Exponential Organizations - Book Review
1 August 2019
Dr. Moria Levy
"Exponential Organizations: Why New Organizations Are Ten Times Better, Faster, and Cheaper Than Yours (and What to Do About It)" undeniably presents an enthralling and captivating narrative. Who wouldn't be drawn to unlocking the secrets to such extraordinary success? While authored in 2014, the book's pertinence has grown even more pronounced in today's context. The book, authored by Salim Ismail, a guiding force at Singularity University, an advanced hub for learning and consulting within the organizational realm, asserts that attaining such remarkable success is not an exclusive privilege of high-tech enterprises. In a time marked by rapid and ceaseless transformations, the indispensability of innovative management approaches is undeniable, and the book's concepts offer invaluable insights for us all.
The book delves into a spectrum of subjects, including:
1. The Base-Designation Sub-MTP Meaning
2. Characteristics of Exponential Organizations
3. Staff on Demand
4. Community & Crowd
6. Leveraged Assets
8. Internal Organizational Conduct
13. Social Technologies
Appendix - Examples
It functions as an educational beacon, relevant not only for progressive enterprises but also for those identifying with more conservative paradigms. Undoubtedly, a profoundly enriching read that imparts wisdom for organizations aspiring to flourish within today's dynamic landscape.
The Base-Designation Sub-MTP Meaning
Companies and organizations tethered to linear thinking and conventional progression align themselves with outdated paradigms. In today's ever-evolving landscape, for a company to survive, thrive, and maintain a competitive edge, it is imperative to embrace accelerated methodologies wholeheartedly. These approaches possess the agility to swiftly conceive and deliver solutions and products within remarkably short timeframes, sometimes even less than a month. The ensuing chapters delve deep into strategies that pave the way for such accelerated action, underscoring the pivotal significance of a foundational calling as a precursor to success. The company's mission acts as a transformative catalyst, ushering in a profound departure from prevailing norms. This prompts the compelling question: How does one articulate and construct such a transformative mission?
• Think on a Grand Scale
• Cultivate Inspirational Thinking
• Gaze Beyond (As exemplified by Google's quest to enhance global information organization)
• Inject Profound Meaning
• Ensure the Viability of the Chosen Path
• Comprehend the Essence and Purpose of the Organization
• The assimilation of such a mission within the organization's fabric ushers in a profound cultural shift.
By adopting an expansive perspective, cultivating aspirational objectives, and adopting an outward-focused stance, a company lays the groundwork for an expedited and triumphant journey, effectively reshaping its cultural landscape.
Characteristics of Exponential Organizations
Staff on Demand
The trajectory toward implementation hinges upon an on-demand work methodology to expedite, flexibly adapt, and furnish effective solutions. Channeling the potential of non-traditional personnel capable of deployment beyond the confines of the fixed organizational structure emerges as a pivotal cornerstone in establishing and operating an exponential organization. While this paradigm is manifest in fields such as computing, its pertinence resonates equally across a spectrum of other vocations. The scope exists to activate individuals for various responsibilities, ranging from real-time control and auditing at any hour of the day to orchestrating targeted contests and engaging startups or other contributors in intensive, short-term endeavors once a year. This dynamic workforce framework traverses diverse roles, encompassing a multitude of communication modes while fostering robust rapport with the audience.
Enabling an operational on-demand workforce engenders several salient advantages, including:
• Fostering Learning and Fresh Approaches
• Nurturing AGILE Methodologies
• Forging Resilient Bonds within the Core Team
However, for the fruition of this model, specific prerequisites are quintessential:
• Well-Defined Management Interfaces
• Clear and Precisely Articulated Tasks
By embracing an on-demand staffing paradigm, an organization not only unlocks realms of learning and innovation but also nurtures a dynamic and responsive core team. This strategic pursuit necessitates the seamless integration of management interfaces and meticulous task definition to ensure flawless execution.
