Engagement – information enabled loyalty
Interface – automation and connection between an ExO’s internal and external processes
Dashboards – tracking of key business and employee metrics
Experimentation – taking calculated risks and reimagining value
Autonomy – a self organising team and structureSocial – using digital tools to create a more engaged culture
- Embrace a new way of thinking by reshaping your organisation’s culture and objectives.
- Implement the four core ExO executions — transform leadership, partner/acquire/invest in other ExOs, shift your core, and use as much data as possible.
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