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The Rise of Exponential Organizations and How to Become One

by Salim Ismail

12 minute read

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    When you look at the world today, it’s obvious how vastly different it is from 20 years, even 10 years ago.

    We clearly are now living in a world of total singularity. It’s given rise to a new breed of organizations that can grow much faster than their peers.

    And this presents an unbelievable business opportunity which you can now take advantage of.

    Through decades of research, I’ve cracked the code on how these organizations perform so well and uncovered what it takes to operate like they do.

    Here’s why you’ll want to build your own Exponential Organization and how to do it.

    Covered in this article:

    • The doubling of exponential technologies
    • How exponential growth is fundamentally changing our world
    • How Exponential Organizations will thrive in this new world
    • Example of an Exponential Organization
    • The returns of an Exponential Organization
    • How to become more like an Exponential Organization
    • 1 way to start becoming an Exo today


    The doubling of exponential technologies

    What we’ve been seeing over the past few decades can be summed up by Moore’s law, the observation that the number of transistors in a microprocessor doubles every two years.

    The same can be said about computing power. Every two years it doubles, while the price gets cut in half.

    The fascinating thing about this is that once you start doubling patterns, the trend doesn’t stop.

    We’ve been doubling computational price performance for over 100 years.

    Once you take a domain, discipline or industry area and you power it with information and technology then the price performance starts doubling.

    If you have an information-based environment some other technology always comes along.

    Essentially, Moore’s law will not stop.

    But the challenge with exponential growth is that we cognitively do not see it.

    All of our intuition and education about the world teaches us linear extrapolation.

    Take 3D printing for example. It is actually 35 years old; it is not a new trend.

    And yet people only started hearing about it around 2 or 3 years ago - when the technology really started exploding.

    This is the enormous challenge - and corresponding opportunity - in this new technology.


    How exponential growth is fundamentally changing our world

    We now have a dozen technologies all moving on this doubling pattern.

    list of accelerating technoloiges like robotics ai nanotech and neuroscience
    Drones, human sequencing, nanotech, biotech, etc.

    When these technologies intersect, enormous application areas become available.

    Peter Diamandis touches on this phenomenon with his 6Ds Framework to describe what’s happening.

    For the sake of brevity, let’s look at the Digitizing part of that framework.

    When you digitize things they become very, very disruptive.

    Film photography used to operate from a scarcity model – coming in at about a dollar a photograph.

    analog cameras and digital phone cameras represent how the shift has changed many facets of the camera industry
    Then we move to digital photography and into an information-based environment.

    When you move into this information environment, 3 fundamental things happen:

    1. Marginal cost goes to zero
    2. The domain quickly explodes (everyone taking photographs)
    3. The problem space shifts (from analog to digital and new challenges emerge)


    You can see this in many other industries, like in music, where there’s a shift from scarcity business models to abundance business models.

    You can see it in solar power where the cost has dramatically gone down. 

    You can see this application of Moore’s law in real-time with a set of separate trips across the country I took with my Tesla.

    2 tesla trips across the country

    This is a new paradigm we’re entering here. I call this a Gutenberg moment because the implications of my world just change so dramatically from this.

    Another example is CRISPR editing wherewWe can now edit the human genome as easily as you can edit a word document.

    The fact that it's possible is unbelievable and is a massive inflection point for humanity.

    There’s unbelievable technologies and breakthroughs that are coming.

    These new technologies are deflationary – they cost less and less over time.

    graph of cost of solar power over the last few decades


    How Exponential Organizations thrive in this new world

    Traditionally advanced technologies always cost a lot and only a big company or a govt lab could afford to r&d and launch new products.

    Today more than any time in humanity, people can pick up new technologies without any startup costs.

    The challenge is that it’s super hard to see the exponential curve.


    line graph depicting the deception of linear vs exponential growth
    Disruption can now come from anywhere and it comes from everywhere.

    As we go through domain after domain, the costs go to zero, and we disrupt the status quo. Today, any entrepreneur can enter a legacy environment with a beginner’s mind, leverage new technologies, and immediately disrupt it.

    My favorite (and most well-known) example of this is Elon Musk, but you see it happening all over the world.

    All organizations are designed for scarcity, efficiency and predictability. And it’s been this way for several hundred years.

    The challenge for meeting today is that you need to be architected for adaptability, flexibility, agility and speed.