Community & Crowd
Communities comprised of users, stakeholders, and other vested parties are no longer a novelty. Once often confined by geography or shared ideologies, these communities have transitioned to the online realm, united by shared intent, beliefs, resources, priorities, needs, and potentially additional traits. These virtual communities boast a heightened cohesiveness when compared to a broader audience. Their affiliation with the organization or cause they support is marked by dedication and active involvement. The process of forming a community encompasses three pivotal stages:
1. Attracting and connecting initial members through the organization's Mission, Purpose, and Values (MTP).
2. Cultivating and nurturing the community continuously to foster growth and vibrancy.
3. Establishing a platform that automates interactions (feedback, likes, rankings, etc.).
An audience serves as another invaluable component propelling progressive companies forward. Unlike on-demand employees, the audience becomes acquainted with an idea the organization aims to promote, subsequently deciding whether it captivates their interest. The audience engages with the organization.
The audience can be effectively leveraged to:
- Generate innovative and creative ideas.
- Participate in trials validating services/products.
- Facilitate crowdsourcing of activities.
Activation of both communities and audiences bestows the following advantages:
- Augmented loyalty directed towards the organization.
- Accelerated growth and enhanced sales.
- Validation of new concepts and perpetual learning.
- Cultivation of novel ideas.
However, specific prerequisites are indispensable:
- A pre-existing MTP (Mission, Purpose, and Values).
- Commitment and active engagement.
- Authentic and transparent leadership.
- Facilitated entry for participation.
- Generation of mutual value for the community and the audience.
While not always the central focus for the audience, numerous highly successful products and services derive their strength from sophisticated algorithms. The Google search engine exemplifies an exemplary manifestation of this paradigm, where the algorithm orchestrates search result ordering more effectively than any other engine. Two prominent categories of algorithms in today's landscape are machine learning and deep learning. Machine learning enables the analysis of results based on detected features within data or information. It relies on historical databases, possessing the capacity for learning, training, and prediction. Netflix's movie recommendation system is an illustrative case of a machine learning application. Deep learning, a subset of machine learning, hinges on neural network technology. It is the bedrock for intelligent natural language analysis, content-based video extraction, and more.
The Significance of Algorithms:
• Facilitates learning devoid of diverse human biases.
• Ensures accessibility and high-performance precision at any given moment.
The Phases for Algorithm Implementation in Enterprises:
1. Collating data and information (from external sources, within the organization, sensors, individuals, and existing databases).
2. Organizing and structuring content in a manner that algorithms can discern and process.
3. Integration of intelligent tools.
4. Utilizing and acting upon the generated insights and information.
Algorithm Integration -
Yields the Capability to:
• Gradually amplify products and services.
• Harness devices, sensors, and repositories.
• Minimize errors, thereby enhancing growth stability.
• Facilitate relatively seamless updates to existing arrays.
• Proficiency in machine learning/deep learning techniques.
• Cultural readiness to embrace the amalgamation above.
Choosing to lease buildings rather than purchasing them is a well-established practice that has been prevalent for numerous years. Ismail introduces an innovative extension of this concept, broadening its scope to encompass production lines, warehouses, services, and other tangible entities. The fundamental principle here revolves around differentiation: for scarce assets and resources, ownership is advisable; for other assets, refraining from ownership is a wiser approach. In situations where safety cannot be assured, avoiding unnecessary risks is a prudent strategy.
Differential Ownership of Assets -
Empowers the Following:
• Gradual expansion of products and services.
• Reduction of marginal costs for products.
• Diminished resource requirements for asset management.
• Amplification of agile operational capacity.
• A capacity to seamlessly relinquish underutilized assets.
• Well-structured interfaces.
Once again, this concept is not uncharted territory: games, quizzes, point accrual, membership clubs, vouchers, and coupons have been integral to our landscape for ages. However, recent innovation has centered on these strategies being information-based and social.
