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Exponential Organizations

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Tom De Bondt

on 4 October 2016

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Transcript of Exponential Organizations

What we'll learn about
Why new organizations are 10x better, faster and cheaper than yours (and what to do about it)
Who knows them?
Market Cap to 1Bn
Attributes of an ExO
MTP
Massive Transformative Purpose
Technology as The Key Enabler
Moore's LAW
Exponential Organizations
Fail Fast
The fastest way to succeed is to double your failure rate
Thomas J Watson Sr.
Founder IBM

Time
Years
company (founding Year)
Typical Fortune 500 company
20yr
8yr
Google
5yr
Facebook
(1998)
(2004)
Tesla
(2003)
4yr
Uber
(2009)
Whatsapp
(2009)
Snapchat
Oculus Rift
(2011)
(2012)
2,5yr
2yr
1,5yr
1yr
ExO'S
Moore’s Law is a computing term which originated around 1970; the simplified version of this law states that processor speeds, or overall processing power for computers will double every two years.
ExO Definition:
An Organization 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 exponential technologies.
SCALE - External
IDEAS - INTERNAL
Think BIG
Aspirational (radical transformation)
not a mission statement
Purpose:
Why do this work?
Why does organization exist?
Examples:
TED: "ideas worth spreading"
GOOGLE: "Organize the world's information"
QUIRKY: "make invention accessible"
Staff on Demand
Community & Crowd
Algorithms
Leveraged Assets
Engagement
Interfaces
Dashboards
Experimentation
Autonomy
Social Technologies
Engagement
Engagement is comprised of digital reputation systems, gamification and incentive prizes, which create network effects and positive feedback loops.
Leveraged Assets
Don't buy anything necessary to run your business. Rent or lease them and make use of cost per use models.
Algorithms
As the world turns into data and information, ExOs are leveraging Algorithms, including Machine Learning and Deep Learning to get new insights about their customers and products.
Community & Crowd
Make use of the community. If you don't have one, build it. Make use of this community and test new releases or prototypes on them and ask feedback. The crowd can be leveraged by harnessing creativity, innovation, validation and even funding.
Staff on Demand
A necessary characteristic for speed, functionality and flexibility in a fast-changing world. Rather than ‘owning’ employees, ExOs leverage external people for simple to complex work – even for mission critical processes.
Interfaces
When implementing the externalities (SCALE), ExOs use customized filtering and matching processes – which we call Interfaces – to process the output of external attributes into the internal organization, using algorithms and workflow software.
Dashboards
In order to measure and manage the performance of an ExO, a real-time, adaptable dashboard with essential company and employee metrics and short feedback loops is implemented – accessible to everyone in the organization. Lean value & growth metrics + learning metrics + OKRs
Experimentation
ExOs use the Lean Startup methodology and other techniques inside different organizational departments to constantly experiment with new ideas and processes, culturally enabling risk-taking and failure. Processes are constantly being tweaked with fast feedback loops.
Autonomy
ExOs have a flat organization, allowing self-organizing, multi-disciplinary teams and / or Autonomy individual employees to operate with decentralized authority. A good example of this trend is the Holacracy model.
Social Technologies
ExOs leverage collaborative tools, such as file sharing, activity streams, wikis, telepresence, virtual reality and emotional sensing to manage real time, zero latency conversations. When implemented it creates transparency and connectedness and lowers an organization’s information latency.
At Least 4 attributes
6 D's of Exponential Framework

1. DIGITIZED
early stages of exponential growth processes may deceptively look linear
2. DECEPTIVE

once exponential growth reaches the inflection point, or “knee of the curve,” they become truly disruptive
3. DISRUPTIVE
4. DEMATERIALISE
No longer do you have to buy a flashlight or digital camera, it's all integrated in your smartphone
5. DEMONETIZE

As manufacturing techniques improve, technologies are becoming less expensive at an alarming pace

more information is becoming digitized, opening the door for a layer of analytics (e.g. machine learning) to be placed on top of it

6. DEMOCRATIZE

there will be 3 billion more people on the Internet by 2020, leading to more perspectives because these people will be given a voice in the global discourse for the first time
Massive Transformative Purpose
Why is it important?
Enables coherent growth
Binds collective aspirations
Attracts top talent
Supports a cooperative culture
Enables Agility and learning

Dependencies:
Must Be Unique
Leaders Must Walk the Walk
Must support all 3 letters in the Acronym
Staff On Demand
Why is it important?
Enables learning
Allows Agility
Forms cohesion in Core Team

Dependencies:
Interface
to manage SoD
Clear Task Specification
Community & Crowd
Why is it important?
Increase loyalty to Exo
Drives Exponential Growth
Validate new ideas and learning
Allows agility and rapid implementation
Amplifies ideation

Dependencies:
MTP
Engagement
Authentic & transparent leadership
Algorithms
Why is it important?
Allows fully scalable products & services
Leverages connected devices & sensors
Lower error rate stabilizes growth
Easily updated

Dependencies:
Machine or Deep Learning techniques
Cultural acceptance
Leveraged Assets
Why is it important?
Allows Scalable products
Lowers marginal cost of supply
Removes having to manage assets
Increase agility

