Exponential Organizations

"Today, if you're not disrupting yourself, someone else is; your fate is to be either the disruptor or the disrupted. There is no middle ground."

— Salim Ismail

Salim Ismail was the founding executive director of Singularity University, after selling his company to Yahoo. He studied the companies that in the previous decade grew at inexplicably high rates, and found that they weren't better at managing assets; they had almost no assets. Airbnb had no rooms, Uber had no cars, and both were worth more than the hotel and taxi chains that did.

Everything starts with purpose. Every exponential organization has a massive transformative purpose, an MTP, which doesn't describe what the company does but the change it wants to bring about in the world. "Organize the world's information" attracts talent, community and customers without paying them, and gives coherence to decisions when the company grows at speed.

A good MTP is recognizable because it fits in one sentence, points to a transformation and not to a product, and is so ambitious it is never fully accomplished. It also provokes in whoever hears it the desire to join, like TED's "Ideas worth spreading." If your team can't repeat it from memory, or a customer wouldn't want to be part of it, you don't have it yet.

To grow without owning, Ismail orders five external attributes under the acronym SCALE:

• Staff on demand. Use external talent for everything that isn't core to the business.
• Community and crowd. Turn users and followers into workforce, ideas and capital.
• Algorithms. Automate decisions with data and artificial intelligence instead of with people.
• Leveraged assets. Rent, share or access what others own instead of buying it.
• Engagement. Incentives, reputation and game mechanics to keep the community active.

To control what grows, he proposes five internal attributes under IDEAS:

• Interfaces. Processes and filters that connect the outside with the organization without collapsing it.
• Dashboards. Real-time metrics available to everyone, OKRs included.
• Experimentation. The Lean Startup method as a way of operating, not as an isolated project.
• Autonomy. Self-organized teams with real authority to decide.
• Social technologies. Collaboration tools that replace email and hierarchy.

Ismail doesn't ask for all ten attributes. With a few well implemented, a company already shows exponential behavior.

A concept to master is dematerialization. Every industry that becomes information follows the same curve. First it deceives, because the change seems insignificant. Then it demonetizes the incumbent, who loses the revenue before understanding why. And finally it democratizes access at a price that was previously unthinkable. The founder who identifies which part of their industry is about to become information knows where to build.

How to apply it? Write your MTP in one sentence that doesn't mention your product. Then go through the ten attributes and mark which you already have, which you could have in three months and which don't apply in your industry. Start with the two cheapest, which are usually dashboards and algorithms. And ask yourself a hard question: what asset are you buying that you could rent or let the community contribute?

As a founder it will help you design the company from the start with this logic, which is far easier and cheaper than converting it later.