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BOOK REVIEW: How to make your organisation ten times better

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

“NEITHER age nor size nor reputation nor even current sales guarantee that you will be around tomorrow,” say the authors of this book.

Richard Foster, of Yale School of Management, estimates that by 2020 more than three-quarters of the S&P 500 will be companies that we have not heard of yet. The average lifespan of an S&P 500 company in the 1920s was 67 years; today it is 15 years.

In the past, we could use linear thinking and extrapolate on existing trends to predict the future. For many reasons, this is no longer the case.

For most of human history, productivity was a function of human power so that if you doubled the number of people, you doubled the output. When we domesticated working animals, the same applied: double the number of animals, and you double the output.

With the advances of the industrial era, we had machinery that did the work of 10 horses or 100 labourers, and prosperity increased commensurately. This resulted in the doubling of people’s lifespan, and tripled the per capita net worth of almost every country - adjusting for inflation.

Over time we have seen companies grow to previously unimaginable scales, with previously unimaginable revenues, and with unimaginably few people.

These companies are called ‘Exponential Organisations’ by the authors. They have a disproportionately large impact – at least 10 times as large as their size would warrant - thanks to information technologies that take what was once physical and dematerialises it for a digital world.

The demise of the photographic film

An example of the need for reconsideration of how we operate our companies can be seen from the photographic industry of the past. Photography was based on the idea of scarcity; we were careful when we took photographs to insure we didn’t waste any of the 36 shots on our film rolls.

In contrast, the advent of digital photography has been revolutionary. The marginal cost of taking an extra photograph is essentially zero. Even storing photos has become cheaper than an envelope – free. These digital photographs can be recognised across legions of others, filtered, edited, added to social technologies, and more.

Companies such as Kodak have been pummelled by revolutionary technological change coming from multiple directions: cameras, film, processing, distribution, retailing, marketing, packaging, storage and the resultant radical change in people’s perceptions of the photography.

That is the very definition of a paradigm shift. 

At the centre of every current “paradigm shift” or “disruption” is a fundamental change in the role of information, how we process and use it.  Nikon is seeing its cameras rapidly supplanted by smartphones. Map and atlas makers were replaced by GPS systems. Libraries of books and music are now on phones and e-readers. Universities are being threatened by MOOCs (massive open online courses), and the Tesla S luxury car is little more a computer with wheels, that it updates itself every week via a software download.

Gordon Moore’s Law formulated 60 years ago describes how the price/performance of computation will double about every 18 months. And this formulation has proven to be correct.

Four futuristic observations

Add to this futurist Ray Kurzweil’s four observations. The first is to extend Moore’s law backwards and forwards. Extended to any information technology, he shows that doubling patterns extends all the way back to 1900 as well.

Kurzweil’s second observation is that the driver is always information. “Once any domain, discipline, technology or industry becomes information-enabled and powered by information flows, its price/performance begins doubling approximately annually.” His third observation is that once that doubling pattern starts, it doesn’t stop and everything just gets faster.

His fourth observation is that these information-fuelled technologies include artificial intelligence, robotics, biotech and bioinformatics, medicine, neuroscience, data science, 3D printing, nanotechnology and aspects of energy.

Consider that the first human genome sequenced in 2000 cost $2.7bn. In 2011, Moore had his own genome sequenced for $100 000, but today the cost is about $1 000 and expected to drop to $100.

The subtitle of the book is “Why new organizations are ten times better, faster, and cheaper than yours and what to do about it".

The authors reviewed 60 classic innovation management books, interviewed C-level executives from several dozen Fortune 200 companies, and investigated the characteristics of the one hundred fastest growing and most successful startups across the world, including those that comprise the Unicorn Club.

Their conclusion was the set of commonalities these companies used to become at least 10 times better than their competitors, described in this book.

When we look at what it takes to create and run the Exponential Organisations described in this book, two realities emerge. Running superb companies requires the companies to be run superbly, and nothing about this has changed.

The authors identify how Exponential Organisations differ in terms of strategy, structure, culture, processes, operations, systems, people and key performance indicators from other superb companies. One thing stands out: there is no escaping the fact that superb companies need to be run superbly.

The authors suggest a set of prescriptions for running Exponential Organisations. For example, “the crucial importance of a company having what we call a Massive Transformative Purpose” which is just a rehash of the need to have a really good mission and vision statement; not a bad one.

So is the use of other prescriptions such as dashboards, the outsourcing of people and facilities, and following effective and efficient processes or sets of rules when calculating or doing problem-solving operations (call them algorithms to sound contemporary). And of course, use technology for efficiency wherever you can. 

Personally, I prefer Jim Collins' conclusions of how to become ten times better and more than your competitors which he describes in Great by Choice. But you will need to add the background provided by this book to bring Collins’ prescriptions for greatness into this end of the decade.

Readability:     Light ---+- Serious
Insights:         High --+-- Low
Practical:         High ---+- Low

* Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Executive Update. Views expressed are his own.

 

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