Good to Exponentially Great
When the technology strategist Salim Ismail released his book “Exponential Organizations” in 2014, he gave rise to the idea that some organizations, when they integrate specific attributes, can achieve rapid expansion—or exponential growth.
Rather than increasing human capital or physical assets, the most successful companies, known as ExOs, leverage accelerating technologies to grow faster, bigger and cheaper than the competition. One example is AirBnB, which has been able to scale faster than hotel chains that rely on creating a physical footprint.
Cesar Castro is an early disciple of the Exponential Organization (ExO) model and Certified ExO Advance Coach. He’s the founder of Escalate Group, a Fort Lauderdale, Fla.-based firm that uses the ExO framework to advise C-level clients looking for business transformation and innovative growth strategies. We spoke with him about how companies can go from incremental to exponential, and why the principles of ExO are even more relevant today.
Archie: What is an Exponential Organization, in your definition?
Cesar: An Exponential Organization is a company that successfully navigates disruptive innovation and transforms their business model to create 10x larger impact. I see it more like an organization that embraces an abundance mindset and uses a set of attributes to better position it for success, impact and growth. Organizations can try to implement the mindset, but it only becomes effective if they adapt it as part of their business model.
Archie: What are the benefits to a company?
Cesar: An Exponential Organization is better equipped to navigate industry disruption, disruptive innovation, transform their business and change the world for the better. However, It goes beyond purely product innovation and business model innovation; this is about transforming an industry. An Exponential Organization must connect and scale
abundance, and integrate innovation, new technologies and organizational structures into a game-changing new business model with the goal to purposely solve large global challenges and problems and unleash the next wave of growth.
Archie: How has the ExO model changed since the book came out seven years ago?
Cesar: With the ExO model, the attributes are valid but there are several important changes. For example, virtual work has become a big enabler for staff-on-demand around the world. We are moving from the engagement economy into the peer-2-peer ownership economy. Things such as gamification, badges, leaderboard and reputation have all evolved with AI, new data analytics capabilities, new behavioral science discoveries, and decentralized ledger technologies like blockchain. These are all reshaping and creating new business models. The shift to an information-based society has been even more exponential. The Internet and technology have advanced to a new stage and businesses must adapt. In other words, the metabolism of any organization needs to be considerably higher than in the past.
Archie: What did Covid teach companies about exponential change?
Cesar: Covid made it plain that any organization that doesn’t embrace digital transformation would fail. The adoption of new mindsets, behaviors and online technologies by consumers rose dramatically as a result of Covid, and the pace of change in enterprises also accelerated. We were all exposed to a sudden transition in our living circumstances. Industries like retail, restaurants, healthcare, real estate, education, and others have had to adapt quickly to new ways of doing things. After that, we witnessed the rise of a new generation of businesses in Proptech, Healthtech, Foodtech, and other sectors. COVID was huge and it is one of those moments currently disrupting our world.
Archie: Do you think the pandemic made companies less resistant to transformative change?
Cesar: I think Covid was a big accelerator for change management overall. People understood what exponential meant. Disruption did change mindsets, but in terms of actually implementing change, it was not consistent. We are wired to think linearly, so when events like this happen and things change dramatically fast in a short period of time, you think exponentially and you see some of the changes, but if they are not impacting you or your sector directly you don’t initially make the change. But if you stick with this mindset when they do finally impact your business or your sector, you are too late.
Archie: Does the ExO model work for startups or just corporations with deeper resources?
Cesar: The one difference I see between the startup and the corporation is that the corporation already has what Salim Ismail refers to with the ExO as the ‘immune system.’ For a company to successfully implement a business strategy like this, you need to run problem analysis at the core of your organization so people can develop capabilities to take your current business model and extend it in time and quality to make it better. But parallel to this, you need to have something on the edge—on the side of the organization—running the real disruptive innovation. This is ‘dual transformation’— addressing problems on the inside which are your existing core projects, and then projects on the edge, which is going to make the company transform and evolve. If you are a startup, you don’t necessarily have the core yet, as you are solely on the edge, focusing more on the new disruptive ideas. Your immune system is much lower.
Archie: Has virtual work and work-from-home arrangements helped or hurt companies looking to be ExOs?
Cesar: The fundamental effect it has had is that businesses and individuals now require a new strategy for internal and external collaboration. We must excel at both in-person and remote collaboration as well as sync and async. If you are already looking to be an Exponential Organization, you are becoming a digital company and your chances of success in this new environment are higher. Building the digital fabric needed to connect people, locations and processes for emerging hybrid and flexible work arrangements will be simpler for firms that are currently applying the ExO attributes and considering how to connect and scale abundance.
Archie: Salim Ismail’s book identifies 11 key attributes of an ExO. Today, which attributes do you think are the most important ones to have?
Cesar: A company needs to implement at least four attributes to have the opportunity to become an ExO, and establishing a Massive Transformative Purpose (MTP) is a must. From my point of view, and focusing primarily on the new ownership economy, beyond having a MTP the key attributes organizations need to implement are: Community & Crowd, Experimentation, Autonomy, and Social Technologies. This is how companies can learn how to operate in a new Web3 world.
Archie: What is your firm doing to create business transformation in the Web3 economy?
Cesar: One of our rising practices is our Web3 Studio, where we help companies in the fintech, telecom, energy, retail, and healthcare sectors uncover their Web3 business models. We have enabled them to unlock innovative ecosystems, creative teams, business agility, jobs-to-be-done, resilient products and platforms, and engaging experiences. As I have said, those who don't start climbing the Web3 learning curve may miss the most significant value-creation opportunity of our lifetimes.