Exponential Organizations by Salim Ismail: Summary and Notes
One sentence summary: Exponential Organizations by Salim Ismael with Michael S. Malone, and Yuri Van Geest explains a new brand of businesses — the exponential organizations. They have revolutionized how companies accelerate their growth with the help of technology.
One Paragraph summary: Exponential Organizations by Salim Ismael describes how any company can streamline its performance and grow to the next level. The book examines the future of organizations and gives insights into a new breed of companies called Exponential Organizations that are reinventing best practices in business using technology.
Favorite quote from the author:
Exponential Organizations has made it to the list of my favorite books. Knowing me, that’s not easy! But if you read the book, you will understand why. The authors paint the picture of different and exciting breed of organizations that are changing the way we do business. If you are going to start a business in our hypercompetitive global marketplace, I suggest you pick the book because Salim’s vision of exponential organizations is a powerful one.
Main Takeaways from Exponential Organizations
Defining the Exponential Organization
Inside the Exponential Organization
Implications of Exponential Organizations
Starting an ExO
EXOS for large organizations
The Exponential Executive
Lesson 1: Defining the exponential organization
An Exponential Organization (ExO) is an organization whose impact or output is disproportionately large — at least ten times larger — than its peers. Instead of using armies of people or large plants, ExOs are built upon information technologies that take what was once physical and dematerialize it into the digital on-demand world. ExOs are characterized by what the authors call Massive Transformation Purpose (MTP). If you don’t know what this means, think SpaceX’s mission of making humanity a spacefaring civilization or Google’s mantra of organizing the world’s information.
The most important outcome of an MTP is the generation of a cultural movement.
Here is why.
An MTP is so inspirational that a community forms around the ExO. In other words, people come to believe in an ExOs ability to transform the world.
There are five external characteristics that define an Exponential Organization. They have the acronym SCALE:
Staff on demand
Community and crowd
They are passionate about ideas
For any ExO, having staff on demand is necessary for speed, functionality, and flexibility in a fast-changing world. Community and crowd are also crucial to ExOS. There are three steps to building a community around an ExO:
Use an MTP to attract and engage early members
Nurture the community
Create a platform to automate peer-to-peer engagement
Lesson 2: Inside the exponential organization
The internal organization of ExOs is extremely robust, precise, and properly tuned to process all inputs. ExOs have distinctly different internal operations encompassing everything from their business philosophies to how employees interact, measure their performance, and even their attitudes towards risk.
Just as ExOs external attributes can be encompassed with the acronym SCALE, so can ExOs internal mechanisms be expressed with the acronym IDEAS
Interfaces are filtering and matching processes by which ExOs bridge from SCALE externalities to internal IDEAS control frameworks. They are algorithms and automated workflows that route the output of SCALE externalities to the right people at the right time internally. These processes start manually and gradually become automated around the edges and eventually become self-provisioning platforms that enable the ExO to scale.
Dashboardsrefer to new ways for ExOs to measure and manage the organization. These are important for tracking critical growth drivers in real-time, creating a control framework to manage fast growth, and minimizing exposure from errors.
Salim defines experimentation as the implementation of the lean startup methodology of testing assumptions and constantly experimenting with controlled risks. Experimentation is important because it keeps processes aligned with rapidly changing externalities, and enables faster learning.
Autonomy is described as self-organizing, multidisciplinary teams operating with centralized authority. Extreme autonomy is relying on small, independent, multidiscipline teams and has worked well for ExOs. Autonomy increases agility, creates faster reactions and learning times and there is better morale in the company.
Social technologies as an attribute has the effect of flushing old business environments to become more digital, low latency environments. Social technologies create horizontal interactions in vertically organized companies. It is important as it causes faster conversations, faster decisions, faster learning, and stabilizes the team during rapid growth.
Lesson 3: Implications of exponential organizations
Salim points to some of the characteristics of an ExO ecosystem and the dynamics at play. The first implication is that information accelerates everything because once a company changes from a material, mechanical basis to a digital and informational one, the match is lit for an inevitable explosion. And that's just the beginning. As we add trillions of sensors on every device, process, and person, the process will accelerate to unimaginable pace
The second implication is Drive to Demonetization which is cutting the marginal cost of marketing and sales to nearly zero. This makes it possible to promote an online product worldwide for a tiny fraction of what it cost about 25 years ago.
