Exponential Organizations: this article explains the concept of Exponential Organizations by Salim Ismail, Mike Malone and Yuri van Geest in a practical way. After reading it, you will understand the basics of this powerful innovation and organizational tool.
What are Exponential Organizations?
Exponential Organizations focus on scale. That enables them to grow into large, powerful companies in a short period of time. The best-known examples at the moment are companies like Netflix, Tesla, WhatsApp, Uber and Bitcoin and several start-ups.
One of the founders of this new way of thinking is Canadian business expert and entrepreneur Salim Ismail. Together with Mike Malone and Yuri van Geest, he wrote the book Exponential Organizations (2014) in which they explain the changing society we live in.
Exponential Organizations and central coordination
Companies that had been successful for decades until now, are having trouble keeping up. The reason is simple. Many of these organizations are used to directing all activities centrally because that’s the way it was always done. This works admirably in a relatively stable environment with a predictable future. Currently, however, both the market and environment are changing rapidly, and the future is less predictable due to increasing technological developments and innovations. As a result, product life cycles are becoming shorter and shorter.
To survive in this new, rapidly changing world, it’s important that companies think about a new structure and adjusting their organization. Using institutional innovation, a re-evaluation must be made regarding all relations, structures, processes and models of the organization. Capital, talent and information too will have to be brought together in a different way. That will, among other things, simplify production models and processes. Exponential Organizations are fully capable of this and realise that they have to organize themselves differently in time of instantaneous change.
New success factors
Exponential Organizations continuously innovate and invest in this area. They are aware of rapid changes and the great uncertainty that goes with them. To them, leading an organization based on a rigid hierarchical structure is a thing of the past. Therein lies their strength. They have a number of useful ways to stay standing in an ever-changing environment. These new success factors can be summarised in the acronyms SCALE and IDEA.
This acronym focuses on external elements that Exponential Organizations use as new success factors. The letters represent the following terms:
1. Staff on Demand
A lot of money can be saved by only hiring staff when they are needed. It is very important to have a good pool of workers. Freelancers and self-employed workers with specific knowledge and expertise.
2. Community & Crowd
By creating a large fan base and proper communication with the general public, an organization is able to test new ideas and get financing and/or crowd funding when necessary.
Algorithms are the basis for computer language. We live in a world where data is collected and shared using computers, clouds and other digital platforms. No company can do without. It’s the best way to collect customer information and communicate with them.
4. Leveraged Assets
You can’t make new investments without money. That’s why companies must always be on the lookout for assets, in whatever way, shape or form. This can be done by offering services or access to a platform, for example, by means of a small monthly payment in the form of a subscription.
It’s always good for a company when users and customers are involved. This can be initiated, for example, by organizing competitions or by asking users to think about solutions to possible problems.
Exponential Organizations: Internal IDEAS
Where SCALE focuses on the external elements as an acronym, IDEAS focuses on the internal elements that Exponential Organizations use as success factors:
Two systems can communicate with each other via interfaces. This is a way for organizations to keep in touch with their customers and users. Interfaces are indispensable for Exponential Organizations.
By implementing a dashboard, an organization is able to monitor the company’s performance. User data is immediately transparent and can be linked to interfaces.
Exponential Organizations are not afraid to experiment. As a result, they are open to process improvements and can respond quickly to feedback from their users.
There is hardly any room for hierarchy in an Exponential Organization. By allowing teams to function autonomously, decisions are taken more quickly and everyone is responsible for their own actions.
Mutual relationships between staff members and departments are important. In order to avoid hindering their cooperation and communication as much as possible, so-called activity streams help them to conduct real-time conversations with each other, regardless of where everyone physically is or what time it is. That means they don’t have to wait for each other and can start immediately.
Massive Transformative Purpose (MTP)
According to co-author Yuri van Geest, Exponential Organizations are 10 times better, faster and cheaper than traditional organizations. Exponential Organizations provide a clear answer to the question ‘why’. The authors call this MTP; Massive, Transformative, Purpose, which focuses on a higher goal to achieve a radical change. That ultimately leads to a better world.
It’s Your Turn
What do you think? What are your thoughts about Exponential Organizations? Do you recognize the practical explanation or do you have more suggestions? What are your success factors for organizational development in this rapidly changing world?
Share your experience and knowledge in the comments box below.
- Ismail, S., Malone, M. S., & Van Geest, Y. (2014). Exponential Organizations: Why new organizations are ten times better, faster, and cheaper than yours (and what to do about it). Diversion Books.
- Starbuck, W. H. (Ed.). (1971). Organizational growth and development. Harmondsworth: Penguin Books.
- Website Exponential Organizations: https://exponentialorgs.com/
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Published on: 06/02/2018 | Last update: 10/13/2022
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