8. Exponential Organizations
Currently, five Exponential Organizations (ExOs) have risen to the top of the technology world in the western hemisphere and have become global brands in the process: Facebook, Apple, Google (Alphabet Inc.), Microsoft, and Amazon. Globally, people use or interact with these companies in some way every day. Salim Ismail first outlined ExOs in his book Exponential Organizations when he noticed similarities between companies that grew 10x, Unicorns (startups with $1 billion-dollar valuations), and the leading technology companies in the world.37 As we dive deeper into exponential theory, we will examine these ExOs more closely.
In his work, Salim Ismail defined ExOs as companies that are ten times larger than peer companies, with four or more specific internal or external attributes (as defined below), and a Massive Transformative Purpose (MTP). The MTP functions as the “why,” the motivation for why a company operates. Simon Sinek has made a living helping people think about their why. This philosophy is driving purpose-driven growth companies and a movement towards Environmental, Societal, and Governmental (ESG) companies making an impact. An MTP often describes the ExOs vision for a better future for the industry, the community, and the world at large.
From Salim Ismail’s book Exponential Organizations, here are the five internal and five external attributes of an exponential organization using the acronyms IDEAS and SCALE.38
• Interfaces: ExOs have very customized processes for how they interface with customers and other organizations.
• Dashboards: A real-time, adaptable dashboard with all essential company and employee metrics, accessible to everyone in the organization.
· Experimentation: Implementation of the Lean Startup methodology of testing assumptions and constantly experimenting with controlled risks.
· Autonomy: Self-organizing, multidisciplinary teams operating with decentralized authority.
· Social Technologies: Social technologies, or collaborative technologies, allow organizations to manage real-time communication among all employees.
· Staff on Demand: Minimize full-time staff and outsource tasks. Uber uses staff on demand when they incentivize drivers to go online during busy times.
· Community and Crowd: If we build communities and we do things in public, we don’t have to find the right people—they find us.
· Algorithms: ExOs leverage data and algorithms to scale in ways that were not possible just five or ten years ago.
· Leveraged Assets: Hold on to what’s critical. Outsource everything else. Access not ownership.
· Engagement: Enabling collaborative human behavior (social behavior) to engineer the results we want from our community.
Leaders use these internal and external attributes to create a compounding effect, where change accelerates, producing more efficient processes, strategies, technologies, and organizations. For example, with the compounding effect, a negligible improvement can be dramatic over time. A 1% improvement everyday compounds into a 37x improvement after one year. IDEAS and SCALE pay off in the long run, though in the short term, none of these attributes are likely to make a noticeable difference. Using these attributes, ExOs like Facebook, Apple, Google (Alphabet Inc.), Microsoft, and Amazon have grown to be very BIG companies, with influence larger than governments. New companies like Uber, Airbnb, Netflix and others leverage these principles to grow faster than other companies, taking over their industries in a short period of time. They are likely to be the giant companies of tomorrow.