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Kindle Notes & Highlights
by
Salim Ismail
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August 27 - September 8, 2021
No matter how promising its product or premise, unless an ExO is able to optimize the engagement of its community and crowd, it will wither and fade.
and tools. In this chapter we’ve provided both: the MTP to elicit the passionate involvement of all stakeholders in a crusade to achieve a compelling larger vision; and the components of SCALE to build and engage the Community & Crowd, to use Staff on Demand and Leveraged Assets, and to leverage Algorithms.
Key Takeaways Exponential Organizations have a Massive Transformative Purpose (MTP) Brands will start morphing into MTPs ExOs scale outside their organizational boundaries by leveraging or accessing people, assets and platforms to maximize flexibility, speed, agility and learning. ExOs leverage five externalities (SCALE) to achieve performance gains: Staff on Demand Community & Crowd Algorithms Leveraged Assets Engagement
And just as the external attributes of the Exponential Organization can be encompassed with the acronym SCALE, so too can an ExO’s internal mechanisms be expressed with the acronym IDEAS. Interfaces Dashboards Experimentation Autonomy Social Technologies
Interfaces are filtering and matching processes by which ExOs bridge from SCALE externalities to internal IDEAS control frameworks. They are algorithms and automated workflows that route the output of SCALE externalities to the right people at the right time internally. In many cases, these processes start out manual and gradually become automated around the edges. Eventually, however, they became self-provisioning platforms that enable the ExO to scale. A classic example is Google’s AdWords, which is now a multi-billion dollar business within Google. A key to its scalability is
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Most of these Interface processes are unique and proprietary to the organization that developed them, and as such comprise a unique type of intellectual property that can be of considerable market value. ExOs invest considerable attention to Interfaces and a great deal of human-centered design thinking is brought to bear on these processes in order to optimize every instantiation.
Ultimately, Interfaces tend to become the most distinctive internal characteristics of a fully realized ExO. There’s a good reason for this: at peak productivity, Interfaces empower the enterprise’s management of its SCALE external attributes—in particular Staff on Demand, Leveraged Assets and Community & Crowd. Without such interfaces the ExO cannot scale, thus making them increasingly mission-critical.
There has always been a tension in business created by the need to balance instrumentation and data collection versus running the company and getting things done. Collecting internal progress statistics takes time, effort and expensive IT. That’s why results were usually tracked annually or, at best, quarterly.
In High Output Management, Grove’s highly regarded manual, he introduced OKRs as the answer to two simple questions: Where do I want to go? (Objectives) How will I know I’m getting there? (Key Results to ensure progress is made)
Some characteristics of OKRs: KPIs are determined top-down, while OKRs are determined bottom-up. Objectives are the dream; Key Results are the success criteria (i.e., a way to measure incremental progress towards the objective). Objectives are qualitative and Key Results are quantitative. OKRs are not the same as employee evaluations. OKRs are about the company’s goals and how each employee contributes to those goals. Performance evaluations—which are entirely about evaluating how an employee performed in a given period—are independent of OKRs. Objectives are ambitious and should feel
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Scientific results in neuroscience, gamification and behavioral economics have shown the importance of both specificity and frequent feedback in driving behavioral change and, ultimately, having an impact. Specificity and rapid feedback cycles energize, motivate and drive company morale and culture. As a result, a number of services, including OKR Hub, Cascade, Teamly and 7Geese, have been formed to help businesses track these measures.
The only difference between scalable learning and kaizen is the use of new and more advanced offline and online data-driven tools to test assumptions of customer groups, use cases and solutions.
By relying on quantitative and qualitative data, a company forms a conclusion based on a series of well-considered questions: Does a product fit the need of the customer? How did a customer solve a problem or need in the past? What are the current costs created by the customer problem? Should we adapt or change our course? Are we ready to scale?
As Eric Ries explains, “The modern rule of competition is whoever learns fastest, wins.”
Autonomy is a prerequisite for permissionless innovation.
From teleworking to outsourcing to flattened, virtual organizations, there has been a clear and steady trend toward increased autonomy in the workplace. As a result, we predict the lightweight OKR approach will gradually replace traditional top-down managerial oversight.
“We start from the presumption that our people are talented and want to contribute. We accept that, without meaning to, our company is stifling that talent in myriad unseen ways. Finally, we try to identify those impediments and try to fix them.”
One survey by McKinsey found that after experiencing poor customer experience, 89 percent of consumers switched their business to a competing company. On the flip side, 86 percent said they were willing to pay more for better customer experience.
“There are still hierarchies in a network, but the hierarchies tend to be competence-based hierarchies, relying more on peer accountability than on authority-based accountability—that is, accountability to someone who knows something, rather than to someone simply because they occupy a position, regardless of competence. It is a change in the role of the manager, not an abolition of the function.”
“Communication is the basis for civilization and will be a catalyst and platform in the future for more innovations in many industries.”
Priestley’s equation for social business is: CONNECTION + ENGAGEMENT + TRUST + TRANSPARENCY.
views social technology as having three key objectives: Reduce the distance between obtaining (and processing) information and decision-making. Migrate from having to look up information to having it flow through your perception. Leverage community to build out ideas.