Key Elements for Fostering Commitment and Engagement:
• Transparent Rating System
• Empowerment of Individuals (Control and Influence)
• Peer Pressure (Social Comparison)
• Cultivation of Positive Feelings for Sustainable Behavioral Change
• Immediate Feedback
• Well-Defined, Authentic Rules, Objectives, and Rewards
• Virtual Accruals
Gamification is at the heart of engagement creation. We also observe competitive incentive mechanisms and other traditional tools, such as reinforcing a sense of purpose and passion for work.
Aligning Commitment and Involvement yields the Potential to:
• Enhance Loyalty
• Empower Ideas
• Transition the Audience into a Community
• Leverage Marketing Efforts
• Facilitate Learning through Gamified Approaches
• Gather Digital User Feedback
• An Existing Mission, Purpose, and Values (MTP)
• Clear, Fair, and Consistent Regulations, Free from Conflicts of Interest.
Internal Organizational Conduct
Beyond the previously outlined five SCALE principles, which predominantly direct their focus outward, organizations driven by ambitions of rapid growth must also internalize efficient and controlled mechanisms through the following strategies:
Interfaces act as crucial bridges connecting the external and internal domains. In an organization undergoing accelerated development, the design and maintenance of algorithm-driven, automated, and meticulously managed workflow interfaces are paramount. These interfaces facilitate the seamless dissemination of knowledge and directives to the appropriate individuals within the organization, enabling prompt and effective action. While certain processes may involve a fusion of manual and online elements, a natural evolution toward complete online integration is typical. These interfaces not only optimize resource allocation but also mitigate the occurrence of operational errors. During heightened activity (PEAKS) periods, robust interfaces become pivotal in empowering various SCALE components: functional algorithms, communities, audiences, on-demand personnel, and more. Despite being recognized as conduits operating inward and outward, these interfaces also cultivate connections among diverse external factors. For instance, an interface bridges the gap between app developers and users at APPLE.
Effective online interfaces yield the following advantages:
• Intelligent routing of external inputs to internal functions.
• Identification and targeted engagement of disengaged individuals.
• Establishment of links between external SCALE empowerment factors and stabilizing elements within the organization.
• Facilitation of scalable solutions.
• Clearly defined processes amenable to standardization.
• External empowerment factors are poised for scalability and enhancement.
• Algorithms (almost invariably indispensable).
Management dashboards function as dynamic real-time control tools, empowering an organization to assess, scrutinize, and oversee the deluge of data inundating the enterprise from customers and employees.
The collated and assessed data encompasses a spectrum of metrics, ranging from traditional (downloads, inputs, usage statistics) to more sophisticated indicators:
• NPS - Net Promoter Score: Anchored in value-centric metrics such as retention percentage, reusability, and more.
• OKR – Objectives & Key Results: Metrics meticulously devised to monitor the progression towards collective and individual objectives (a methodology increasingly prominent within Exponential Organizations).
The Management Dashboard:
• Real-time monitoring of pivotal growth catalysts.
• Implementation of the OKR methodology for comprehensive oversight of accelerated expansion.
• Reduction of vulnerability to errors through immediate feedback loops.
• Real-time metrics are conducive to monitoring, collation, and analysis.
• Incorporation of the OKR framework.
• Cultural endorsement from employees.
Ismail's conception of experiments is firmly rooted in the LEAN STARTUP framework (for a summarized overview of the book, please see below): it entails the formulation of ideas and hypotheses, their translation into actionable plans, rigorous experimental testing (involving actual users), data collection, feedback integration, iterative refinement, and beyond. The experimental realm is anything but sterile; it is a controlled arena that adeptly mitigates risks. Ismail asserts that this methodology becomes imperative for accelerated organizations committed to risk reduction. It is built upon the urgency to introduce new products/services rapidly and harnesses experimental tools as the propellant driving this achievement. Significantly, an experimental environment must cultivate a culture that embraces failures and derives insights from errors.
