Exponential Organizations: A book review by Bob Morris

Posted on: January 8th, 2015 by bobmorris

ExponentialExponential Organizations: Why new organizations are ten times better, faster, and cheaper than yours (and what to do about it)
Salim Ismail with Michael S. Malone and Yuri van Geest
Diversion Books (2014)

How and why the exponential organization (ExO) paradigm is sustainable but only if….

The term “gazelle” was coined by the economist David Birch. His identification of gazelle companies followed from his 1979 report titled “The Job Generation Process” (MIT Program on Neighborhood and Regional Change), wherein he identified small companies as the biggest creators of new jobs in the economy. In 1994, however, Birch revised his thesis, isolating job-creating companies he called “gazelles.” Characterized less by size than by rapid expansion, Birch defined the species as enterprises whose sales doubled every four years. By his estimates, these firms, roughly 4% of all U.S. companies, were responsible for 70% of all new jobs. The gazelles beat out the elephants (like Walmart) and the mice (corner barbershops). When you hear politicians say, “Small businesses create most of the new jobs,” they’re really talking about young and growing firms. They are talking about gazelles.

As Salim Ismail explains in his eponymous book, an exponential organization (ExO) “is one whose impact (or output) is disproportionately large — at least 10 times larger — than its peers because of the use of new organizational techniques that leverage accelerating technologies.”

These are its core values, accompanied by my brief annotations:

1. Information Accelerates Everything: But be certain that the information is correct, relevant, and sufficient.
2. Drive to Democratization: True, at least in terms of opportunity and access but establish a meritocratic rewards system.
3. Disruption Is the New Norm: Again true, but meanwhile, remember that revenue pays the bills.
4. Beware the “Expert”: Wisdom is eternal but expertise must accommodate the work to be done now.
6. Smaller Beats Bigger: Unless the subject is profits. I do agree that not all growth is progress.
7. Rent, Don’t Own: This creates options and alternatives while minimizing fixed, depreciating costs.
8. Trust Beats Control and Open Beats Closed: Trust lubricates mutually beneficial collaboration.
9. Everything Is Measurable and Anything Is Knowable: That is true more often than not…but not absolute.

Here are the six characteristics of exponential leadership, accompanied by Ismail’s comments:

1. Visionary Customer Advocate. “If customers see their needs and desires being attended to at the highest levels, they are much more willing to persevere through the chaos and experimentation that often happens with exponential growth.”

2. Data-driven Experimentalist: “To create order out of high-speed chaos requires a process-oriented approach that is ultimately nimble and scalable.”

3. Optimistic Realist: “Leaders able to articulate a positive outcome through any scenario, even downside scenarios, will be able to help maintain objectivity within their teams.”

4. Extreme Adaptability: “As a business scales and its activities morph, so too must its management…Constant learning is critical to staying on the exponential curve.”

5. Radical Openness: “While many [most?] leaders and their organizations ignore most of the criticism and suggestions [from within and beyond], creating an open channel to the crowd [outside of the given C-Suite] and the mechanisms to determine signal from noise can provide new perspectives and solutions, allowing access to whole new layers of innovation.”

6. Hyper-Confident: “Two of the most important personality traits for an exponential leader to have are the courage and perseverance to learn, adapt and ultimately, disrupt the given business.”

In my opinion, after only a few modifications, these could also be also the defining characteristics of those who lead small-to-midsize companies as well as those who head divisions, business unites, and even departments in Fortune 100 companies such as those that Ismail examines in Chapter Nine of this book, notably Coca-Cola Company, General Electric, Amazon, Zappos (owned by Amazon), and Google Ventures.

As Ismail explains in Chapter Nine, these forward-looking companies “are implementing the ideas discussed in the previous chapter [“ExOs for Large Organizations”]. Some are building ExOs at their edges; some are acquiring or investing in ExOs in their current market space; still others are implementing ExO Lite [see Pages 228-239].

Long ago, Ezra Pound urged aspiring writers to “make it new.” I was again reminded of that challenge as I noted the reference to “new organizations” in this book’s subtitle. Salim Ismail urges business leaders not only to make their organizations new but also to make them “ten times better, faster, and cheaper” than their competition. In fact, I presume to suggest that a company’s greatest competitor tomorrow will be who it is, what it does, and how it does it today. With organizations as with individuals, most limits are self-imposed.

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