Salim Ismail’s book takes a closer look at a rising breed of new organisations characterised by rapid growth and a strong reliance on technology.
do you build a gigantic organisation very quickly? One that is 10 times better, faster and cheaper than its peers, and which affects an enormous number of people? A traditionalist would say it is pie in the sky and yet it is already happening around us. Think of Google, Uber, Amazon, Tesla and others that virtually sprang up over the past few years.
In the past five years the business world has seen the birth of the “exponential organisation”, which is able to eliminate the incremental, linear way traditional companies get bigger.
It leverages assets like the community, big data, algorithms, and new technology for achieving performance benchmarks 10 times better than its peers. This new breed of company has revolutionised how an organisation can accelerate its growth by using technology and open innovation.
This was the subject at USB Executive Development (USB-ED) and finweek’s regular We Read For You presentation recently held in Cape Town and Johannesburg. The book reviewed was Exponential Organizations by Salim Ismail with Dr Morne Mostert, director of the Institute for Futures Research at Stellenbosch University, eliciting the most salient characteristics of this new breed of business.
According to Mostert, the book confirms that our sense of a changing world is accurate.
The following trends are noteworthy:
Twenty years ago it took 20 years to become a $20bn company – now it can take as little as nine months. The average half-life of a business competency has dropped from 30 years in 1984 to five years in 2014. This has serious implications for business schools, faculties of commerce as well as learning and development units in business. Eighty-nine percent of the Fortune 500 companies from 1955 were not on the list in 2014. The average lifespan of an S&P 500 company has decreased from 67 years in the 1920s to 15 years today. In the next 10 years 40% of all S&P 500 companies will disappear from this list. The traditional 20th-century way of doing business is to secure assets, protect them and then sell access to a scarce resource. The emerging way is to tap into the abundance on the outside of the organisation or “the world out there”.
This pivots on the notion that customers will not just experience the impact of a single business, but a broad suite of experiences in a dynamic and unpredictable world. Consciousness of how to leverage such external experiences through technology is key to the exponential organisation.
Mostert explains this by pointing out that it is a simple reality that there are always more creative and innovative people outside an organisation than inside it. For that reason, the crowd can be used for innovation, validation and funding.
The very notion of what it means to be a member of “staff” is challenged, as new technology platforms embrace the concept of “staff on demand”, a fluid approach, contrasted with traditional headcount management.
It is essential to improve such engagement through an MTP (Massive Transformative Purpose) – a call for active participation for the achievement of an enormous positive contribution to the world. It is interesting how all exponential organisations think of themselves as technology and software companies, irrespective of their industries. This is because such organisations are constantly using technology platforms and algorithms to experiment and produce rapid prototypes.
“The future is a factor of the quality of our decisionmaking. Exponential organisations have found innovative ways of tapping into the wisdom of the crowd through technology platforms,” Mostert says.
Dr Morne Mostert Director of the Institute for Futures Research at Stellenbosch University