An Echelon Media Company
Wednesday December 7th, 2022

Exponential Organisation (ExO): is it the new breed of global businesses?

Ramesh Shanmuganathan Executive Vice President & CIO John Keells holdings

Today we face a more dynamic and disruptive operating environment than in the 20th century and the Covid-19 pandemic was a wake-up call for us in terms of the speed and magnitude with which disruption can proliferate. Most started looking at transforming themselves to meet these challenges and stay relevant. But transformations are often either poorly defined or lack focus and so fall short of addressing the root issues holistically.

The main reason for this is that the information-based world is now moving exponentially, whilst organisations are operating in a linear fashion, struggling both to respond as well as to scale in an unpredictable environment. This requires organisations to reimagine, remodel and relaunch themselves and primarily based on a grandiose aspiration that unifies both people inside and outside the organisations to build an organisation of the future on so-called LEGO blocks which can be easily scaled to become an Exponential Organisation (ExO). ExOs have outputs disproportionally greater because of their inherent ability to leverage technology at scale.

Organisations’ lifespans are getting shorter and they are being challenged by newcomers and annihilated within a short period of existence simply by harnessing the power of exponential potential of 3rd platform technologies, platforms and ecosystems.

Visibly a new breed of leadership and organisations are getting created. It’s good to understand the characteristics of these organisations, what makes them successful and see whether we could inbreed these traits in reimagining and remodelling the rest to gain the benefits of exponential growth.

What is an Exponential Organisation (ExO)?

An Exponential Organisation is one that overarches and empowers which then attracts and unifies both internal and external stakeholders alike. It can scale disproportionately and exponentially, at least 10 times or more, than traditional ones.

Today neither age, size, reputation, current revenue nor your share price guarantee that you will be around. On the other hand, it’s becoming evident that if you can build an organisation that is sufficiently agile, nimble, smart, scalable, and fast then you may have a higher chance of being successful by creating exponential growth.

The ability to scale exponentially is based on several attributes Exponential Organisations possess.

WHAT IS AN EXPONENTIAL ORGANISATION

Further, Exponential Organisations are driven by the following key-value drivers where personal accountability is key.

  • A higher aspirational purpose for the organisation
  • Real-time performance metrics which are accessible to everyone in the organisation
  • Flatter organisation with multi-disciplinary teams and decentralized authority
  • Driven by rapid prototyping, failure, an iterative adaptation based on agile methodologies
  • Collaborative work culture with transparency and connectedness

What trends and challenges are making the traditional businesses extinct and Exponential Organisations a business mandate?

Today most C-suite executives are navigating unpredictable, complex, and hyper-accelerated operating environments. Most have experienced change at an evolutionary pace and often viewed crises as infrequent, isolated events. Their responses framed challenges arising from change and disruption, as temporary setbacks to overcome. They also viewed the opportunities for the organisation’s growth through the same lens, with the assumption that competitive and operating conditions would eventually reach equilibrium.

As a result, transformation initiatives were often tactical, functionally driven, back office-oriented, and focused on risk mitigation versus growth, customers, innovation, and self-disruption.

Today, leadership faces a far different environment. Technological innovation is not only accelerating, but also increasingly disruptive to marketplace competitive dynamics, societal norms, and government policies.

There are three significant shifts that are causing new challenges for 21st-century leadership,

  • The speed and complexity of sustained volatility, uncertainty, complexity, and ambiguity (VUCA). This widens the scenarios and forces choices in shorter time frames with less certainty.
  • Acute and chronic disruptions multiply and amplify at faster rates, shifting from a singular, repairable event to a continuous, compounding condition.
  • As technology compresses traditional risk mitigants, namely distance and time, disruptive forces shape and reshape the operating environment, making threats more existential, interconnected, and sudden. COVID-19 pandemic was a classic example of this.

The volatility fueled by these disruptions creates challenges but also opportunities for organisations and those are compelling ones as well,

  • It changes customer and employee preferences
  • It exposes gaps in capabilities
  • It affects the competitiveness of existing offerings, positively or negatively It outmodes some monetization strategies, giving rise to alternate methods
  • Growth and profitability

Some would expect these conditions to persist or wait for them to improve, but there are a few who are confident in their organisation’s ability to respond. We need to acknowledge that traditional transformation initiatives alone cannot help an organisation sustain and grow in these conditions. The need is to seek opportunities that would exponentially increase the organisation’s growth opportunities require a holistic review of the purpose and leadership.

What key organisational shifts are necessary for making ExO a more realizable proposition?

Most organisations are designed for scarcity, efficiency and predictability and have got used to this status quo. Further, they have been overly dependent on traditional methods of assessing organisational success – return on investment, efficiency, productivity, asset base, liquidity, gearing, loyalty, control of the value chain, industry ranking, years of experience, etc.