Dependencies:
Abundance or easily available assets
Interfaces
Engagement
Why is it important?
Increase loyalty
Amplifies ideation
Converts crowd to community
Leverages marketing
Enables play and learning

Dependencies:
MTP
Clear, fair and consistent rules without conflicts of interest
Digital Engagement
1. Ranking Transparency
2. Self-efficacy
3. Peer Pressure
4. Eliciting positive emotions to drive long-term behavioral change
5. Instant Feedback
6. Clear, authentic rules, goals and rewards
7. Virtual currencies or points
Interfaces
Why is it important?
filter external abundance into internal value
Bridge between external growth drivers and internal stabilizing factors
Automation allows scalability

Dependencies:
standardized processes to enable automation
Scalable externalities
Algorithms
Why is it important?
Track critical growth drivers in real time
OKR' create a control framework to manage fast growth
Minimize exposure from errors because of fast feedback loops

Dependencies:
Real time metrics tracked, gathered and analysed
Implementation of OKR's
cultural acceptance by employees
Dashboards
OKR's are bottom-up where KPI's are top-down
Objectives are dreams where key results are success criterias (milestones)
Objectives are qualitative
Key resulst are quantitative
objectives are ambitious
OKR's
(objectives and key results)
Why is it important?
measurement and tracking of experiments
Maximizes value capture
Faster to market (MVP)
You will learn faster

Dependencies:
Measurement and tracking of experiments
Cultural acceptance
Experimentation
Does the product fit a customer need?
How did customers solve this before?
What are current costs created by the customer problem?
Should we adapt or change course?
Are we ready to scale?
Lean Philosophy Questions to ask
Why is it important?
increases agility
More accountability at customer face
Faster reaction and learning times
Better morale

Dependencies:
MTP
self-starting employees
Dashboards
Autonomy
Why is it important?
Faster conversations
Faster decision cycles
Faster learning
Stabilize the team during rapid growth

Dependencies:
MTP
Cloud Social Tools
Cooperative culture
Social
Reduce the distance between obtaining information and decision-making
Migrate from having to look up information to having it flow through your perception
Leverage community to build out ideas
Enables P2P culture and sharing economy
Key Reasons to use Social
Social Objects
Activity Streams
Task Management
File Sharing
Telepresence
Virtual world
Emotional Sensing
7 elements of social
9 Key Dynamics of
an ExO Ecosystem
1. Information Accelerates Everything

2. Drive to Demonetization

3. Disruption is the New Norm

4. Beware of the "Expert"

5. Death to the Five-Year Plan

6. Smaller Beats Bigger

7. Rent, Don't Own

8. Trust Beats Control and Open Beats
Closed

9. Everything is Measurable and Anything is Knowable
Create an ExO from scratch
STEP 1:
CHOOSE AN MTP
Questions to ask:
What Do I really care about?
What am I meant to do?
What would I do if I could never fail?
What would I do if I received a billion dollars today?
How To Build An ExO
This is perhaps the best time in the history of business to build acceptance (and even celebration) of entrepreneurship, different crowdsourcing options, crowdfunding opportunities and legacy markets ripe for disruption—all create a compelling (and unprecedented) scenario for new company creation.
Risks and how to avoid them before starting
Market Risk:
crowdfunding, communities (Market Validation)
Technology Risk:
cloud computing and SAAS models (variable costs without investments)
drop of cost for Hardware Tech
Execution Risk (main risk):
Is the team or Founder capable of doing it?
We'll learn how migitate the execution risk of building an ExO
Exponential Technologies
AI
Robotics
BioTech
NanoTech
Medicine
Neuroscience
Energy
Computing
Must be exciting and pull people to
your company
STEP 2:
Join or create a community
Find a community of other people who share your passion

Talk about your new idea and do a first Market Validation

If you get the community right, opportunities will arise
STEP 3:
Compose a Team
Founders should bring the bigger picture
They are a critical part for the DNA of the company
Build around the MTP

STEP 4:
Breakthrough Idea
1. A minimum 10x improvement over the status quo
Solve Big Untested Problem
Radical Change
2. Leverage information to radically cut the cost of marginal supply
3. Does the idea solve a real customer problem or use case on a frequent basis?
STEP 5:
Build a Business Model Canvas
9 steps in the BMC
1. Who are the key partners?
2. What are the key activities?
3. What are the key resources?
4. What is the Value Proposition?
5. What is the Customer Relationship?
6. Which channels to use?
7. What are the customer segments?
8. What will be the cost structure?
9. What are the revenue streams
Build the BMC light to get an MVP (Minimal Viable Product) asap.
STEP 6:
Find A Business Model
8 new value drivers to generate revenue
STEP 7:
Build an MVP
STEP 8:
Validate Marketing & Sales
AARRR
Acquisition: How are your users finding you?
Activation: Do the users have a great 1st experience?
Retention: Do your users return to the product or service? (Toothbrush test)
Revenue: How do you make money?
Referral: Are your users telling other people?

