Exponential Organizations – we desire their growth but we don’t understand them

In a decade, organizations will either
be exponential or perished.
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Over the past year, it seems that everyone has become familiar with “exponential growth”. However, it’s little known that all exponential growth corresponds to the mathematical function
f(x)=abx
that defines the accelerated growth of many technologies, companies, as well as the adoption of services or applications in recent years.

Let’s examine some examples that will help us understand this:

DiDi, China's Uber

DiDi is China’s alternative to Uber. Incorporated in 2012, and probably a “victim” of China’s total disregard for Silicon Valley’s intellectual property, it has grown to eclipse Uber’s statistics which, in turn, also responds to an exponential growth curve.

Uber, founded in 2009, currently has 75 million users and makes more than 15 million rides per day. Undoubtedly, not bad for a company with a 12-year track record.

Yet DiDi, founded in 2012, has 550 million users and already accounts for 30 million rides per day. Extremely impressive for a company that has been on the market for barely a decade.

Facebook, the company funding the Metaverse

Another strong example of exponential growth is Facebook’s monthly active users (MAU). At the end of 2004, Facebook had 1 million MAUs and by the end of 2018 that number had grown to 2.32 billion. Up 231.900% over a 14-year period!

Even more impressive, however, is Facebook’s revenue growth since 2004. In 2004 Facebook saw revenues of a measly $400,000. In 2005, this revenue grew to $9 million, an increase of 2.150%. A rapid advance that took them non-stop forward until 2018, when Facebook generated $55 billion in revenue.

A dizzying increase of 13.753.150% during the same 14-year period.

No doubt, it’s not easy to imagine how the exponential and ever-faster growth of companies like DiDi or Facebook works.

Exponential growth is denied even by the brightest minds.

Our brains tend to think linear and predict things based on past experience. Therefore, nonlinearity is provocative for scientific research and for the human mind, not least because it challenges the assumption of unpredictability. This poses a serious problem for established knowledge, but it is consistent with the facts of human reality.

In 1998, Paul Krugman, Nobel laureate in economics, predicted that by 2005 the impact of the Internet on the economy would be insignificant.

“By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.”

Paul Krugman, 1998.

No less linear and skeptical was Steve Ballmer’s statement in 2007, when he was asked about the iPhone. His response, in an ironic and overbearing tone, mocking the iPhone was:

Apple's iPhone is the most expensive phone in the world and it doesn't appeal to business customers because it doesn't even have a keyboard, which makes it not a very good email machine... Right now, we're selling millions and millions and millions of phones a year. Apple is selling zero phones a year.

Steve Ballmer.
CEO Microsoft, 2000-2014
It is evident that the linear, arrogant and narcissistic mentality of Steve Balmer and all his subordinates cost Microsoft many, many millions of dollars in the years that followed.

Apple vs Microsoft Reveneus

Pedro Carrillo.
CEO GENYUS SCHOOL
“The Exponential Organization Bootcamp helped us to know how to apply tools of great value and high impact in order to build an ExO, such as exponential assessment, trend mapping, or to go beyond the vision of the company and define our Massive Transformation Purpose (MTP). The program has been pure value, knowledge, practical application and even fun for us. Wishing to have another opportunity like this.”
In fact, the world is evolving at a relentless speed, no matter how much some people might dispute it. Another good example of exponential acceleration is the growth in user acceptance from the introduction of the telephone to today’s mobile applications:
TIME TO REACH 50 MILLION USERS
All in all, examples that highlight how exponential systems have made an impact in a very short time. Disruptions, caused by exponential organizations, the ExOs.

What exactly is an Exponential Organization?

An exponential organization (ExO) thinks and acts in a radically opposite way to traditional or linear organizations, which rely on the exploitation of limited resources for their growth. ExOs base their growth on the abundance of available and not always sufficiently utilized resources. This use of available abundance allows them to generate disruption and transform entire industries in a very short time.

To understand exponential organizations we must first understand the 6Ds of Peter Diamandis and Steven Kotler.

The 6Ds are a chain reaction of technological progression, a roadmap of rapid development that always leads to huge changes and opportunities.
The 6Ds chain reaction of exponential growth follows these stages:

1.

Digitized

Once something transitions from physical to digital, it immediately acquires the ability to grow exponentially.

2.

Deceptive

The initial exponential growth is so small (.01 to .02) that it passes unnoticed by the vast majority. At this stage, progress naysayers have their moment of glory in the development of any product or service.

3.

Disruptive

The moment when, although no one expected it, a new market emerges or grows faster than the existing market.

4.

Demonetized

Cost no longer plays a role in the equation as the technologies that facilitate the new product or service cheapen.

5.

Dematerialized

Complete disappearance of the original physical product since it is transformed into a digital service or product. The transformation of atoms into bits that we witnessed from Blockbuster to Netflix, from Kodak to Instagram or from our entire desktop to an iPhone in 2007.

6.

Democratized

The cost of technology decreases to the point at which the new service or product becomes accessible to all.

Every industry is going to be disrupted. Either you initiate it yourself or others will.