The challenge for most is they need to architecture at the core to be – agile, nimble, adaptable, flexible and fast. Most traditional forms of organisational structures don’t mesh well onto a new world order fast being ushered into that is moving fast and disrupting the traditional players.

We need to understand the underlying shifts helping organisations to achieve exponential growth.

EFFICIENCY TO INTELLIGENCE

Traditionally organisations were structured to drive efficiency and today the focus should be to harness the intelligence of constituents. This means they should become flatter; have real-time metrics accessible to everyone to drive performance; teams should be self-organised and multi-disciplinary while functioning in a decentralised system. This allows for innovation and constant experimentation with new ideas and rapid learning loops key to driving sustainable value.

It’s vital to complement this with the right values and style, building deep skills, a smart strategy, and the right incentives to make it stick. Data is fast becoming the glue that ties all the loose ends driving value by bringing new insights about customers and products, allowing for continuous improvement in the existing business and big strategic shifts where required.

ASSETS TO ACCESS

Overemphasis on assets and a stronger balance sheet has become a thing of the past. Today the focus is on creating shared value on a shared asset base built on digital platforms which can scale rapidly to generate exponential growth. This shift is driven by pervasive digital access to all constituents of the organisation hence enabling rapid scaling by increasing access or sharing of people, capital, assets and other resources as opposed to owning these. Extending this concept on an ecosystem front to leverage wider communities from customers, suppliers and competitors rather than owning these. Crowdsourcing; crowdfunding; crowd-ideation are very mature practices that are forming the new order.

LOYALTY TO EMPOWERMENT

The new scalable business models are those providing customers with tools and information on how to “Do-It-Yourself ”. Leveraging digitization and allowing for the fulfilment of an increasing customer need through self-actualization, increases market size. It also makes customers your new brand advocates at no cost to your business. An interesting example is Quirky which encourages users to vote on the design and features of consumer products on an online platform. Digitization creates an opportunity for empowering customers and making them ‘prosumers’ – this appeals to customers by increasing their sense of control and independence and allows for self-actualization.

How does one start to build or transform to become an Exponential Organisation?

Today we can categorize organisations into four quadrants based on their “capacity to change” and “ability to win”. Exponential organisations will have a higher capacity to change as well as a higher ability to win and that’s what distinguishes them.

The rest obviously will fall into the other three quadrants with the other extreme being both low and tagged, “competing”; the one with higher capacity to change and lower ability to win tagged, “enduring” whilst the one with higher ability to win and lower capacity to change tagged, “established”.

Exponential organisations stand apart by demonstrating a superior ability to win as well as a higher capacity for change. They do so by staying ahead of technological, environmental, social, and governance trends as well as making bolder investments to enhance value and capabilities in terms of intelligence, access, empowerment to amplify their ability to win and capacity for change.

Exponential organisations continue to prioritize longer-term, more intangible investments in their ability to win and capacity for change even during times of crisis and disruption. This underlines the critical success factor of exponential organisations – strategic implications of how they organise, invest and lead to become more valued, more stable organisations.

There are 3 major building blocks that are critical in orchestrating an Exponential Organisation,

(01) Massive Transformative Purpose (MTP) – both internal and external focus

(02) Manage abundance of IDEAS – internal focus

(03) Tap into the abundance of SCALE – external focus

An organisation has to combine MTP with IDEAS and SCALE to nurture an Exponential Enterprise.

ExO = MTP + IDEAS + SCALE

What is a Massive Transformative Purpose (MTP) in the context of ExO?

We have entered a new era where an individual can make a massive impact in ways that we never previously imagined, let alone achieved. An MTP is a new paradigm bigger than just a mission statement and is the highly aspirational tagline that tries to have a global appeal that acts like a magnet in attracting the constituents.

  • Massive – big, audacious and aspirational
  • Transformative – significant transformation in an industry, community, or world
  • Purpose – unifies and inspires action from all concerned

The Massive Transformative Purpose (MTP) can be stated as the heart-beat as well as higher aspiration and purpose of the organisation. It sets the tone for everything the organisation does and unifies all constituents, to creating a transformative organisation. It goes on to motivate the organisation and its people, and acts as a guiding principle for all its activities. It creates clarity of purpose for everyone and helps to stay focused and build scale based on a higher aspiration.

Some of the known MTPs are,

  • TED- ideas worth spreading
  • SpaceX – Revolutionize space technology to enable people to live on other planets
  • Google – Organise the world’s information
  • Tesla – Accelerating the transition to sustainable transportation

It’s important for an MTP to be,

  • Audacious and aspirational
  • Focused on an outcome
  • Unique for the context
  • Drive radical transformation
  • Motivated by the next point of inflexion

And also bear in mind an MTP is not,

  • Mission focused
  • Technology centric
  • The present context
  • Driven by financial KPIs

What are the attributes which drive IDEAS in ExO?