    Our old org structures don’t mesh well onto a new world that is moving fast and delivering abundance.

    But the ones that are doing this are Exponential Organizations (ExOs).

    They’re scaling organizations as fast as we can scale technology

    The Master Business Course with Growth Institute is all about teaching you how to build your own. It's the most comprehensive course ever put together on exponential organizations.

    the exo formula
    There are 3 major factors you’ll need to build your own ExO.

     
    1.  Massive Transformative Purpose
      This is the most important one.

      When you have a purpose-driven organization then everybody lines up and it makes the organization less political.

    2. S.C.A.LE. – The 5 external attributes of the ExO

    3. I.D.E.A.S - These are the 5 internal attributes of ExOs

     

    Examples of Exponential Organizations

    TED is a global media brand. But it wasn’t always that way.

    Originally, they started off as a conference.

    But over the last 20 years, they've created over 20,000 events.

    They took an established environment, applied ExO principles, and blew it up to a global level at zero cost.

    Our favorite startup that has ever been created is GitHub. It’s the highest rated ExO – it fulfills all 11 attributes – and Microsoft bought them a few years ago for 7 and a half billion dollars.

    They have no assets. No workforce. No intellectual property.

    You can take any established existing environment, apply ExO principles, and create massive value very quickly.

    A midmarket that’s established can really swing for the fences. There’s incredible business opportunity coming.


    The returns of an Exo

    We’ve uncovered some data on the potential returns of the ExO model.

    We have a survey called the ExQ Survey (the Exponential Quotient).

    We ask 25 questions. On a scale of 1-4. And with those questions we can quantify how scalable your organization structure is.

    We also used them to rank the Fortune 100 by their ExO score.

    To take it even further, we did a 6 year trailing analysis on those companies.

    6 year returns of fortune 100 companies at the top and bottom

    We found that the market cap of the top 10 companies was 15 times the market cap of the bottom 10 companies.

    With further analysis, there emerged 4 more metrics:

    • 3x better revenue growth
    • 6.4x more profitability
    • 10.9x higher asset utilization
    • 40x total shareholder returns
    results of an exo study into the fortune 100 companies found major returns from the top 10 companies

    The ExO model applied to big companies shows that the model of top 10 companies delivers 40 times the shareholder return of bottom 10 over 7 years.


    How to become more like an Exponential Organization

    For several years, I was heading up innovation at Yahoo.

    This experience taught me a fundamental lesson:

    When you try any level of innovation within an existing company, the immune system will attack you.

    With that in mind, here’s what I suggest you do if you want to become more like an ExO.

    1. Transform leadership in mindset and education
    2. Create inspiring ExOs at the edge
    3. Invest in or partner with adjacent ExOs
    4. Leverage or expose data and information
    5. Hire a “Black Ops” team
    6. Set up a Google[X] equivalent


    Make sure that you do not do disruptive innovation at the core. You cannot do disruptive innovation inside the mothership. Do it at the edge.

    Take your current organization and reshape it so you can create Exponential Organizations at the edge easily.

    Over time, if it works the ExO becomes the gravity center and outsizes the mothership.

    A big company has enormous difficulty innovating.

    I think of a big company as a Roman army operating phalanx formation marching along with spears. If you come in from the side, you’re going to get speared.

    Start today

    If you're ready to take on the attributes of an Exponential Organization, you can get started today.

    With the Exponential Organizations Master Business Course, you'll implement the 3-month blueprint to become an Exo and accelerate your company be years ahead.

    Learn more here

    Salim Ismail

    Salim Ismail

    Salim Ismail is a sought-after speaker, strategist and entrepreneur based in Silicon Valley. He travels extensively addressing topics including breakthrough technologies and their impact on a variety of industries and society in general. Salim has spent the last six years building Singularity University as its founding Executive Director. SU is based at NASA Ames and is training a new generation of leaders to manage exponentially growing technologies.

    Salim Ismail es un orador, estratega y emprendedor muy solicitado de Silicon Valley. Constantemente viaja para abordar temas que incluyen tecnologías innovadoras y su impacto en diversas industrias y la sociedad en general. Salim ha pasado los últimos seis años siendo director ejecutivo de Singularity University (SU) . SU se encarga de entrenar a una nueva generación de líderes para administrar tecnologías de crecimiento exponencial.

     
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