The 20th century industrial business models don’t work anymore. Today’s businesses are information based. This makes them able to scale faster than ever before and has changed the rules of the game dramatically not only in relation to product characteristics, but also in relation to how we organize our businesses. From product development, to supply chain management, organizational structure, and customer relations, the formula for success has changed. What made your company succeed in the 20th century will kill it in the 21st. The question to ask then is: what can my company do to survive?
Perhaps the most influential business book since Blue Ocean Strategy is Exponential Organizations, which describes this paradigm shift in detail. The book’s main author is Salim Ismail, one of the founders of Silicon Valley think tank Singularity University. He and his co-authors delved deep into the features that characterize companies like Airbnb, Uber, Google, SpaceX, TED, Netflix and other organizations with hyper growth, all of which can be described as exponential organizations — or ExOs. What all these companies have in common is that they produce a minimum of 10x greater output or impact than their competitors, which in turn makes them 10x better, faster and cheaper. This momentum means that ExOs not only slay their closest competitors, but also rip the rug out from underneath the whole industry.
There are a total of 11 characteristics that fully embody exponential organizations, BUT if your company can successfully apply 4 or 5 of them really well, you have the potential to become an ExO too. While it doesn’t matter which of the 11 characteristics you strategically choose to focus on, we have come up with three suggestions that serve as good starting blocks for any company.
1. Identify which of your offerings can be information based
Any part of your business, which can be based on and driven by information can be scaled at an unprecedented pace resulting in a much more lean and agile organization. And yes, while there is still a need for the organic, analog, face-to-face services of your business, these aspects are not core to you being an ExO. Take a look at how the digitization of the music and film industries wreaked havoc on incumbents. They’re still recovering and who knows if they ever fully will. The world of books is also zooming full speed ahead down the same road. Soon it will be disrupted along with your family physician who becomes redundant because of IBM Watson-like intelligence, which can diagnose you better based on database knowledge. The auditor’s position will be automated with robots as well as taxi drivers as Uber releases more and more autonomous vehicles. And the product development process? Proctor and Gamble used to have the record for fastest product development. That was 300 days. The product platform Quirky can move an idea to reality in 29 days. Even biology has been digitized. Researchers can now program the DNA on the Commodore 64 level. It’s almost impossible to comprehend, right?
2. Determine your Massive Transformative Purpose
Why does your company exist? Why, even, is it important for your company to exist? What difference does it make in the world? Simon Sinek talks about the “why”. In exponential organizations they talk about the Massive Transformative Purpose (MTP). It is no longer enough just to be in the market to create profits for your stakeholders. Customers and employees are attracted to companies that aren’t purely commercial, but have a greater purpose and communicate this purpose. Zappo’s MTP is “Delivering Happiness.” Yeah, maybe on paper they are selling shoes, but there’s a big difference for employees who wake up every morning to sell a lace up shoe in size 8 versus an employee that wakes up to deliver happiness in size 8. MTPs also give companies a much bigger board to strategically play with. Google’s MTP is “Organizing the world’s information.” The breadth of this makes projects like autonomous cars and Google Glass — products that otherwise seem really out of touch with Google’s strategy — fit perfectly because it supports their greater purpose. Even Coca-Cola has an MTP. It’s “Open Happiness”, not “We are in the market to maximize the benefits for our shareholders and be the leading distribution chain for sugary soft drinks.” Most startups are born with an MTF. It is their guiding light. The upward bound that holds all their activities together. What is your MTP?
3. Have an unapologetic customer perspective
Why has Netflix become such a dominant player? Digitizing Blockbuster’s physical benefits definitely has had something to do with it, but so has their state-of-the-art algorithms that enable them to individualize their offerings to customers with extreme precision. What is it that has made Airbnb the world’s biggest provider of accommodation in just five years without owning a single hotel room? Part of the answer has been their ability to develop and nurture an incredibly strong community of both landlords and tenants who feel such a sense of trust that sharing your home with strangers from all over the globe becomes totally normal. What is it that has made Apple the first company that is likely to receive a trillion-dollar valuation? The fact that their highly designed interfaces create an unprecedented, powerful and user-friendly customer experience. The tools listed above may be different, but they have a very clear starting point and end goal: the customer.
Actually, this post should have been titled “The Top 4 Steps for Becoming an ExO” because another important key step is innovating on the edges of your organization so that intrapreneurship can flourish. But that’s a whole other blog post in itself. Stay tuned…
The question really isn’t whether your company should or shouldn’t become an exponential organization. If you don’t, there is no doubt that another firm will jump at the chance and run away with the 10x ExO advantage. 40% of today’s Fortune 500 companies will be gone within the next 10 years because they did not adapt in due time. Will your company go down with them or ride out the wave?
If you are interested in learning more about ExOs, you can book workshops and keynotes or read more here.
Kris Østergaard is an international ExO expert and the translator of the best selling book Exponential Organizations into Danish. He is also the co-founder of the innovation bureau DARE2, the startup hub DARE2mansion, and the accelerator program thinkubator.