The third implication is Disruption. The rate of change is so high that you must assume that someone will disrupt you. New actors and entrants are well equipped to attack any market along with the company's profit margins due to the advantage of democratization of information and technology.
The next implication is Death to the five-year plan. The five-year plan has been present in large companies from their corporate strategy departments. These multi-year strategies are supposed to outline a company's long-term visions and goals. The truth is, the five-year plan in itself is an obsolete instrument which rather than offering a competitive advantage is often a drag on operations. In ExOs, the five-year plan is not only unworkable but is seriously counterproductive, and the advent of ExOs signals its death.
Another implication is that size does not matter because small organizations can very well beat bigger ones. Salim argues in the coming years adaptability and agility will increasingly eclipse size and scale.
Rent don’t Own is another important implication. Low-cost access to information and technology is empowering small teams everywhere to act — they don’t have to create. The last implication is that everything is measurable, and anything is knowable. Readily available information is helping firms realize new business models and new ways of doing things.
Lesson 4: Starting an ExO
Before starting an ExO, an assessment of three major risks is necessary:
Technological risk; will it work
Market risk; will people buy the product?
Execution risk; is the team able to function and pivot as needed?
The challenge lies in discovering how to derisk each of these three areas
Next, you need to select an MTP. This is perhaps the easiest goal because whatever your passion, there are communities out there filled with other passionate, purpose-driven people devoted to the same crusade.
After selecting an MTP you need to assemble a team. The founding team in any startup is important, because given the rapid dealing of an ExO company in terms of resources, the careful composition of its founding team is especially critical. The next steps are having a breakthrough idea, finding a business model, building a minimum viable product (MVP), and establishing a culture for the ExO
Lesson 5: ExOs for large organizations
While large organizations may struggle to adapt to the new age of ExOs, they have one key advantage — intellectual capital. Most of the world's global brain trust is running these organizations and this brain trust can come up with some amazing ways to capture ExO principles. Large organizations can take several steps to grow exponentially. They can either:
Invest in or acquire ExOs
Leverage disruptive technologies themselves
Adopt ExOs attributes
Some IDEAS and SCALE attributes that large organizations should put into place include:
Migrating towards an MTP
Creation of community and crowd
Implementing algorithms in their models
Engagement and Experimentation
Using Social Technologies
Lesson 6: The exponential executive
The Exponential Executive is a leader destined to emerge from the transformed economy of democratized technology and digitized information. The Exponential CEO must constantly be alert for disruptive startups because the competition doesn’t just come from existing players. The best strategy in most industries isn’t to fight these disruptors but to join them.
The Chief Marketing Officer (CMO) has intrinsic duties because marketing roles have seen considerable disruption, thanks to mobiles and social media. Duties of the CMO would include product personalization, AI monitoring of social media, using the MTP community as a sales force, differential real-time monitoring of pricing models, and using crowd-sourced online marketplaces for online materials.
The Chief Financial Officer (CFO) will face radical disruption from several technologies including AI (Deep Learning), sensors, and bitcoin (the underlying blockchain protocol in particular). The duties of the CFO will include enabling AI accounting, taxation without borders, understanding digital payment solutions, and getting in sync with crowdfunding and crowdlending. This will see overall unbundling of the financial arena and digital payment sector and the CFO will be able to handle and understand financial transformations and digitalization.
The Chief Technology Officer (CTO) will have to deal with a growing number of devices, technologies, services, and sensors brought in by the workforce that will not increase hacking and other security issues. This post is one of the most challenging corporate executive roles today and the CTO must be vigilant and up to date as the company scales beyond its normal boundaries.
The Chief Innovation Officer (CIO) has to manage the company's creative development to leverage community and crowd for product development, use virtual reality testing, AI design innovation within particular constraints. The Chief Operating Officer (COO) has to get things done by understanding trends in security and privacy risks, decentralization, localization, and leveraged assets, as each will greatly affect the organizer.
The Chief Legal Officer (CLO) will have to overcome a new set of hurdles for the legal function making it both stressful and exciting to be a CLO. They will have to understand how regulatory and legal frameworks cope as technology accelerates and situations change in business.
Exponential Organizations is an excellent book, especially for forward-looking entrepreneurs. The main lesson is that you should never settle. Disruption can come from anywhere and the thing is, you don't have to be disrupted, you can be the disrupter.
Who Would I recommend the Book To?
Any person in any organization, startup or old business that aspires to become an exponential organization. This would be an amazing read on their journey to achieving their goal.GET THE BOOK ON AMAZON
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