STEP 9:
Implement SCALE & IDEAS
STEP 10:
Establish the culture
STEP 11:
Ask Key Questions Periodically
Who is your customer? Still the same profile?

Which customer problem are you solving?

What is your solution and does it improve the status quo by 10x?

How will you market the product or service?

How are you selling the product or service?

How do you turn customers into advocates using viral effects and NPS to drive down marginal cost of demand?

How will you scale your customer segment?

!!How will you drive the marginal cost of supply towards zero?!!

What major trends and technology will be in place 2-3 years in the future? And how can you advantage them? (skate towards the puck is going)
STEP 12:
Building and Maintaining a Platform
4 Core Competences / Roles:

1. Visionary / Dreamer
2. User Experience Designer
3. Programming/Engineering
4. Finance / Business
Discovery Skills
Delivery Skills
Examples
Hyperloop
Scanadu
Google Loon

Make sure people think you're crazy when you tell them your idea

1. AUTHENTICITY
2. PERSONALIZATION
3. INTERPRETATION
4. EMBODIMENT
5. FINDABILITY
6. ACCESSIBILITY
7. PATRONAGE
8. IMMEDIACY
Most ExO's leverage 3 or 4
software is eating the world (sensors)
cost and barriers of entry are dropping
cost of demand
Key Idea: marginal cost of supply goes to zero
cost of research, cost of product development, cost of customer development
Since the internet cost of demand has dropped
(online marketing, viral loops)
community management (incl. open source)
Examples are solar power, mobile predictions, telco's (google LOON)
HIPO (highest paid persons opinion) VS geeks
Strategic planning doesn't make sense in an ExO environment (1yr continously updated plan)
execution beats planning
Smaller is more agile and flexible
Gives flexibility and nimbleness (opex vs capex)
millennials have different value system an requirements in workplace. Creativity should be stimulated
we are in a world of perfect information
cross referencing informationstreams
Questions to ask yourself:
Are you validating key assumptions about your business model?
Have the customer shown engagement and commitment?
Are the customers delighted?
If you are not embarrassed about your first product you’ve launched to late.
Think about the absolute minimal features to test your idea
3 kind of MVP's
Theoretical:
test your Value Proposition through interviews and reviews

Virtual:
use video’s, presentations, etc to test reactions from customers

Real MVP:
Test real user behavior, interaction and response to your product.
Landing Pages with Adwords links
A/B test landing pages and Adwords text links
valuable insights

All attributes must be there before you will be able to scale. Otherwise Optimize each layer before going to the next one.
Use growth hacking methods like seo, content marketing and A/B testing
Staff on demand
: use contracters and freelancers.

Crowd&Community
: Validate your MTP and product with your community and get feedback whenever possible.

Algorithms
: Optimize processes and personalize products & services
Can you use opensource machine & deeplearning applications to lower your cost.

Leveraged Assets
: do not acquire too many assets.

Engagement
: Build your product with engagement in mind. Gamify and incentivize where possible.
Create culture by implementing the internal attributes IDEAS

Interfaces
: Design custom processes for managing scale. Don’t automate them until you’re ready.

Dashboards
: set up OKR and value, serendipity, and growth metrics to gauge and measure. Full transparency

Experimentation
: learn, iterate and test assumptions (lean startup methodology). Failure is called experience

Autonomy
: Implement holocracy or self-organizing teams. Learn from GitHub’s model. Open standards, decentralization, permissionless innovation.

Social
: Asana, Trello, slack as tools
Horizontal communications patterns should be setup.
Culture is what happens when the boss leaves the office.

Effectively track, manage reward performance of the employees

Make sure the team is habituated to transparency, accountability, execution and high performance.
4 key steps
Identify a pain point or use case for the customer

Identify a core value unit or social object in any interaction between the producer and the customer

Design a way to facilitate the interaction (matchup capability - uber/airbnb)

Determine how to build a network around your interaction
Examples: GigWalk, Freelancer.com,
PeoplePerHour, Uber, 99 Designs, odesk,
Examples: Kickstarter, Indiegogo, DYIDrones, Waze, TED, LocalMotors
Examples: PageRank - Google,
Product Recommendation - Amazon,
Kaggle, Algorithmia
Examples: Uber => no cars
Amazon cloud computing => no servers
Techshop => equipment subscription model
Waze => no GPS’ and sensors
Airbnb => no rooms
Examples: Gamification, Incentive Competition + Digital Reputation Systems
X-Prize,
Examples: quirky => rank/match/filter ideas
Google: Adwords interface
Airbnb: simple interface for customer and supplier
Examples: examples: Google => 50K employees everybody has weekly OKR’s, transparant to all employees
Linkedin, Zynga, intel
Examples: General Electric with 60K employees => 400 pilot cases => cost savings => drop time for product innovation
TATA & P&G => risk taking incentives
Examples: VALVE: no job descriptions, no CEO, no management meetings => more turnover per employee than Microsoft
Tangerine bank (canada): 4x more customer deposits per employee
dropbox, google hangout, trello, assana, leap, slack, beam, yammer, noteable
Full transcript