Exponential vs. traditional organization

A good example to understand exponential disruption comes from the hospitality industry.

In order to grow, Marriott or Hilton need to find available land in suitable locations, build another hotel on it, obtain permits and licenses, and then set in motion everything else. All this requires an extensive operation in such a business. Of course, over the years they have prospered greatly and have become the largest hotel chains. And they continue to grow, but in a linear way. Their growth is based on resource scarcity, even though they set standards in their sector and are far ahead of their competitors.

“Any company designed for success in the 20th century is doomed to failure in the 21st.”

David S.Rose

Airbnb, on the other hand, is an example of disruption according to the 6D-model, a company designed for exponential growth. To grow, i.e. open a new accommodation, this start-up uses existing and abundant but unused resources: houses or apartments built but currently unoccupied. Its growth is based on generating the supply of available resources and connecting them with the demand of many users who need these resources.

What makes these two companies different is that Airbnb is based on the principle of abundance. The world abounds with people who have an extra room in their home or who have a property they don’t live in, and it also abounds with travelers looking for a cheap and convenient accommodation alternative. Of course, they had to break paradigms first, but that is exactly what these types of exponential organizations do:

The eXo is asking questions that no one has ever asked before as it seeks to generate a new reality in its sectors.

The result is exponential growth. Today, Airbnb, founded in 2008, shows these figures:
2.9 million hosts on Airbnb worldwide
An average of 14,000 new hosts will join the platform each month
There are more than 7 million listings on Airbnb worldwide
There are 100,000 cities with active Airbnb listings
There are 220 countries and regions with active Airbnb listing
As we have seen above, due to our tendency to think in a linear way, it is very difficult for us to predict or even imagine the way in which exponential technologies will transform the world. We have never been able to predict their inflection point because their growth does not respond to any past pattern.
Linear vs Exponential

Attributes of ExOs

We have given examples of ExO, but in order to identify whether an organization is exponential, there is a simple formula that synthesizes the elements that form them.
M.T.P. + S.C.A.L.E. + I.D.E.A.S.
M.T.P. stands for Massive Transformative Purpose and means that the organization must have a real purpose to inspire and transform society.

The M.T.P. has to be the driving force that motivates the members of the organization to impact their environment and guides them through periods of accelerated growth. Here are some good examples of an M.T.P:
Accelerate the transition to sustainable transportation
Organise the worlds information
Ideas worth spreading
Radical breakthroughs for the benefit of humanity

Tania F. Navarro
Cofounder Criogene

“The Exponential Organization Bootcamp helped us to know how to apply tools of great value and high impact in order to build an ExO, such as exponential assessment, trend mapping, or to go beyond the vision of the company and define our Massive Transformation Purpose (MTP). The program has been pure value, knowledge, practical application and even fun for us. Wishing to have another opportunity like this.”
S.C.A.L.E.

comprises the second part of the formula and the acronym stands for:

S taff on demand
  • Link internal objectives and external talent in a flexible and on-demand manner. Examples of applications that put this principle into action include Taskrabbit and Gigwalk.
C ommunity & Crowd
  • Build a community around your M.T.P. The idea of ExO is not for you to find your customers, but for your customers to find you. Example: TED
A lgorithms
  • as an engine for growth and learning through machine learning and AI. Google, UPS, Amazon and Netflix are probably the best examples of using algorithms to learn from their users.
L everaged Assets
  • Lease available assets as needed for flexible periods of time. Examples: Amazon Web Services, wework.
E ngagement
  • Involve people in the development of your service or product. Waze GPS is undoubtedly a good example of this, for it improves the Google Maps algorithm thanks to the collaboration of all its users.
I.D.E.A.S.

is the third and final part of the formula and is composed of:

I nterfaces
  • The platforms that are used for interaction between users, customers and suppliers and that become the most important environment for a good UX and subsequent internal productivity. Example: Apple App Store, Google AdWords.
D ashboards
  • Digital environments that enable ExOs to understand end-to-end organizational performance and make data-driven decisions in real time. Examples: Google Analytics or Amplitude.
E xperimentation

Experimentation and continuous learning based on a culture that promotes experimentation, A/B testing and data science for continuous hypothesis (in)validation. Examples: Netflix and Amazon.

A utonomy
  • ExOs are organizations based on networks of self-organized and decentralized teams that take responsibility for the business with a high degree of freedom and accountability. Examples: Zappos, Spotify, Basecamp, Valve.
S ocial Technologies
  • Collaborative technologies that enable teams to collaborate both internally to create their products and services and externally with their customers. It’s here that the development of the metaverse will play a key role with applications such as Microsoft’s Mesh or the future Meta workplace.
The team of ActioGlobal has implemented many of these attributes in our transformations of organizations that have wisely decided to create disruption ahead of the competition. The case of Adevinta is outlined here as a prime example.

There is no doubt that the potential of exponential organizations is unlimited. And considering how technology is driving the present, with the resulting ever-faster development of society, the economy and work, then for us it is beyond doubt that in less than a decade organizations will either be fundamentally exponential or will have vanished from the scene.
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