From our perspective, Social Technologies are comprised of seven key elements: Social objects, Activity streams, Task management, File sharing, Telepresence, Virtual worlds and Emotional sensing.
“An Exponential Organization is one whose impact (or output) is disproportionally large—at least 10x larger—compared to its peers because of the use of new organizational techniques that leverage accelerating technologies.”
The key question for any organization is not whether you “look” like an Exponential Organization, but “How exponential are you?” That is, how much have you internalized the philosophy of being an ExO? How does it inform your daily operations in terms of autonomy and social technology? How efficiently do you use the right tools, from dashboards to interfacing? And how open are you to risk, to experimentation and even to failure?
1. Information Accelerates Everything
Network effects and customer experience lock-in seem to be at the root of this fundamental change in the nature of competition.
By this we mean that with the web, it is possible to promote an online product worldwide for a tiny fraction of what it cost just twenty-five years ago. And, in concert with a viral referral loop, customer acquisition costs can also be cut to what was once deemed impossible: zero. It is precisely this advantage that allowed businesses such as Craigslist, eBay and Amazon to scale with extraordinary speed to become some the world’s biggest companies.
What we’re now seeing with ExOs—and this is tremendously important—is that the marginal cost of supply goes to zero.
argue that as technology brings us a world of abundance, access will triumph over ownership. By comparison, scarcity of supply or resources tends to keep costs high and stimulates ownership over access.
Today, the outsider has all the advantages. With no legacy systems to worry about, as well as the ability to enjoy low overhead and take advantage of the democratization of information and—more important—technology, the newcomer can move quickly and with a minimum of expense. Thus, new actors and entrants are well equipped to attack almost any market, including yours—along with your company’s profit margins.
As Steve Forbes sees it, “You have to disrupt yourself or others will do it for you.” This applies to every market, geography and industry.
We see a consistent set of steps around disruptive innovation comprising the following: Domain (or technology) becomes information-enabled Costs drop exponentially and access is democratized Hobbyists come together to form an open source community New combinations of technologies and convergences are introduced New products and services appear that are orders of magnitude better and cheaper The status quo is disrupted (and the domain gets information-enabled)
(As an aside, consider that an MTP is a BHAG with purpose.)
In short, a five-year plan is a suicidal practice for an ExO. If it doesn’t send the company racing off in the wrong direction, it can present an inaccurate picture of what lies ahead, even in the right direction. The only solution is to establish a big vision (i.e., an MTP), set an ExO structure into place, implement a one-year plan (at most) and watch it all scale while course-correcting in real time.
Moments of Impact: How to Design Strategic Conversations That Accelerate Change,
Ertel and Solomon boil it down to five distinct phases for any team planning session or strategic decision: Define your purpose Engage Multiple Perspectives Frame the Issues Set the Scene Make it an Experience
Moments of Impact is an important guide for anyone interested in reducing the rash of mind-numbing, unproductive meetings and optimizing the time that management spends together.
Thus, the near future, certainly for ExOs, sees five-year plans being replaced with the following elements: MTPs for overall guidance and emotional enrollment. Dashboards to provide real time information on how a business is progressing. Leveraging “Moments of Impact” for clean, productive decision-...
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In an ExO world, purpose trumps strategy and execution overrides planning. Replacing five-year plans with these new, real time elements can be scary but it’s also liberating, and the rewards for those willing to stay on the ride will be both decisive and astonishing. Besid...
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As Peter Diamandis has often noted, one key advantage of a small team is that it can take on much bigger risks than a large one can. This can be seen clearly in the graph below—courtesy of Joi Ito, director of the MIT Media Lab—which shows how startups are characterized by high upside potential and low downside, while large organizations are characterized by just the opposite.
While this new paradigm is still in its early days, preliminary indications are that when successful, ExOs will build on the leverage created by their externalities and become platforms.
First computing, then tools and manufacturing. Today, that same rent-not-own philosophy even encompasses employees. Individual “temps” are nothing new, of course, but the concept now includes groups of temporary workers. Organizations can rent staff on demand from Gigwalk and other companies when a large amount of work needs to be done quickly, relieving them of the traditional, nightmarish practice of serial hiring and firing. In this instance, there is no distinction between “rented” staff and the ExO attribute, Staff on Demand.
Over the decades business owners have steadily moved from viewing business through the lens of a balance sheet to instead focusing on P&L—that is, emphasizing the primacy of profits over ownership.
Vision: What you’re doing Purpose: Why you do it Business model: What will fuel you as you’re doing it Wow and uniqueness factors: What sets you apart from others Values: What matters to you
ExOs are taking advantage of this accelerating trend in one of two ways: by creating new business models on existing data streams or by adding new data streams to old paradigms.
“A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.”
When assessing a startup for funding, investors typically categorize three major risk areas: Technology risk: Will it work? Market risk: Will people buy the product? Execution risk: Is the team able to function and pivot as needed?
“No business plan survives first contact with a customer.”
It takes more than seven years, on average, before a “liquidity event.” Inexperienced twenty-something founders are outliers. Companies with well-educated thirty-something co-founders who have history together tend to be most successful. The idea of a “big pivot” to a different product after startup is an outlier. Most Unicorns stick to their original vision (i.e., their founding MTP).
