By Marco Abele, CEO of Tend
Only a matter of decades ago, linear organizations were viewed as the pinnacle of industry. Untouchable, even mystical, run by all-powerful magnates, successful conglomerates with multiple disparate subsidiaries, spread across the globe, worked in splendid isolation, with different cultures, different operating systems and processes.
This model is looking ever more outdated and trapped in a former era. In a technology-driven environment, it is difficult to see how such clumsy, complicated structures can possibly survive. Consensus-building, never mind product development and launch, constitutes a major feat, taking months of to-ing and fro-ing across the globe potentially years before launch. Costly marketing and publicity must surely be stifled by sub-optimum communication, including sometimes hazy feedback regarding what works and what doesn’t.
According to a study by thought leader and technology strategist Salim Ismail, the average timeframe for a Fortune 500 company reaching a value of $1 billion USD is around 20 years. By contrast Snapchat, Instagram and Uber took only a few years. The pace of bringing a new idea into production has sped up by a factor of 10. 300 days for a linear organization might now be under a month for an exponential one.
These linearly organized conglomerates are used to having the power to decide for themselves and to dictate reality to suit their needs. Many are in denial, believing that they are immune to the changes going on around them. Their view is too often limited to the short-term, meaning fast and aggressive changes to their model would, to their minds, risk an irrecoverable loss in perceived executive power – to the detriment of their career plans.
Moreover, skepticism regarding the likely chance of success of a big transformation has grown out of their experience of past failures. Their lasting impression is of a lot of hard work, spiraling costs, and endless hours of painstaking persuasion and compromise.
Finally, many simply cannot accept that an alternative model could possibly work positively for them.
The rise and rise of Exponential: the orchestrated fluidity of a community
Contrast this cumbersome business model with one which is lean and agile, that is no longer based on a fixed framework but rather upon highly adaptable components. This is orchestrated fluidity rather than land-grab or silo mentality.
This enables a very different growth path: a rapid launch in a deliberately limited market followed by timely and frequent iterations and improvements, moving steadily towards a fit for purpose, slick product which is then easily spread to other key markets. These highly dynamic organizations are more capable of engaging with a growing community which willingly gives user feedback and bolsters the company’s reputation by word of mouth. Such an Exponential Organization will have the confidence to seek and attract best-of-breed satellite partners, knowing that these partners share the same vision and feel real ownership.
All of this is underpinned by combining the latest technologies with the modern economy’s new business processes to create enormous value in super-quick time. It’s about leveraging ever-cheaper and more accessible technology, leveraging big data, leveraging open source, whilst identifying and exploiting the weaknesses of their linear competitors.
The attributes of the Exponential Organization
So-called Exponential Organizations stand out by demonstrating the following key attributes:
- They have practically instant scalability in multiple dimensions, be it workforce-, innovation-, geographic- or platform-related.
- The productive and flexible use of the industry community, engaging with the top players, making them feel a part of something bigger, and engaging them as advocates within the community. Importantly, the community ensures resources are plentiful.
- High performance is driven by healthy competition as partners seek excellence in their efforts to remain a key part of the team. Significantly, they don`t need to be controlled at every stage of production or distribution.
- The set-up is asset-light, meaning a virtual or lean infrastructure with outsourcing of the non-core, heavy-lift components of the solution. Combined with super-early testing and experimenting with trusted early adopters prior to any major investments.
- There is an extremely strong, often small, tight-knit core team committed to the cause and able to nurture the effective use of their ecosystem. It’s a clear transformative purpose that pulls everything together.
- Importantly, they are in a constant state of preparedness and learning, ready to counter any challenges and embrace opportunities that emerge.
Exponential Organizations win out
We’re talking Uber, Airbnb, Instagram, Facebook, among others. They have outpaced the traditional linear organizations and conquered markets in an instant. Their momentum will not suddenly stop. Take for example Airbnb versus a traditional hotel chain: how long does it take and how much does it cost for Airbnb to add more accommodation, with no new real estate to acquire or hotels to build; it's quick and the cost is negligible.
So who's more competitive; who's going to win out over time? To me it's clear.
Marco Abele is CEO of Tend and Former CDO of Credit Suisse