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How Kiwi companies can become the new breed of 'exponential organisations'

09 Jul 15

The business world has seen the birth of a new breed of company - the exponential organisation – that could tilt the playing field in favour of cash-strapped Kiwi entrepreneurs.

The term 'exponential organisation' was coined by Salim Ismail, a Canadian business strategist and entrepreneur, who’s holding a series of talks in New Zealand later this month to explain how kiwi business leaders can tap into the phenomenon that has seen the rapid growth of disruptive companies like Airbnb and Uber.

With digital technologies having dropped the cost of doing business, there’s no reason Kiwi entrepreneurs can’t tap into this and leverage off other people’s capabilities to overcome the tyranny of distance and a small domestic market, he said.

“The question is will people take on the ambition to go for it?,” he said.

Ismail is the founding executive director of Singularity University, part of NASA’s research centre in Silicon Valley, and helps train business leaders how to manage break-through technologies. He’s had hands-on experience with his start-up Agstro, which used social networks to find news about people’s clients, colleagues, and friends, bought by Google in 2010 and before that he headed Yahoo’s internal ideas incubator, Brickhouse.

The business book he co-authored last year, Exponential Organisations: Why new organisations are ten times better, faster, cheaper than yours (and What to do about it), has become a best-seller in the US.

Ismail says the new breed of organisational structure that started emerging a few years ago is the only model that can keep up and take advantage of the rapid pace of technology-driven change. These companies leverage external factors such as big data, algorithms, community, crowd, user engagement, gamification, and other techniques to achieve performance benchmarks 10 times above their competitors, he said.

One example he cites is Procter & Gamble, the world’s largest consumer products company, taking 300 days to develop a product from new idea to sitting on shop shelves. New invention platform Quirky takes just 29 days to do the same thing.

There are three key things exponential organisations do, Ismail said.

They have a massive transformational purpose that is aspirational and creates a community rather than the traditional bland mission statement.  Google’s is to organise the world’s information while Singularity University’s is to impact billions of people.

The second key factor is how they scale. Rather than the traditional model of owning assets and a workforce and building them over time, these new companies grow fast by having collaborative technologies that tap into other people’s capabilities and work, staff on demand they can borrow or rent, and leased assets that don’t require a lot of upfront capital. Airbnb, the accommodation website that lets people rent from local hosts, doesn’t own its own hotels and can easily and cost-effectively add another property whereas rival provider, Hyatt Hotels, has the expense of building a new hotel to do the same, he said.

And the third thing is a new type of leadership to manage these companies which are largely decentralised and avoid the usual corporate top down hierarchy, he said.

Of the 10 key factors he’s identified, any company doing four out of ten will succeed and some of the 100 exponential companies Ismail has found are doing 9 or 10 of them. His personal favourite is Github, the web-based Git repository hosting service that allows software developers to rate each others coding. He reckons it has become so influential Silicon Valley developers are paid according to their Github rating.

Ismail said businesses that aren’t being disruptive, will end up being disrupted by a newcomer.

His advice to companies is to build revenue around an information-based stream, such as the plethora of companies that have sprung up with the digitising of healthcare. Then they should figure out how to drop their cost of supply by leveraging the community or crowd or tapping into others involved in that space.

And because it can be too hard and time-consuming to change the culture of most medium to large-sized companies, they’re better off taking the most disruptive and hard-to-manage staff members in their business and let them develop new ideas on the fringe, a model Apple has done successfully.

“It has been able to take a disruptive team and by operating under stealth go attack another industry. It started with watches and phones and has now shifted to healthcare and payments,” Ismail said.

Another option is to find the most disruptive newcomer threatening your business and either partner with them or buy them, he said.

(BusinessDesk receives funding from Callaghan Innovation to assist in the coverage of the commercialisation of innovation).

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