IDEAS is how an ExO executes on its MTP internally and IDEAS here stands for Interfaces, Dashboards, Experimentation, Autonomy and Social Technologies (IDEAS). Each of them has a significant stake in making the MTP realizable and they are:

INTERFACES

Interfaces connect the outside world to your organisation, and they come in two main categories: User Interfaces & Application Programming Interfaces (APIs). They are algorithms and automated workflows that route outputs as efficiently as possible to the right constituents within or outside the organisation.

DASHBOARDS

It’s important to decide what to measure, and dashboards give you real-time visibility to those. To track and monitor performance, all members of an organisation must be able to access real-time metrics via a central dashboard

EXPERIMENTATION

Successful businesses are open to experimentation and use it to their benefit regularly. ExOs use methods facilitating rapid experimentation and process improvement through fast feedback loops to further their growth through iterative steps.

AUTONOMY

Quick, informed decision-making is a competitive advantage for any organisation. Smart organisations empower their people on the front lines with autonomy. ExOs have a flat hierarchy to promote agility and accelerate learning and reaction times by empowering their people.

SOCIAL TECHNOLOGIES

Social technologies tie companies and teams together. These are the communication tools that allow small, autonomous teams to move rapidly and keep parent companies in the know about projects and other work. They drive real-time, zero-latency conversations across the organization.

What are the attributes which enable SCALE in ExO?

SCALE helps the ExO to marry the external constituents to its internal constituents and rapidly scale the organisation exponentially by leveraging access, intelligence and empowerment and SCALE (which stands for Staff on Demand, Community & Crowd, Algorithms, Leveraged Assets and Engagement). Each of these makes the MTP scalable by seamlessly integrating external factors to grow exponentially.

Each of the key factors in SCALE has significant potential to exponentially scale the organisation but needs to be addressed holistically rather than in an individual fashion.

STAFF ON DEMAND

To act quickly and flexibly in a fast-changing world, ExOs leverage external sources such as extending community, crowd-sourced skills, partners, contractors, etc to rapidly scale. Outsourcing as many tasks as possible rather than maintaining a large full-time workforce allows companies to fill expertise gaps and ensure a constant flow of fresh ideas as well as change course easily.

COMMUNITY & CROWD

ExOs build and join communities, and they crowdsource or crowdfund ideas and validate same to achieve rapid growth

ALGORITHMS

Algorithms allow organisations to make decisions faster and more effectively than humans can on their own—which also helps drive autonomy. ExOs use AI and machine-learning technologies to refine these algorithms to scale their organisation based on intelligence.

LEVERAGED ASSETS

ExOs access, rent, or share assets to stay nimble — and they’ll even outsource mission-critical assets. Not owning assets increases agility and allows quick scaling.

ENGAGEMENT

Digital engagement & reputation systems, gamification, etc. create the opportunity for a virtuous positive feedback loop, which enables faster growth propelled by active user engagement which helps EXOS to engage markets quickly.

How can any organisation, be it an established one or a start-up, aspire to be an ExO?

There are five critical steps, each involving diagnostics, organisational design, and leadership, that firms must take to become or remain an exponential organisation. The key initial steps in the journey to an exponential organisation are to:

  • Validate its ability to win
  • Maximize its capacity for change

The remaining three steps strengthen the ties between the two crucial initial steps:

  • Organise for advantageous transformation
  • Activate the strategic capability
  • Lead the organisation forward

For exponential organizations these steps may be more diagnostic and confirmatory, providing visibility into the current state, revealing opportunities for higher payoff, inspiring new performance indicators, and ultimately creating focus and direction for leaders across the business. For lagging enterprises, these steps may reveal gaps in strategy, operations, and the corporate investment portfolio that, if closed, could yield significant competitive benefits and financial returns. Measuring the gaps is critical, as this will help the organisations to shape and sequence a transformation.

As the operating environment becomes more volatile and uncertain, the organisation must not take a tactical view to its strategic direction but rather stay its course by anchoring a consistent framework for decision-making.

A strong, long-term strategic vision, coupled with clear, quantitative goals, provides greater clarity to key enterprise stakeholders: its leaders, employees, customers, partners, and investors. That clarity encourages stronger support around tough decisions about values, investments, and priorities.

Organisations without proper MTP or a true strategic North Star find themselves at crossroads now and then unable to make tough decisions efficiently and with confidence. An MTP alone is not sufficient, but it’s important to focus on IDEAS and SCALE and ensure that the organisation’s strategy, people, and operating model are aligned to harness their potential to win continuously and change/invest to ensure that the organisation is both leading and maximising their competitive value.