Integration of Experiments into Organizational Dynamics:
Unleashes the Capacity to:
• Align Processes with External Shifts
• Maximize Value Extraction
• Achieve SPEED TO MARKET (MVP - Refer to the LEAN STARTUP Book Summary)
• Foster Risk-Taking that Promotes Exploration and Learning
• Diligent Monitoring and Measurement of Experiments
• Organizational Cultural Embrace (Especially Embracing Failures)
Independence embodies teams' ability for decentralized operations, self-discipline, and self-organization. The need for autonomy is a distinctive trait of knowledge workers (M.L. - please refer to the book summary by Davenport: "Thinking for a Living"). Furthermore, the imperative for independence and decentralization arises from customers and users demanding zero tolerance for shipping and service issues. It also serves as a means to enhance appropriate work and service levels.
A decentralized organizational structure embracing team autonomy yields several advantages:
• Heightened adaptability to changes, with roles capable of dynamic shifts.
• Anchored in core objectives.
• Harnesses positive energy as a catalyst for activity.
• Prioritizes work organization over employee hierarchy.
• Facilitates organic growth and development, free from bureaucratic constraints and rigid structures.
While organizational hierarchies endure, they manifest as a capability-based network rather than a traditional structural form.
Autonomy and decentralization:
• Elevated agility in operations.
• Increased accountability toward customers.
• Rapid responses and accelerated learning.
• Cultivation of an optimistic mindset.
• An existing Mission, Purpose, and Values (MTP).
• Employees skilled in autonomous operation.
• Management dashboards.
Systems built upon social technologies are concepts familiar to us all. They create digital environments that are more expansive, inter-organizational, and scalable, thus facilitating lateral interfaces. These systems encompass the following essential elements:
1. Social objects
2. Social channels
3. Task management
4. Document sharing
5. DIGITAL PRESENCE (e.g., web conferencing or Skype)
6. Virtual worlds
7. Emotional sensations.
Upon implementation, they promote connectivity, transparency, and an improved flow of information. Consequently, they constitute an indispensable component for organizations aiming for accelerated development.
Organizations undergoing accelerated development cultivate an ecosystem characterized by the following defining attributes:
1. Information is a pivotal catalyst for propelling organizational advancement.
2. Reduction in marketing and sales expenditures.
3. Embracing DISRUPTION as the standard operating mode.
4. Relying on data scientists, extending beyond dependence on traditional subject matter experts.
5. Abandoning the underestimation of multi-year plans, shifting away from the conventional five-year plans.
6. Triumph of agile and smaller entities over their larger counterparts.
7. Embracing cloud-based operations, favoring utilization over ownership (as previously elucidated in the concept of leveraging assets).
8. Open systems are anchored in trust rather than strict control.
9. Comprehensive measurability; All facets are comprehensible; Pioneering innovative business models.
Ismail dedicates multiple chapters to illustrate that organizations of various sizes and stages can transition into accelerated entities. Established institutions and emerging startups can adopt the Exponential Organization (ExO) framework. He outlines step-by-step approaches for both, grounded in the principles of SCALE and IDEAS, to embark on their acceleration journey. The book provides case studies spanning organizations of varying scales, showcasing their successful transformation into an accelerated state or even an "accelerated LITE" mode – a hybrid approach for organizations embracing certain conservatism while aiming to harness the benefits of innovative concepts.
The lingering question arises: Can all organizations aspire to and achieve this paradigm? According to Ismail: Absolutely, yes. While I may retain some reservations, I am confident that any organization can extract invaluable insights from the brilliant concepts proposed and determine their suitability for implementation. This book undeniably offers a rewarding experience, providing a wealth of knowledge. A truly worthwhile endeavor indeed.
Appendix - Examples:
The illustrative examples presented encompass the following diverse organizations:
• Airbnb Hotels
• GitHub - Software: Configuration Management
• Local Motors - Automotive Industry
• Quirky - Consumer Products
• Google Ventures - Investments
• Valve - Gaming
• Tesla - Automotive Industry
• Tangerine - Banking (Canada)
• WAZE - Car Navigation
• Netflix - Movie Streaming
• GOOGLE - Search, Expanding Beyond...
• APPLE - Similarly, commencing with smartphones and venturing into diverse domains.